Financial Services
Leveraging quantum computing for compliance
Quantum computing is revolutionising a range of industries, including governance, risk, and compliance (GRC). It applies the principles of quantum mechanics to process financial regulatory compliance data that is beyond the capability of traditional computers. Although quantum computing is still experimental in nature, it is expected to optimise investment portfolios and manage financial risk with greater efficiency.
Thus, financial institutions can make informed investment and fund management decisions while minimising risks and maximising returns. In today’s fast-paced world, timely data-driven decisions help you navigate the volatility. Banks can efficiently detect money laundering and fraud and perform KYC, monitoring, and surveillance.
This article discusses the potential role of quantum computing in risk, governance, and compliance with regulations such as the Foreign Account Tax Compliance Act (FATCA), the Markets in Financial Instruments Directive (MiFID II), the Health Insurance Portability and Accountability Act (HIPAA), and the General Data Protection Regulation (GDPR). It also assesses how quantum computing measures up to the traditional data protection methods.
Quantum computing in compliance, risk, and governance
The field of GRC comprises complex decision-making, data analysis, and regulations. Quantum computing, with its exceptional capabilities, enables accurate risk assessment, decision-making, and financial regulatory compliance. Here are some of the quantum computing applications in finance –
Real-time fraud detection
Quantum computing has the potential to enhance fraud detection algorithms by processing vast datasets. It may swiftly analyse transaction patterns and identify anomalies, reducing financial losses and protecting the organisation’s reputation. Additionally, it could automatically and proactively detect the subtle signs of anomalies, malicious transactions, and money laundering.
Risk modelling and analysis
Quantum computing can handle several variables simultaneously to accelerate risk modelling and analysis. It can simulate complex scenarios without needing extensive time and resources. Real-time risk modelling, analysis, and detection help a business quickly identify potential vulnerabilities.
Compliance monitoring
Quantum computing analyses complex standards and regulations and ensures adherence to regulatory frameworks. By aligning organisational processes with comprehensive financial regulatory compliance requirements, it enhances accuracy, maximises regulatory compliance, and reduces the risk of violations.
Optimal decision-making
Quantum computing impacts supplementary processes to impact the GRC decision-making. These include portfolio management, supply chain optimisation, and quantum algorithms to identify the most efficient solutions. Thus, businesses can align strategic decisions with long-term goals and mitigate risks.
For example, in the electronics industry, manufacturing could depend on a web of suppliers, each with a different risk profile depending on regulatory changes, geographical location, and political disruptions. Quantum computing can pre-empt instabilities and disruptions, thus helping you avoid regulatory non-compliance and ensuring business continuity.
Data security and privacy
Businesses can establish robust encryption techniques and challenge the traditional methods with quantum computing. Emerging quantum-safe encryption techniques are being developed to enhance financial regulatory compliance data protection and fortify data security and privacy within GRC.
Contingency planning and situation analysis
Companies should proactively prepare for various situations and make contingency plans in GRC with quantum computing. Businesses can create several simulations and perform rapid analysis while forming contingency plans. Additionally, they can evaluate multiple variables simultaneously to get quick insights into potential outcomes and plan risk mitigation strategies.
How does quantum computing measure up to traditional data protection methods?
As quantum computing evolves, it poses a potential threat to traditional encryption algorithms like Rivest, Shamir, Adleman (RSA), Elliptic Curve Cryptography (ECC), and other public-key cryptosystems that today’s computer widely use for GRC processes. Therefore, traditional protection methods could become a threat to data security, requiring organisations to re-evaluate how they approach governance, risk, and compliance.
Unlike traditional computers that process the information in basic units of 0 and 1 (bits), quantum computing uses qubits (quantum bits) where data can be stored as 0, 1, or both. This multiplies the processing power while consuming less energy.
As business operations become globalised and GRC operations complex, quantum computing leverages big data, sophisticated analytics tools, and cloud computing to boost financial regulatory compliance and rapidly reduce risk. At the same time, it helps a business stay ahead of the curve in cybersecurity threats and prevent financial and reputational risks.
How can Infosys BPM help?
The cross-functional teams across consulting and operations within Infosys BPM, along with a proprietary product suite, provide a CoE for implementing best practices, monitoring regulations, and providing on-demand certifications for your employees. The compliance benefits help your organisation reduce the total cost of ownership by 50-70% and minimise false positives by up to 40% through operational and technological initiatives.
Explore how Infosys BPM expertise can help your business navigate the complexities of financial regulatory compliance with cutting-edge solutions.