@Pixabay.

Despite significant adoption of artificial intelligence, compliance-heavy sectors are struggling to use the technology to modernise their IT systems while abiding by their regulatory obligations. 

This will affect fund operators because of the massive IT systems many work on, especially those that work on IT services that have, for example, been compiled by years of M&A in the business.

“It’s a choice between innovation and risking non-compliance or

staying compliant and risking obsolescence."

Modernisation and regulatory obligations need not be a Sophie’s choice, said Ritchie Puckey, Head of Compliance at Espria, an IT managed service provider, who said financial services could be falling behind other industries in AI utilisation. 

“It’s a choice between innovation and risking non-compliance or staying compliant and risking obsolescence,” said Puckey. “This problem is rooted in how IT and tech approach compliance-heavy sectors.” 

Puckey added that, generally, businesses prioritise the latest and greatest technology while thinking of regulation and security as an afterthought. 

Building foundations: safety first 

Instead of an afterthought, he says that both regulatory requirements and security should be the foundations on which these businesses are built. 

First, Puckey said, companies should ask whether any technological upgrade “Fits into existing compliance frameworks, without opening these businesses to significant regulatory risks.” 

Security, too, is vital, in Puckey’s eyes, due to the critical nature of some of these businesses. A failure in security could result in significant reputational and financial damage. 

The fears regarding AI use at work is shared across the economic landscape. According to a poll in a report released by the insurance and consulting giant Gallagher, respondents primarily fear the use of AI in the areas of data protection at 33% and, secondly, legal liabilities relating to the misuse of AI at 31%.

But he added that, despite the risks of using AI in these industries, the emerging technology should not be shunned. Instead, he argues that “It’s more important to approach it with open eyes, understanding its risks for data privacy and transparency. Before investing in AI-powered tools, mapping functionality against regulatory landscapes, and asking the hard questions on exactly where data is processed and how decisions can be audited and explained is important.” 

By conducting due diligence first, businesses will be able to more safely utilise the power of AI technology. 

While these industries struggle to juggle their use of technology and their regulatory obligations, others are charging ahead, according to Gallagher.

According to the report, AI adoption is taking off at a “ferocious pace” across businesses. The report added that business leaders are more aware of the risks of AI now than they were a year ago, and they are now taking action to mitigate those risks. 

“The more you spend, the more benefit you get long term."

Time could be of the essence for many businesses in what seems to be an era increasingly defined by the use of AI. In the realm of investing, those leaving AI off the table, risk increasingly marginal returns as their competitors’ operations processes become more efficient and streamlined. 

“The more you spend, the more benefit you get long term,” said Mark Gillan, Head of Investment Operations, Scottish Windows, in a recent comment to Fund Operator. AI can help boost companies in a multitude of ways, perhaps most importantly – by cutting operating costs.

 In the aftermath of a record £150 billion investment in the UK, by several major US tech companies, compliance-heavy industries risk falling further behind if they don’t manage to grasp the opportunity that AI affords them.

 

Please Sign In or Register to leave a Comment.