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Finance, Investment, Risk & Compliance

COVID-19 impacted every aspect of finance, investments, risk and compliance. It flipped rules, accelerated existing trends and established new standards. As small businesses shutter doors and fears of inflation lurk, it continues to cause unprecedented movements in the financial markets. Experts agree that we’re heading towards a highly-unpredictable future for investors and businesses. Yet this greatest of crises has brought about significant opportunities.


Join one of Esme Learning’s executive education courses to know about the multiple inflection points in the financial landscape and prepare yourself for the disruption ahead. 

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Cambridge Startup Funding: Pre-seed to Exit Programme
Cambridge Startup Funding: Pre-seed to Exit Programme
Learn how to secure funding for your startup across all stages from pre-seed to exit.
Oxford Fintech Programme
Oxford Fintech Programme
Learn about the disruptive change and opportunities in fintech and financial innovation, gain insights from fintech startups and transform into a digitally-enabled organization.
Cambridge RegTech: AI for Financial Regulation, Risk, and Compliance Programme
Cambridge RegTech: AI for Financial Regulation, Risk, and Compliance Programme
Learn how to navigate the complex and ever-changing regulatory landscape and the roles artificial intelligence and machine learning are playing in its transformation.
The New Normal in Finance, Investment, Risk & Compliance

The rise of NFTs, cryptocurrencies in the purchase of property and the extraordinary growth of fintech, edtech, regtech and health tech are all disrupting the investment landscape. These changes are also leading to various regulatory changes. But one particular event in 2021 characterizes how changeable the current financial landscape can be. 


On January 28, 2021, members of WallStreetBets, a social media group on Reddit, engineered a short squeeze involving brick-and-mortar video game retailer GameStop. The stock, which had been trading at just $3 per share a year previously, shot up to a staggering $483.


A group of outsiders took on Wall Street’s financial giants and won. Endearing David-beats-Goliath stories occasionally come to pass in the financial world, but the GameStop incident revealed how the players are changing along with the rules:


  • The entirety of the plan was carried out on social media – now making it a vital platform in the finance sector. 

  • In  just a few weeks, 28% of Americans bought stock in GameStop. 

  • The whole plan was executed by small traders, making them an incredibly significant player in today’s financial markets. 

  • On January 29, fintech company S3 Partners revealed that short-selling hedge funds had suffered a year-to-date market-to-market loss in GameStop of $19.75 billion.

  • Trading app Robinhood shut down the purchase of GameStop shares before it began plummeting, leading many to accuse the app that purports to democratize finance of protecting “billionaire hedge-fund managers.”

  • In his testimony before the U.S. Congress, CEO of Robinhood  Vlad Tenev said that the GameStop stock had experienced a “1 in 3.5 million event which is basically unmodelable.”

  • Steve Huffman, CEO of Reddit, said the site wanted to keep WallStreetBets online because it brought many new users to Reddit. 

  • These contradictory statements intensified the need for more financial regulations and made clear that fintech cannot operate outside it.

  • Four other “meme” stocks were traded along with GameStop, representing a probable shift in market behavior where stock prices don’t necessarily reflect stock value. 


9 Investment Trends in 2021


The COVID-19 pandemic continues to influence the financial markets, in many cases accelerating pre-existing trends. Increased adoption of digital technologies, expanding role of government in the economy, persistent fear of inflation, easy money and emerging markets have become key moving pieces on the financial chessboard. 


Nine investment trends reshaping the financial markets:


1. Surging economy alongside soggy markets


As the economy continues to rise, it’ll also face several undertows. Economic stimuli is reviving economies but can lead to inflation and raise bond yields. As businesses begin to open back up and consumers start spending more money, the surge in savings could also go down. 


2. Bottoming Inflation


There’s a persistent fear of inflation due to factors such as:

  • Depopulation as the global working-age population falls

  • Deglobalization and reduced competition

  • Declining productivity due to government bailouts

  • Rising government debts could revive inflation. 


3. Housing in Demand


In 2020, home prices increased in most developed countries and this boom could last over a longer period as 90% of the world’s central banks dropped short-term rates, consequently pushing mortgage rates to record lows.


4. Easy Money Drying Up


According to Morgan Stanley, “the potential return of consumer price inflation could compel central banks to tighten again, which we expect to come first in the form of reduced bond buying (not higher rates).”


