Although the term may be in dispute; digitalization, cloud migration and digital transformation all refer to essentially the same thing. Specifically, making data and content always accessible, with reduced dependencies in the organization IT and accessible remotely from any device. One thing that is indisputable is how COVID-19 has accelerated digitalization and the centralization of content on a secure cloud infrastructure.
The move was borne out of necessity and not forward-thinking by a few select visionaries from every field. Even the financial industry, which is often derided for being slow to adopt technology and resistant to change, has embraced digitalization full-on. There’s nothing else quite like a pandemic to spur digitalization forward as a mission-critical aspect of business continuity.
On-premise solutions carry challenges
The benefits of a centralized solution essentially articulated themselves in the wake of the global shift to working from home, seemingly overnight. Firms with in-house and on-premise compliance monitoring and reporting systems were (at least initially) unable to employ them when their employees shifted to making trades and other financial transactions from their private residences. In short, on the New Compliance Normal Hub, we highlighted how the new normal opened “the door to various market abuse scenarios especially in the current volatile markets, from Insider Dealing to Spoofing and Layering. You no longer have physical control over your once monitored employees.” This gap in business continuity accelerated the adoption of digital transformation efforts and the migration of operations to the cloud, which we discussed previously.
In the absence of the ability to conduct remote installations and upgrades, companies quickly realized how vulnerable they were. Some firms were unable to even enter their offices as corporate landlords were required by law to block access. At the beginning of the pandemic crisis, FIS asked the question, “Are you prepared to ensure comprehensive compliance going forwards, considering future regulatory requirements coupled with home office capabilities? Managed Services in the cloud are not just less costly but also more accessible even in adverse conditions.”
Digital efficiencies drive cost reductions
Beyond the basic provision of physical access to IT infrastructure, digital solutions also reduce the cost of maintenance. That’s the primary reason why MSPs have boomed over the last decade or so. Their rise has been enabled by the value they bring to their clients who no longer need to burden themselves with hiring elusive IT staff, system maintenance and protecting themselves against cyber threats. Instead, outsourcing all this has offered the panacea that many smaller firms, in particular, were looking for. Decision support, consultancy and 24/7 query responsiveness are the hallmarks of an outsourced third-party solution. In the wake of the immediate shift to working from home, these services proved essential to business continuity.
Collectively, agility and the ability to work outside a corporation’s typical bureaucracy and other impediments that thwart rapid change catapulted digitalization into the spotlight for small businesses. Especially those who were locked out of their own offices. And here’s where it gets interesting for many digitalization vendors, since “where there’s a mystery, there’s money to be made.”
Cybercrime is on the rise
Risk and compliance requirements never go away. Regulatory authorities have been known to offer temporary respite during financial crises, but the laws still apply. Even prior to the onslaught of the novel coronavirus, regulatory guidelines and providers like Cappitech reminded firms that they needed to be prepared. “Whether it’s internet problems, kids at home or illness, the current work from home environment means you can expect staff not to be 100% available to follow their usual reporting routines.”
MSPs have been increasingly targeted by ransomware hackers and the expected demise of 25% of all MSPs due to the rise of cyber threats has left many small firms questioning if they entrust their IT needs to an outsourced third party. Instead, many financial firms are leaning on compliance vendors who host their respective solutions on AWS, Azure and other established cloud platforms. Urgency trumps risk and some firms were left with the unwelcome choice of shutting down or taking the leap towards digitalization to help them limp along and get through the COVID crisis.
Through COVID, “working from home, less face-face interaction and general uncertainty – have led to a surge in cybercrime activity,” according to CUBE. “Now, more than ever, businesses should be looking at ways to automate their compliance systems and implement smart, technological solutions that reduce human error, free up resources and allow individuals to focus on valuable tasks such as implementing effective regulatory change.”
Compliance vendors recognize the opportunity that digitalization brings for them and their clients. Expect to see augmented offerings with enhanced cybersecurity provisions and other services. Their viability and survival depend on it. Vendors supporting multiple firms with the same solution can easily identify trends, troubleshoot and predict future hiccups in time to get ahead of problems before they start. This ability to literally be “plugged in” to what’s happening around digitalization efforts and firms’ operations in remote as well as office environments offers clients an advantage to stay ahead of cyberthreats by banding together.
“We need to see the industry as a whole stepping up to deliver the kind of fast, digitally native products to SMEs,” a statement made by DueDil, broadly applies to all providers, not just those developing compliance solutions. Similarly, Sphonic’s statement also applies here, “In the new-norm, institutions need to embrace the digital opportunity in driving efficiency in onboarding times, cost and customer experience without compromising risk.”
Large firms have evolved with their own legacy in-house and networked third-party solutions over the years to protect them from cyber threats and non-compliance. Midsize firms, arguably more nimble, have been migrating to the cloud for some time to gain a competitive advantage over the larger firms that they compete against. Small firms have struggled with operational costs, the burden of viability and the requirements to remain compliant. Going forward, technologically advanced compliance vendors have an opportunity to align their offerings with the needs of small businesses – if they do, they may stay afloat through this crisis and emerge on the other side of it even more prosperous than they were before it began.