What is Regulatory Compliance Risk? And How Does
Data Archiving Help?

By virtue of the type and volume of data they manage, financial services companies take on significant regulatory compliance risk. Compliance officers face the daunting task of understanding and managing adherence to an ever-increasing number of complicated laws and regulations. A veritable acronym soup of regulations include rules for both data privacy and data retention–and the risks corresponding to these mandates can often seem to be at odds with each other.
Given the rapidly changing regulatory landscape, it can be difficult to understand regulatory compliance requirements to accurately assess and manage the associated risk. Let’s take a step back and start with the basics and explore how solutions like data archiving can help.
What is Regulatory Compliance Risk?
Regulatory compliance is an overarching term that refers to an organization’s practice of following the laws and regulations that govern its business.
Regulatory compliance risk is, simply, the chance that your organization might break one of the laws that regulates how it does business and be penalized for doing so.
Regulations can be specific to both the industry and the jurisdiction in which a company does business. Some 128 countries have data privacy laws; many of these regulations only came into being within the last five years and often apply to companies within and outside their geographical area. For instance, consider the well-known GDPR legislation: These stringent data protection rules cover not just European companies but any organization that does business or has customers in the EU.
Companies in the financial services (finserv) industry are hit with a double-whammy of sorts when it comes to regulatory compliance. First, of course, they move massive amounts of money. With that comes massive volumes of sensitive customer data that is generated—and subsequently stored—on a daily basis. These attributes combine to make finserv firms a flashing target for cyber criminals and hackers. As such, these companies are subject to a rapidly growing number of regulations established to both protect consumer rights and prevent damage to the global economy that could result from a security breach.
And of course, with these regulations comes significant risk to organizations scrambling to understand and comply with them.
Regulatory Compliance Risk in Financial Services
Regulatory compliance risk in the finserv industry is complicated not just by the volume of data that is managed—and that volume is tremendous—but also by the type of data used by this industry. Whether a firm is small or large, chances are it’s dealing with myriad types of sensitive customer and employee data:
  • Personal customer data (name, address, birthdate, Social Security number, etc.)
  • Credit information
  • Mortgage and loan information
  • Transaction details
  • Email and other logged communications
  • Personal employee information and salary information
  • Analytics and marketing data
  • And more
To complicate matters even further, these different types of data are typically stored in different formats on different systems, all with varying levels of security. Considering that all of this information is sensitive and simultaneously subject to a number of different regulations, the compliance risk associated with the variety of data and systems is substantial.
The Cost of Regulatory Compliance in the Real World
No matter how you slice it, maintaining regulatory compliance is expensive.
With the increasing prevalence of cyber security threats, firms large and small have been forced to make significant investments in both human and technology resources to adequately monitor and manage the risk associated with non-compliance. The work of compliance officers and their teams is more important than ever for executing effective strategies to identify and mitigate risk. At the same time, software solutions have evolved to provide automated tools for managing regulated and unregulated information at scale.
Though these investments are substantial, failing to meet compliance requirements has been reported to be nearly three times more costly. According to figures from the Association for Intelligent Information Management, the average cost of compliance for all organizations in a 2017 study was $5.47 million, while the average cost of non-compliance was $14.82 million. Harkening back to the GDPR example, fines start at $11 million or 2% of annual revenue for compliance violations.
And it’s not just huge, international corporations that are subject to regulatory compliance risk. Since all finserv companies handle similar types of regulated data, they are all subject to scrutiny and costly repercussions when not in compliance.
Expenses associated with non-compliance accumulate not only with the fines and penalties associated with breaking regulations, but also with lasting costs like damage to customer trust, loss of investor confidence, diminished employee morale, and hits to corporate reputation.
Compliance Strategy: Data Archiving
One of the ways to reduce data compliance risk is efficient implementation of data retention policies and systems to monitor their implementation and enforcement. Unfortunately, this can present a herculean task for compliance teams dealing with the volumes–and wide variety–of sensitive data in the financial services industry.
This is where software solutions can help. From a technology perspective, there are two approaches to managing the mountains of private data that must be retained: backups and archives. While both approaches store data, they were created for different purposes.
A backup makes a copy of all data so that, should that data become damaged, corrupted, or missing, it can be recovered quickly. Backups are important for ensuring business continuity, for instance, to restore a database to a last-known-good state following a software or hardware failure. However, the storage space and costs associated with backups are significant. Given the vast quantities of data produced in a finserv company in a single day, backups are not a long term solution for compliance-related data retention.
The process of data archiving, on the other hand, handles inactive or historical data. Archiving stores a copy of this data for legal or compliance reasons. Archiving inactive data is more efficient than straight back-ups, freeing up storage space and bandwidth for current transactions.
In addition to freeing up valuable and expensive storage space, the data archiving approach meets additional requirements for reducing regulatory compliance risk:
Immutable Storage. An important aspect of data retention regulations is that data be stored in an unalterable state. Data archiving solutions use WORM (write once, read many) storage to ensure that data is immutable. In a WORM system, data cannot be changed, overwritten, or deleted, even by the administrator. The same cannot be guaranteed by backups alone.
Access tracking. Archiving provides a granular level of detail about who accesses the data and when, which is required for audits as well as for analyzing any security incidents.
Scheduled destruction. Once data is no longer required for regulatory compliance purposes, it can be destroyed to free up space. Destroying unneeded data also removes the risk of it becoming compromised. A data archive solution should have scheduled data destruction built in, removing this task from the compliance officer’s plate.
Management of disparate data. A data archiving solution that can handle different types of data efficiently is an absolute must for finserv companies that transact structured and unstructured data from various systems.
Get Started with Data Archiving
Interested in how a data archiving solution can help take the headache out of managing regulatory compliance risk? Take a look at our Omni Archive Manager, or reach out to talk to one of our specialists.

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Rijil Kannoth

Head of India Operations

Rijil is responsible for overseeing the day-to-day operations of Infobelt India Pvt. Ltd. He has been integral in growing Infobelt’s development and QA teams. Rijil brings a unique set of skills to Infobelt with his keen understanding of IT development and process improvement expertise.

Kevin Davis

Founder and Chief Delivery Officer

Kevin is a co-founder of Infobelt and leads our technology implementations. He has in-depth knowledge of regulatory compliance, servers, storage, and networks. Kevin has an extensive background in compliance solutions and risk management and is well versed in avoiding technical pitfalls for large enterprises.