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Significance of Technology Infrastructure in optimizing Compliance Processes

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By Sandeep Agrawal Director and Co-founder Teamlease Regtech

Technology is transforming the way we manage our day-to-day routines including our health, education, etc., and has also redefined the way businesses are managed today. In the last 5 decades, technological innovations for businesses can be classified into three phases.

Sandeep Agrawal

1. Enterprise Applications;  Introduced in the 1980s,  these solutions were designed for specific business functions with limited applications. For Ex; Tally helped businesses shift from paper-based accounting (Bahi-Khata).

2. Business Process Management Suite;  Introduced in the 2000s by Gartner, is referred to as enterprise solutions to automate repetitive activities and offer analytical capabilities.

3. Digital  Process Automation;  These solutions combine human elements with different software applications whilst using technologies like AI, ML & RPA. For example; Bank Account opening through a Mobile App with minimal manual engagement is a classic example.

Evolution of Regulatory Environment in India 
The history of regulatory compliance dates back to the onset of modern society. Even in the ancient and medieval ages, the legal systems of empires and kingdoms ensured that merchants could not supply sub-par goods or deal in counterfeit currency. Over time, compliances and regulations have evolved to ensure the core ideals of ensuring the quality of goods/services, and the prevention of tax evasion and fraud.

Before the Year 1947, Britishers passed various legislations in India with the motivation to preserve their commercial and economic interests. Post-Independence, the regulatory environment has evolved over the decades to suit the ever-changing business environment.

Over the years, both Regulators and Corporates have embraced technology to enhance the overall compliance processes. This adoption can be categorized into three phases:

1. Publishing updates via the Internet:  Before the introduction of Regulatory websites during the Year 2005, paper copies of the Acts & Rules were the only option. The sheer volume of physical copies maintained by compliance professionals is hard to imagine. Today digital repositories of acts and rules on government portals compiled by RegTech organisations have eliminated the need to maintain paper-based repositories.

2. Document Management Software (DMS);  Various Laws in India require the preservation of physical records for 03 – 06 years. Businesses have struggled in the past with large storage space requirements, improper handling, and fire threats among other concerns. Business models were built around the management of these physical documents but with the introduction of DMS, things changed. Drastically.

3. Workflow-Based Compliance Management Platforms;  Mid-sized and large corporates consistently found it difficult to monitor compliance status in real-time. Mainly due to the nature of business and the vast geographical spread of offices & plants. Simple platforms were introduced during the Year 2011 offering basic workflows to track and manage compliances across law of the land. Allowing organisations to stay on the right of the law.

4. Monitoring of Regulatory Changes;  The fluid regulatory environment  (3,000+ changes over 2,500 regulatory webpages in India)  in the absence of a single regulatory window makes it practically impossible for professionals to stay on top of these updates. RegTech Companies in India have created technology solutions to identify such changes across all regulatory web pages without any need for human intervention.

5. Introduction of Mobile Platforms;  Mobile phones have become an integral part of our lives and even businesses have adopted various mobile features to solve business problems. RegTech Companies in India have been investing in Mobile platforms to facilitate a “One-Click” view of all compliance statuses with a direct ability to initiate communication from the application to eliminate the need for review meetings.

6. Compliance Automation Platforms; With the advent of regulatory technology Corporates have achieved a level of maturity in their compliance monitoring processes. However, the preparation of returns, registers, and challans among other compliance types is still tedious and expensive. Organizations need automation to reduce the  Cost of Compliance. Automating the compliance document generation process and eliminating any manual intervention regtech platforms can help Corporate India achieve efficacy in its compliance programs.

Few RegTech Companies in India have been investing significantly in automating the compliance document generation for multiple regulators like Labour Laws  (Registers & Returns), SEBI requirements  (PDF Intimations / XBRL Filings), MCA Laws  (Meeting related documentation and E-Forms / other Filings), etc. These automation layers will digitize the entire compliance process and will significantly reduce the need for manual intervention, resulting in higher accuracy and a considerable reduction in the cost of compliance.

And, lastly  Straight Through Filings / API-based Filings facilitate end-to-end digitization of Compliance Processes for both Corporates and Regulators. The introduction of GST by the Finance Ministry supported API-based filings and approved Private players to integrate their platforms with regulatory platforms to facilitate automatic filings. Other Ministries shall adopt and replicate the same to encourage Private players to invest more in such technologies. Public Private Partnerships (PPPs) between Regulators and RegTech Companies can create a compliance ecosystem for paperless, cashless, and presence-less compliance and also facilitate a simplified compliance administration for regulators.

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