When it’s time to face a regulatory audit, you can expect it will involve a lot of work: reviewing your firm’s adherence to regulatory rules, producing any number of documents and reports, evaluating the procedures and processes followed, and ultimately identifying potential risk areas. Considering all the work involved once the audit begins, it is worth taking all the measures possible to prepare for it. The most critical step of all is to make sure that your technology is also up to the task of a regulatory audit. There are a number of areas to review that will help you be better prepared.
Technology is probably the backbone of most of your firm’s processes and procedures. A challenge for a number of firms is keeping documented processes and procedures up to date as technology evolves. For example, do your asset movement procedures use the latest best practices and technology to minimize risk? This would include how your firm utilizes its internal systems and those offered by your custodian to ensure each transaction is verified and properly approved.
Remember that depending on the experience of the auditor, they may be aware of what is “standard” in the industry based on audits of other firms. If you’re not fully leveraging your technology to minimize various risks, you don’t want to be informed of this by the auditor.
Another area to review is the criteria and evaluation process that your firm followed in selecting your technology providers and solutions. Many of your firm’s technology solutions fulfill critical areas of your business. Whether it is your reporting system, trading, CRM or imaging, it is important to be able to demonstrate the level of detail and care that went into your selection of each provider. Firms that have used the same solutions for years might have limited information in this area. If that is the case for your firm, consider briefly documenting your current experience with your existing providers. Specific areas to highlight include reliability, security, service levels and the scalability of the solution.