Alok Tiwari: Delivering Scalable and Cost-Effective Solutions to Address Regulatory Compliance Challenges in Financial Services

In the last few years, the volume of regulations has surged unprecedently. As a result, complying with these regulations has not only become crucial but also challenging. With incessantly revised and new regulations, industry players, especially in financial services, face enormous challenges in managing regulatory compliance. Risk and compliance management is imperative in the financial services industry that directs banks to the government's guidelines. Many financial institutions are still operating with an expensive, old-school approach when it comes to managing regulatory compliance. CogNext is a regulatory compliance platform that offers next-generation compliance management solutions to financial services providers using cognitive technologies.

In an interview with Analytics Insight, Alok Tiwari, Co-Founder and CEO of CogNext, shares insights into his inspiration behind the development of the company and how it helps address banks' risk and regulatory compliance challenges.

1. Kindly brief us about the company, its specialization and the services that your company offers. 

Cognext has built the industry's first no-code risk & regulatory compliance platform, Platform X. Platform X that leverages AI/ML makes regulatory calculations and compliance easy-to-manage, interactive, scalable and less costly for financial institutions, large and small.

Platform X offers a faster, better and cheaper alternative to address the most urgent and critical regulatory challenges in a post-pandemic scenario. Since our inception, in a short span of 24 months, we have won major banking clients in North America, Middle East, Africa and India. We currently have over 15 installations globally.

Our clients include a top 25 global banks, a top 5 banks in the US, top 3 banks in Saudi Arabia, a leading bank in Africa, and one of the largest non-banking finance company (NBFC) in India, a leading private sector bank in India.

We have entered a fintech partnership with Infosys and TechMahindra. We are also working to build partnerships with leading hyperscaler such as AWS, Microsoft Azure.

2. With what mission and objectives, the company was set up? In short, tell us about your journey since the inception of the company?

The rapidly changing regulatory landscape is increasing the cost of risk management & compliance for banks and financial institutions exponentially. Banks have seen over a 500% increase in risk & regulatory compliance post the global financial crisis of 2008. Globally, banks spend around $270 billion every year on risk and regulatory compliance-related activities, out of which $128 billion/year is their spent-on technology. Not to forget $400 billion in fines by U.S. and UK banks in 2020.

Despite massive spent on risk & regulatory compliance, banks are not able to address the challenges posed by new regulatory environment which demands greater transparency, explainability, responsiveness, and audibility of various regulatory submissions and risk disclosures. Most incumbent platforms use legacy technologies- inherently expensive, proprietary, closed, fragmented and resource-intensive.

Founders saw the opportunity to build a modern risk and regulatory platform to disrupt the way banks deal with risk and regulatory computations. The founding team's deep domain knowledge, tech insights, and global client relationships helped in securing quick Proof of Concepts (POC) to validate the idea and launch the industry's first cloud-native big data platform for risk and regulatory compliance.

3. Brief us about the proactive Founder/CEO of the company and his/her contributions towards the company and the industry. 

Alok Tiwari has done bachelor's in engineering and a master's in management. He leads overall strategy, sales, partnership & client success for Europe, UK and North America. He has previously held leadership positions with Deloitte, CRISIL, among others.

Sandip Mukherjee has graduated in B.Tech. (IIT, Kharagpur) and PGDM (IIM Ahmedabad). He leads sales, partnership & client success – GCC, Africa and South Asia and product development. He has previously worked with Deloitte and ICRA.

The founders rank among the most sought-after subject matter specialist in the risk & regulatory domain and are considered a thought leader on risk management both in India as well as globally. They have developed world-class competencies in high-stakes risk and compliance areas transforming international finance, such as Basel III/IV, Credit, Market & Operational Risk, Basel III, BCBS 239 (Risk Data Aggregation & Reporting), Risk Analytics, ICAAP, CCAR/Stress Testing, Model Risk Management, and IFRS9.

Alok and Sandip previously co-founded Aptivaa in 2005, a vertically focused risk analytics firm to deliver risk management solutions to the global financial services industry. Under their leadership, Aptivaa has achieved significant milestones in its journey thus far, emerging as a leading risk analytics firm with 150+ global clients across 35 countries comprising highly respected names in the financial services industry.

4. Tell us how your company is contributing to the AI/Big Data Analytics/ Cloud Computing industry of the nation and how the company is benefiting the clients.

Platform X is the industry's first platform that comprehensively addresses the biggest industry challenge relating to explainability using a fully automated attribution framework. Any compute in the platform is configured using a declarative metadata framework that stores all computations both at intermediate as well as final output level, automatically tracks all changes in input factors and stores every version of the model across time offering complete traceability to explain any changes. The model explainability is becoming a central tool in dealing with issues surrounding bias and ethics in using AI.

To support increased Regulatory demands for complete transparency, Platform X uses a visual self-documenting framework that provides a full drill-down of computation steps, formulae, data used along with the execution logic.

Platform X leverages AI to drive automation through the model life cycle resulting in a very high degree of efficiency in building, executing and managing a large number of models. It offers an AutoML framework to build challenger models to accelerate the model development process. The challenger modelling framework assists a data scientist to significantly reduce time and improve the accuracy of models.

5. How is Big Data/AI evolving today in the industry as a whole? What are the most important trends that you see emerging across the globe?

Post-global financial crisis regulatory changes have resulted in a massive explosion in the number of models used by FI's to dynamically forecast, monitor and manage risks. The emergence of big data and AI has significantly transformed the way banks view data and analytics (DNA) to build predictive risk models. Today, most banks are augmenting their traditional analytics datasets with alternative data sets using customers' digital footprints across social, e-commerce and mobile to gain better insights on risk. The emergence of AI/ML is significantly changing the bank's ability to predict customer's behaviour and risk profiles. Many banks have started using NLP techniques to analyse financial statements, create sentiment-based scores based on social media, online news feed for credit portfolio monitoring. They also use ML techniques to create early warning indicators.

Given the cost, efficiency and performance advantages, banks are rapidly moving the business applications to the cloud. The ongoing pandemic has significantly accelerated the adoption of cloud platforms to run advanced analytics.

6. Please brief us about the products/services/solutions you provide to your customers and how do they get value out of it?

Platform X offers a faster, better and cheaper alternative to address the most urgent and critical regulatory challenges in a post-pandemic scenario covering expected credit loss computation (IFRS9/CECL), dynamic balance sheet forecasting, capital calculations (Basel III/IV), stress testing and what IF/scenario modelling by automating model development, model execution, model monitoring and regulatory reporting.

We have a track record of delivering a 50% time and cost reduction in risk and regulatory function while delivering 10X improvement in performance.

7. The industry is seeing a rising importance of Big Data Analytics and AI. How do you see these emerging technologies impact the business sector?

Platform X is built on cloud-native big data technologies such as Spark, Mongo, HDFS and a UX designed for the business user. The choice of these technologies brings high performance, AI-driven automation, scalability and open API-based configurability at a fractional cost compared to legacy technologies.

These technologies address key industry issues around explainability, transparency, reproducibility and high-performance computing.

8. What is your biggest USP that differentiates the company from competitors?

Leading incumbent platforms use legacy technologies that are inherently expensive, proprietary code-based, closed, fragmented and resource-intensive.

Platform X is a unified, no-code platform to run advanced analytics in a highly automated, cost-effective and open way. Using our platform banks can build, deploy, manage and monitor a large number of models very rapidly. It provides greater transparency, explainability and audibility at a fractional cost.