Key Takeaways
While automation is widely adopted in regulatory reporting, fragmented implementations introduce inefficiencies that compound over time—the “hidden multiplier effect”—which lead to duplicated logic, brittle dependencies and increased risk, ultimately driving up costs.
Disjointed automation across the reporting lifecycle results in opaque data lineage, inconsistent standards and manual reconciliation efforts. Without a unified infrastructure, institutions struggle to adapt quickly to regulatory changes.
Straight-Through Processing (STP) offers a modern, scalable approach by enabling seamless data flow from source to submission within a single governed system.
In today’s regulatory environment, automation is no longer optional—it’s the standard. With the pace to meet ever-evolving regulatory demands accelerating, many financial institutions have heavily invested in automation, yet find themselves still facing persistent inefficiencies, rising costs and mounting risk.
The challenge in regulatory reporting today isn’t a lack of automation—it’s the wrong kind of automation: siloed automation, where bespoke solutions—in isolation—are implemented into different stages of the regulatory reporting process. The unintended overlooked consequence of siloed automation is a hidden multiplier effect.
Dan Shmueli, Vice President of Strategy, Regulatory Solutions, Americas, Nasdaq, discusses the negative impact—the “Hidden Multiplier Effect”—of siloed automation in regulatory reporting.
The hidden multiplier effect refers to the unseen, incremental impact of inefficiencies that is not immediately visible or directly measurable in traditional models or short-term metrics, but whose full impact compounds, significantly incurring costs and risks over time.
While investments in automation are traditionally intended to reduce costs, free up time from manual tasks and/or enable further innovation, when implemented in isolation, it can introduce hidden costs and risks into the regulatory reporting process.
The hidden multiplier effect refers to the unseen, incremental impact of inefficiencies that is not immediately visible or directly measurable.
Fragmentation Across the Regulatory Reporting Lifecycle
Each isolated automation, data advancement between stages and custom integration adds fragility into the reporting architecture, increasing the risk of compounding errors. A misaligned data field or outdated validation rule can permeate across multiple reports and trigger a cascade of reconciliation tasks, troubleshooting cycles and audit escalations. A regulatory reporting process that is fragmented across teams, divisions and operations, and has manual adjustments built in throughout, increases operational risks and key person risks.
While siloed automation may offer short-term relief, it creates long-term complexity by duplicating logic, fragmenting data flows and introducing brittle dependencies between disparate systems along the regulatory reporting lifecycle.
A misaligned data field or outdated validation rule can permeate across multiple reports and trigger a cascade of reconciliation tasks, troubleshooting cycles and audit escalations.
Even with automation and integration, the lack of end-to-end integration across the full regulatory reporting lifecycle requires maintenance, testing and updating of every dependency to ensure alignment. When new reporting obligations emerge from evolving regulatory frameworks, the cost and risks of adaptation grow exponentially.
Limited Scalability and Opaque Data Lineage
When automation is developed in isolation for different steps of the regulatory reporting process, the duplicated effort in building similar data pipelines, validation rules and transformation logic costs not only valuable time and resources, but also creates inconsistencies in data processing, reconciliation and interpretation.
Without an integrated infrastructure, every new reporting obligation incites another series of development, testing, reconciliation and controls, compounding operational overhead. This systemic inefficiency slows down reporting cycles and obstructs institutions from maintaining a consistent regulatory posture across the enterprise.
As new data pipelines, validation rules and transformation logic are built to adapt to a regulatory change amid constantly evolving regulatory frameworks—each time from scratch—the resulting patchwork of disparate automated systems severely limits an institution’s ability to scale and respond quickly. This reactive model of maintaining systems by manually applying updates across multiple fragmented components in parallel slows time-to-compliance and risks reporting delays and inconsistencies.
The resulting patchwork of disparate automated systems severely limits an institution’s ability to scale and respond quickly.
When report logic and data transformations are scattered across the regulatory reporting lifecycle, the governance gap increases the risk of inconsistent data and standards where updates are applied insufficiently or unevenly, leaving poor data lineage and auditability. Without centralized oversight and sufficient transparency, minor oversights can escalate into material compliance failures.
A Modern Approach to Regulatory Reporting: Straight-Through Processing
A patchwork of disjointed automations creates an illusion of progress that can increase costs and risks.
Rather than automating individual steps in isolation, the unified, scalable platform approach of straight-through processing (STP)—which operates with a single, governed system where data moves from seamlessly from source to submission—presents as a solution to the hidden multiplier effect often seen in regulatory reporting.
STP isn’t merely automation. It’s an approach that meets the modern demands of regulatory reporting. By establishing an end-to-end integration across the full regulatory reporting lifecycle, firms can enhance their transparency, explainability and traceability, to respond to constantly evolving regulatory and technical changes.
A shift from siloed automation to STP for financial institutions is more than technical—it’s strategic, helping firms adapt to internal and regulatory changes faster, thereby improving an organization’s agility to seize growth opportunities. Uncovering the hidden costs and risks of disconnected automation is just the start to building a scalable, transparent infrastructure that is fit for the future of regulatory reporting.
Beyond Automation: Why Straight-Through Processing Is the New Standard for Regulatory Reporting
To learn more about meeting the modern demands of regulatory reporting, download Nasdaq’s whitepaper on the fundamentally different approach that goes further than ‘just automation.’
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