5. A Post-Dollar World


Following stimulus rollouts, government debts to the rest of the world peaked at over 50% of GDP, a level capable of triggering a financial crisis. 


As cryptocurrency adoption increases, it’s giving the dollar a run for its worth. They are becoming a store of value as a digital alternative to gold and a medium of exchange as a digital option to the dollar. 


6. A Commodities Revival


Supply constraints during the pandemic and increased demands along with a weak dollar could bring about a revival in commodity prices. 


7. An Emerging Market Comeback


Emerging markets could make a comeback because, as Morgan Stanley points out, “Despite the fact that both exports and manufacturing are shrinking as a share of the global economy, a select few emerging countries concentrated in Eastern Europe and Southeast Asia are still growing on the back of export manufacturing. Today, the top emerging markets account for 36% of global GDP and just 12% of the global stock market, while the U.S. accounts for 25% of GDP and 56% of markets. Imbalances that are this extreme tend to diminish over time.”


8. A Digital Revolution


According to the IMF, of the world’s 30 most-digitized economies (by digital revenue as a share of GDP), 16 are in emerging markets, led by China, South Korea, Indonesia and Colombia.


In these markets, digital revenue is growing by 11% per year faster than in developed markets and could support an emerging-market comeback.


9. Rising Challengers


The market capitalization of smaller, popular rivals of e-commerce giants is witnessing fast growth. Local platform-based businesses are also taking on large e-commerce and social media platforms. 


The Evolution of the Risk and Regulatory Landscape 


The COVID-19 pandemic continues to be the driving force behind regulatory agendas. For instance, during the pandemic, asset managers were allowed the use of capital buffers, ease of reporting and disclosure requirements and changes to market position limits. Now, some places in Europe have set short-selling bans and have imposed new conditions in dividend distribution and remuneration and increased reporting on the liquidity positions of open-ended funds.


Undoubtedly, the regulatory agenda is working against one of the most challenging economic and operational backdrops of recent history.


There’s a growing debate surrounding some trading practices and fund types, such as computer-led trading strategies, short selling, money market funds and exchange-traded funds that contribute to systemic risk.


Regulators are united on the importance of recovery and growth while ensuring it happens in a controlled way to protect investors and maintain financial stability.


What is the new reality of risk management?


An increased pace of digitization, distributed work practices, demands for ESG and greater global interconnectedness are changing the ground realities of risk management. 


Regulators want businesses to take greater measures to protect their customers by: 


  • Operational resilience by business continuity planning (BCP), IT, cybersecurity, AML, protection of client assets and data 

  • Liquidity management of open-ended funds

  • Enabling technology that makes investing simpler and cheaper for customers

  • Protecting the investment ecosystem from crime or poor investment choices 

  • Increased efforts for digital transformations, which will also be scrutinized 

  • Increasing focus on a business’s duty of care and stewardship and reducing short-termism 

  • Meaningful disclosures to investors over costs and performance

  • More sustainable finance/ESG investments


What measures do organizations need to take regarding risk management?


  • Re-evaluate and establish necessary processes for operational resilience, including BCP, IT, cybersecurity, AML, protection of client assets and data

  • Assess risks deemed as systemic and increase stress testing scenarios – regulators are scrutinizing liquidity management of open-ended funds as well as the use of leverage

  • Establish processes for more individual accountability, culture/ethics, governance and distribution 

  • Set up or adjust to new disclosures on commissions, payment for investment research and performance fees 

  • Make ESG the heart of the investment decision-making process


2021 Key Trends in Risk and Compliance 


For corporate risk managers and compliance officers, the COVID-19 pandemic brought on additional challenges. Increases in cyberattacks, supply chain disruptions, employee health and safety and new corporate governance and compliance showed how risks emerge and are intertwined. 

Some of the risk and compliance trends that emerged from this period are:


  • ESG


Investors are increasingly interested in sustainable finance, leading financial institutions to prepare programs related to diversity, gender, fair wage terms to employees, donations to the community, environmental responsibility and corporate governance. Environmental, Social and Governance (ESG) reports are becoming an integral part of company annual reports


Regulators will want to see organizations conform with the global standards that are now being set in relation to ESG issues and attribute sufficient importance to these topics. 


  • Privacy


GDPR is now being considered as the beginning of an increased era of scrutiny entailing consumer privacy protection. Data protection regulations will become more stringent and rigid and will be more meticulously enforced across the globe.


