In these times of digital transformation, many companies are working intensively on innovative technologies which will enable them to focus on the individual wishes of their customers. Because access to customers and the data associated with it are becoming critical factors in determining success in all sectors of industry. Evaluation options which take into account the data from different communication channels such as social media, are becoming more and more relevant for companies. After all, such data analyses offer companies a good insight into customer behavior.

Running parallel to these developments, the regulatory framework for companies is becoming ever more complex. Subjects such as data protection and data security are coming under increasing scrutiny by the authorities and the legislature in a world that is ever more networked. Implementing these requirements not only ties up many resources, it also forces companies to review the regulatory compliance of existing and potential new business models and to adapt them to meet statutory demands.

Regulatory requirements acting as a brake on digitalization projects

Many decision-makers, above all from the heavily regulated financial sector, therefore regard the strict requirements as a barrier to their own digital transformation. The results of the Q_PERIOR study, “Digital Transformation in the Insurance Industry”, confirm this perception. The limitations imposed by regulatory effects were identified in the study as one of the major challenges in the context of digital transformation. A similar picture emerges when decision-makers in the banking industry are surveyed.

Christof Merz, Manager of the Audit and Risk Department at Q_PERIOR, does not share this negative perception: “In themselves, regulatory systems do not constitute a barrier for the successful digital transformation of companies. On the contrary, compliance is becoming more and more of a matter of good practice distinguishing successful companies from less successful ones.” One of the reasons for this lies in the fact that the same rules usually apply to all market participants. “Regulations are often cited by established companies as a competitive disadvantage vis-à-vis new players from the digital world”, adds Anton Taubenberger, banking expert at Q_PERIOR. “But Fintechs are subject to the same regulation in the banking sector as soon as their business requires a banking license.”

Compatibility of digitalization and regulations exemplified by IDD

A current example from the insurance industry shows that regulation and digitalization do indeed go together. The European mediation guideline, Insurance Distribution Directive, IDD for short, was published in February 2016. On the one hand, the EU’s purpose with IDD is to close the existing regulation loophole between classical offline and the ever more popular online distribution. Legislators are thereby ensuring uniform conditions by requiring all distribution channels of European insurance companies from now on to meet the same requirements with regard to the observance of consultancy and informational obligations. On the other, the potential behind digitalization is helping to meet the new IDD regulations. For example, any justified consultancy obligation can be quickly and easily displayed on the basis of available data sources, with the intelligent use of big data models. In addition, an integrated CRM system can be used to easily connect online and offline channels. In this way, building bridges between the sales channels, e.g. through the use of web-based real-time means of communication, can bring profitable results − even for insurance products requiring explanation. Important data are also available in the right place for all customer contact points, ideally in updated form. Not only do insurers benefit but end users too.

Max Planck Society relies on smart IT solution to meet compliance obligations

Beyond the IDD mediation directive and the insurance industry affected by it, public-sector companies and institutions have the chance to benefit from the use of digital solutions in the area of compliance. Central management systems for external and internal rules and regulations such as Q_PERIOR’s “Directive Management 2.0” solution, not only save significant amounts of time and effort for their users. Ideally, they will also enable companies to respond flexibly to future demands.
The prestigious Max Planck Society, for example, is relying on a management system of this kind for rules, directives and handouts. Around 20,000 employees at Administrative Headquarters as well as at the 83 Max Planck Institutes and facilities around the world have access at all times to the rules in force relevant to them via a common IT platform. Employees are also informed of changes on an ongoing basis and are therefore in a position to implement compliance requirements more efficiently. “The management system in use makes it noticeably easier for us to meet internal, regulatory and statutory requirements”, says Rainer Pollack, Head of the Department for Central Services at the Max Planck Society, in summarizing his experience hitherto.

New technologies, networked systems and the analysis of customer behavior open up new opportunities for companies to win new customers and create sales potential. But such opportunities come at a cost. Regulatory requirements and the justified interests of customers and consumers in the secure handling of their data are forcing companies to set up corresponding IT security and compliance structures. This makes compliance a matter of good practice − even or, to put it more accurately, especially − in the age of digitalization.

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