Running a successful company/business requires a lot of planning, strategizing, and implementation. These operations require documentation which is a vital part of any business. Documenting all business operations makes regulatory reporting easy.
Compliance is one of the main reasons businesses need to file reports with the relevant authorities regularly. It helps to ensure transparency across industries like insurance, healthcare, banking, and more. Effectively reporting helps to keep businesses from bad vices like market manipulation, money laundering, and fraud.
Continue reading to understand the ins and outs of regulatory reporting.
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Table of Contents
Do All Businesses Need Regulatory Reporting?
Regulatory and financial reporting is necessary because every company/business should provide them to the regulating authority. Reporting is even more critical in the financial system as slight misreporting can seriously impact the market.
But wait, what is regulatory reporting? It is a process of availing company reports and other relevant information to regulatory agencies as per the law. This helps ensure that the business is compliant.
The reporting information allows regulators such as the Federal Reserve System, FCA, ESMA and others to detect a problem in advance. This helps to mitigate risks averting a major situation by advising the affected business. Besides risk assessment, regulatory reporting is vital as it is what the public, investors, and other players use to gauge a company.
What Should Businesses Include In Regulatory Reporting?
The reporting usually includes the most vital documents in a business. Regulators use these documents to do business assessments and determine compliance. Some of the documents that companies need to file include;
- Assets report
- Liability reports
- Capital reports
- Income reports
- Expenses reports
What Are The Benefits Of Effective Regulatory Reporting?
Effective regulatory reporting benefits businesses, government, investors and the general public. By ensuring the law is followed by every company, regulators create a fair operating ground for everyone. Some of the main benefits are discussed below.
- Improves Transparency
By providing the relevant documents about running your business, it is one step toward showing commitment to transparency. Companies that strive to ensure their information is available to investors and regulatory agencies tend to gain more investors and public confidence. As a rule, always ensures that the available information is up-to-date and accurate.
- Assists In Averting Legal Repercussions
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Regulatory reporting is a legal requirement for businesses. Failure to file can lead to legal repercussions; that is, if the regulator takes legal action, it can lead to massive fines or jail terms. In extreme cases, you might lose your business if massive malpractice is discovered.
- Prevents Economic Repercussions
When a company files regulatory reports, it can help to detect any financial or operational issues. Most of the time, regulators are swift in plugging the cracks. If you don’t file, detecting any anomaly that turns into a big financial crisis can be hard to rectify. Fines, compensations and other damages can cost a company a lot to settle.
- Improved Investor Confidence
Investors will only be interested in performing companies and businesses. One way to win investors’ confidence is by providing the latest information about the company’s performance and operations. Filing regulatory reports is one of the ways investors can access your business information. As a business, always ensure that filing of necessary documents and information is timely done.
- Helps To Streamline The Market
Once every company files its reports, the regulator scrutinizes them all. Through thorough analysis, it’s possible to weed out non-compliance businesses. This helps to level the ground; thus, every business can compete fairly.
Are There Risks Associated With Regulatory Reporting?
Although there are benefits associated with regulatory reporting, there are also risks. These risks arise from different issues, some beyond the company’s control. However, businesses should always be ready to deal with these risks to maintain their efficient report filing.
- Strategic Risk
Usually, strategic risk arises when the people running a business make and implement unsuitable policies. A lapse in company strategy can affect the ability to file accurate reports resulting in legal and economic repercussions. To mitigate this, businesses should continually assess decisions before implementation. Also, employing a competent board of directors is vital in averting risks.
- Compliance Risk
Compliance risk arises when a business can’t fulfill its obligations as the law requires. When a company can’t provide necessary reports timely, it faces compliance risk, which can also lead to legal actions. Avoiding compliance risk is only by ensuring company policies are always followed.
- Operational Risks
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Human activities, such as errors, failed processes and technological challenges, bring operational risks. This kind of risk covers a broad area and can strike anytime. For instance, a slight error when employees are entering data can compromise the whole report. Another example is when there is a power failure or network breakdown. To avoid operational risks, the company should implement the proper countermeasures like backup networks, power generators and hiring private audits.
Emerging Trends In Regulatory Reporting
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Due to innovations and the evolution of information technology, there are some emerging trends in regulatory reporting. The major one is adopting and utilizing emerging technologies such as automation. With ever increasing technology and Artificial Intelligence, it is estimated that it will be possible to automate the entire process in the future. Some companies and businesses are using robotic process automation to speed up operations.
Regulatory reporting is vital for the business to operate without legal implications. Besides the legal consequences, filing these reports improves business confidence and transparency. To be on the right path, timely preparation and filling of accurate regulatory reports is paramount for the business to thrive.
Last Updated on September 22, 2023