Darwin’s Survival: KIDs for PRIIPs
Much of what has been accomplished in the PRIIP Regulation, such as enhancing investor transparency and comparability through greater disclosure to clients can be looked at from the point of view of the work involved, but there is also another side to this coin. In this changing environment, adapting to regulation is a great way to ensure longer term business continuity. There are leading firms who are embracing this change, seeing the necessity to adapt to the world.
From when we have had discussions with different financial institutions in the marketplace, we see that there are fewer of them who consider an exit strategy for their dealings in the financial product issuance and distribution business as a result of these increased regulations. Many of these firms are continuing to offer their different types of funds, investments and strategies in the market, but are instead adapting to the applicable regulatory requirements.
In this paradigm it is necessary to consider the KIDs for PRIIPS regulations that are impacting you as a financial organization. A key resulting benefit will be the huge improvements on comparability and technical details compared to former regulatory standards. This regulation in particular has done a great job of unifying risk assessments for financial product and by creating comparability for investors.
Taken from another point of view, this is important from a best practices standpoint, where organizations are providing better services and transparency to their clients and end investors. When these are accomplished in a way superior to competitors this can result in a win-win situation for both the customer/client as well as the offering institution or service provider.
Organizations may need to adapt their businesses to address these new requirements, but it is surely better than putting your proverbial head in the sand and hoping for an alternative solution. More effective is to address comments and suggestions to the regulatory oversight group, and strive for efforts to best align – like e.g. https://www.bvi.de/start/. This approach will help organizations with the longer term change and trends, as well as being capable in the short term as they become confronted with them.
Some of the most common challenges we have seen for firms in addressing this specific regulation, include
- Categorization of products and consulting on what part of the regulation has to be applied to what extent
- Collecting of data necessary to fulfill regulatory requirements
- Implementing effective daily monitoring routines of the risk indicators for liquid assets
The best approach for adapting to these challenges is knowing that the only constant is change and the trait defining survival will be in this ability to adapt. Here at Anevis we have had the opportunity to work with financial institutions on the effective implementation of these, even as requirements emerge and regulatory deadlines shift. And we plan to take this role going forward.