Compliance has never been more integral to a financial firm’s well-being than it is today. According to a 2014 survey conducted by PwC, compliance is becoming a more strategic partner in the organization, and due to an increasingly complex regulatory environment has been tasked with an increasing number of responsibilities. But with this responsibility comes substantial stress, and with good reason: the SEC reported that since the financial crisis of 2008, 198 financial entities and individuals have been charged with misconduct surrounding financial reporting, disclosures and investments. The total penalties collected from these firms and individuals, as of January 2016: $3.76 billion.
This $3.76 billion was collected for a variety of reasons: defrauding investors by misstating and omitting key facts about products, making faulty disclosures and maintaining inaccurate books, overstating assets and more. While some of these penalties occurred due to poor judgement or unethical actions, many were avoidable and just-plain-dumb human mistakes. According to Bloomberg BNA, 28 percent of financial reporting mistakes result from incorrect entry of manual data into a reporting system. Bloomberg BNA goes on to say that “it’s easy for organizations to write off the occasionally erroneous spreadsheet cell or employee turnover as inevitable cost of doing business. Realistically, each of the…mistakes represents a preventable drain on corporate resources and a [potential] liability to a firm’s reputation.”
While financial firms have undoubtedly made an effort to streamline their reporting processes, they have also created a false sense of security when it comes to manual updating data and information. As a result, Marketing team members, who are accustomed to manually updating and approving these reports, may develop workarounds and ad-hoc processes that can lead to data misrepresentation and compliance failures. So how can your firm avoid becoming another statistic on the SEC’s wall of shame?
- Think local. As our world becomes more digital and on-the-go, employees are more frequently working out of the office and in turn saving files with sensitive financial data on their personal devices. This is not only a security risk but can lead to inaccurate reporting if another employee accessed or edited the “master” file and created a duplicate. Reduce this risk by ensuring that all documents or files are accessible from and saved to a single portal.
- Import data from the source. Instead of having employees manually add data from a source to an Excel file or formula, directly sync this data directly from the source. As long as the data is accurate within the data source, it should copy over to the file. This also saves your team hours of time that would otherwise be spent manually adding numbers—reducing human error (and headaches).
- Change once, update everywhere. If data does change within the data source, files and data sources should be connected so that a specific fact or figure is updated in every document where it exists. For example, if your team is tasked with updating AUM in every fund fact sheet each quarter, once that sheet is opened the AUM value should automatically update. This also reduces the risk of human error and saves your team hours each quarter.
- Hire (and retain) rule abiders. Compliance, by nature, is comprised of detail-oriented individuals who value process and procedure. But sometimes endless manual updates can be too much for someone to bear, and that’s when human errors arise. Find those individuals who can balance the detail-orientation of financial updates and reporting with technology to optimally streamline the process, and hold onto them for dear life.
It is true that technology can be a crutch when it comes to financial reporting. But that is only if you don’t have the right strategy behind that technology. Marketing and Compliance teams should work more closely together throughout the entire document updating process to mitigate errors and increase efficiency. Both teams should embrace document automation processes to avoid adding to the SEC’s $3.76 billion collection box, but also because they want to be forward-thinkers and early adopters in the revolutionary fintech space. If it’s not human error and faulty reporting that leads to firms’ demise, it will be their refusal to innovate and adopt automation technology.