Enhancing Governance: The Role of Automation in Bank Policy Management

In reflecting on the past year and a half, bankers cannot overlook the disruptive factors that have shaped their financial landscape. High-inflation, fed rate increases, interest rate volatility, bank closures, the enduring impact of the pandemic, and the crash of the crypto markets have all left their mark and influenced the perspectives of regulatory bodies such as the Consumer Financial Protection Bureau (CFPB).

Furthermore, after a period of respite in 2020 and 2021, onsite examinations are now returning to their pre-pandemic levels. This renewed focus on regulatory compliance calls for organizations to pay close attention to various areas, with one of the most crucial being the creation, updating, communication, and tracking of organizational policies and procedures.

Traditionally, this process has been manual, consuming countless hours of compliance professionals' time. However, considering the criticality of maintaining compliance across all fronts, relying solely on manual processes is no longer sufficient. Policies play a vital role in establishing and communicating compliance responsibilities to employees, addressing legal requirements, and ensuring that compliance obligations are seamlessly integrated into an organization's business processes. Recognizing this, banks should explore the adoption of policy management software, which can prove to be an invaluable tool.

By leveraging policy management software, banks can effectively stay up to date with evolving regulations, mitigate the risk of compliance breaches, enhance operational effectiveness, foster transparency, and ultimately reduce costs. Automating the management of policies and procedures allows compliance professionals to focus their expertise on higher-value tasks while ensuring a consistent and streamlined approach to compliance.

Benefits of Automating Policy Management

According to the Consumer Financial Protection Bureau (CFPB), banks are expected to maintain policies that are current and complete, while also being accessible to employees to reference in their day-to-day activities. Unfortunately, financial services organizations often don’t meet regulators’ policy expectations. The Federal Deposit Insurance Corporation (FDIC) has said that policies are historically the leading category of “Matters Requiring Board Attention.”

This is due to the traditional way of managing policies, which at many banks, is a manual process using email, word processing, spreadsheets, and a company intranet to manage large-scale compliance updates. By automating policy management, banks would realize several key benefits.

The first is increased productivity. Automating policy management eliminates manual, time-consuming tasks associated with creating, updating, and tracking policies. Compliance professionals can focus on higher-value activities, leading to increased productivity and better utilization of their expertise.

Automation also ensures that policies are up to date with the latest regulatory requirements. It helps banks stay in line with changing laws and industry standards, reducing the risk of compliance breaches and associated penalties. An automated policy manager can also provide a centralized repository for policies, making it easier to organize, access, and communicate them across the organization. This improves governance and ensures that employees have a clear understanding of compliance responsibilities, reducing operational risks.

Automated policy management also improves the examination process by maintaining a comprehensive audit trail of policy changes, approvals, and employee acknowledgments. This transparency helps demonstrate compliance efforts to regulators, auditors, and stakeholders.

As financial services organizations grow or undergo regulatory changes, automated policy management scales easily to accommodate new policies and updates. It ensures consistent implementation and adherence to policies across multiple branches or departments. Automated systems can also provide real-time monitoring of policy compliance, alerting management to any deviations or potential risks.

Manual policy management can be resource-intensive, requiring significant time and effort from compliance professionals. Automation reduces administrative overhead, freeing up resources that can be allocated to other strategic initiatives. It also mitigates the financial impact of non-compliance and associated penalties.

Selecting the Right Policy Management System

When selecting a new policy management software, it’s important to find an end-to-end solution built specifically for financial services organizations. Policy management software should help financial services leaders make informed decisions with greater clarity and confidence.

Specifically, the solution should include:

• Regulatory alerts
• Policy considerations for regulatory updates
• Policy templates
• Regulation overviews

When it comes to implementing new software, the process should be smooth and hassle-free. Bank leaders should look for the ability to transfer data seamlessly through bulk imports of existing users and documents. This allows for a quick upload of all data to the new policy system, eliminating the need for manual reentry.

An ideal solution should also include a range of essential features designed to streamline policy management. Configurable and reusable workflows, a human resources information system (HRIS) data exchange, an industry-specific table of contents, and single sign-on (SSO) capabilities are all necessary in today’s high-speed work environment. These features guide administrators through the system, making it easy to set up user profiles, input information, and foster effective communication among users for effective policy management.

Prompt updating and communication of policies and procedures are crucial to meet regulatory requirements. Policy management software should address this by incorporating features such as due dates, reminder emails, report subscriptions, and audit change reports. Additionally, intuitive dashboards are available for both employees and managers, ensuring that everyone stays on track with their scheduled tasks, and ultimately preparing the bank for examinations.

Tracking employee policy and procedure acknowledgments is of utmost importance, and automating parts of this process can save a significant amount of time. However, policy acknowledgment is just the beginning. Bank leaders need to ensure that employees truly understand the policies. That's why automated policy management solutions go beyond simple acknowledgment. The top systems incorporate additional features to facilitate effective communication of policies and procedures. A quizzing function allows for assessing comprehension of recent changes, while a centralized repository with full-text search ensures that employees can easily access the most up-to-date versions.

By embracing automated policy management solutions, banks can navigate the complexities of regulatory requirements, reduce compliance risks, enhance operational effectiveness, and demonstrate a strong commitment to governance and risk management.

Christopher Boersma, CRCM, CAMS, CISA, is a product manager at BAI, a nonprofit independent organization that delivers the financial services industry’s most actionable insights. For more information, visit www.bai.org.