Peer to Peer Magazine

61 WWW.ILTANET.ORG Unstructured but Interconnected Data The massive, growing and increasingly complex masses of global regulatory data are somewhat paradoxically both unstructured and interconnected at the same time. The data are largely unstructured because each regulatory authority publishes and manages its own regulations, oen with lile regard for how they interact with those of other regulatory authorities. The interconnectivity of the data takes place largely at the level of each affected individual organization. For a multinational corporation operating in a multitude of geographies, it rapidly becomes apparent that each regulation, governing agency, market and geography is interrelated. A change in any single factor can affect the organization's regulatory requirements and ability to conduct business across nearly every other market and geography. To manage compliance while maximizing business opportunities, massive analytical power may be needed to connect these far-flung dots and identify relevant paerns and trends. Only then can businesses properly assess and manage risk. What's at Stake? Failure to properly manage compliance requirements can mean significant repercussions. Sanctions cost corporations more than $20 billion each year. And regulators, particularly in the United States and United Kingdom, are increasingly holding senior managers personally liable for compliance failures — a potentially daunting development. In addition, inefficient or ineffective compliance management adds billions of dollars in costs, draining resources from other areas of the business. The Power of Cognitive Technologies Cognitive technologies are ideally suited to manage the complexity of global regulations. Cognitive methodologies have the ability to: » Analyze massive amounts of unstructured data » Understand relationships between data » Identify paerns and trends Tame Regulatory Chaos with Cognitive Technologies FEATURES These technologies can analyze how a change in a regulation impacts a business, even across seemingly unrelated markets or geographies. They can assess how effective a compliance strategy is likely to be. They can spot trends in regulatory reform and project future regulatory roadmaps. Here are examples of recently evolving areas of regulation where cognitive technologies could bring significant benefits: Systemic Risk Regulators are moving from a model designed to prevent and detect instances of fraud, money laundering and other compliance failures and toward a model requiring financial institutions to reduce systemic risk across their organization and beyond. Regulators are looking at increased disclosure requirements, stress testing and compliance reviews across all products and activities. Corporations can be required to assess not only their own internal risks but how those risks potentially affect the entire financial system –– a challenging goal, to say the least. That level of extrapolation might require cognitive computing to assess the likelihood of various scenarios. An additional challenge is that "systemic risk" could end up being so broadly defined as to make projecting potential effects to the financial system difficult, particularly across increasingly complex portfolio structures. Customer Due Diligence Customer due diligence is being stretched to where regulators in some regions are demanding that institutions not only know their customers, but know their customers' customers as well. This quickly creates a complex web of reporting. For example, financial institutions would have to track their customers, their customers' customers and potentially share and compare that same level of detail with competing institutions if the institutions have shared customers. At the same time, they must balance customer privacy, bank secrecy laws and anti-money laundering laws. This will reach a level of such matrixed complexity that cognitive technologies will be required. ERIC LAUGHLIN Eric Laughlin is the General Manager of legal managed services and Managing Director of the corporate segment for the legal business of Thomson Reuters.

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