Although these regulations vary from country to country, data privacy laws will eventually be standardized worldwide.  


  • Distributed work environment


Risk managers have to contend with a new format of work and the dangers thereof, such as increased cyberattacks in a work-from-home environment. Returning to the office is also bringing up questions about vaccination passports and mask policies. 


  • Diversity, equality and inclusion (DEI)


The Black Lives Matter movement spotlighted systemic racism and social disparity. Organizations will have to conduct themselves with more transparency and responsibility and provide equal opportunity and increased diversity when hiring employees. 


  • Integrated risk management (IRM)


Risks are related to one another, and organizations need to integrate risk analysis and holistic thinking about risks.


According to the STEEP model (social, technological, economic, environmental, and political), uncertainty will persist in the coming years. IRM processes can enhance decision-making and streamline governance efforts. 


  • Risks from third parties and supply chains


The 2020 pandemic showed the susceptibility of organizations to supply chain disruptions. Alongside this, the increased interconnectedness also makes businesses more vulnerable to cyberattacks. 


Compliance officers will have to enforce rules that will protect their businesses from these increased disruptions. 


  • Whistleblower protection policy


Whistleblower protection is already in effect in the U.S. and the EU instituted the Whistleblower Protection Directive in 2021. Similar trends are noticeable in Japan, Australia and many countries across Asia. 


Under these laws, companies that fail to safeguard whistleblower identity face economic and even criminal sanctions. Risk and compliance managers must ensure mechanisms that allow employees to submit reports safely while protecting their identities. 


What led to the growth and importance of RegTech in the financial industry?


Ralf Huber, Co-Founder of RegTech company Apiax, says, “Whilst RegTech automatically solves and implements routine inquiries, compliance officers are empowered to focus on their core business objectives: manage risks on a strategic level and seize opportunities.”


While there are applications of RegTech in other industries such as health tech, it’s inseparably linked to the finance industry. 


The phenomenon of RegTech within the financial services industry was driven by:


  • The 2008 Financial crisis


The financial crisis of 2008 led to the massive overhaul and expansion of the regulatory environment. It led to a deluge of regulations coming from the government and regulators, increasing the complexity of the regulatory environment. RegTech helps companies easily navigate these challenges. 


  • Technology


Advancements in techs like cloud computing, AI, machine learning and Big Data helped entrepreneurs in the regulatory sector create innovative solutions that make risk management easier for businesses. 


  • FinTech


Fintech and the total upheaval of the financial industry are engendering numerous innovations and creating new regulatory policies. RegTech is helping organizations remain compliant with these new rules. 


  • New standards 


Fintechs are trying to keep up with standards such as GDPR, PSD2, open banking and API infrastructures. These technologies are in turn leading to the growth of RegTech within the financial services industry.


  • Digital habits


Increased digitization of businesses and shifts in consumer behavior mean that regulatory solutions need to keep pace.


  • Cost pressure


RegTech is not only increasing productivity but also cutting costs and improving traceability and auditability. 


  • RegTech against cybersecurity


Fintechs have to follow regulations and restrictions to protect their consumers against cyber threats, which are constantly growing as cyber crimes grow. RegTech is helping companies by monitoring security measures and remaining compliant. 


  • New compliance risks


An increase in distributed teams due to work from home and cloud-based interactions are bringing on new compliance risks and potential breaches that RegTech helps organizations manage. 


  • Unachieved growth goals


Financial institutions are using RegTech to more than meet regulatory requirements. They’re leveraging it to achieve targets and remain competitive. 


Top 5 Compliance Frameworks for 2021




The General Data Protection Regulation (GDPR) is a European regulation but applies to all organizations doing business or interacting with EU citizens. It’s focused on how personal data is processed. The UK GDPR sets out seven key principles:


  • Lawfulness, fairness and transparency

  • Purpose limitation

  • Data minimization

  • Accuracy

  • Storage limitation

  • Integrity and confidentiality (security)

  • Accountability




The California Consumer Privacy Act (CCPA) is very close to the GDPR and gives consumers in California additional rights and protections regarding how businesses use their personal information.


The CCPA establishes the following privacy rights for people in California:


  • A right to know what personal data is collected, used, shared, or sold by businesses.

  • A right to delete personal data.

  • A right to prohibit the sale of personal data. Children under the age of 16 must give explicit consent to have their data eligible for sale, and a parent or guardian must give explicit consent for a child under the age of 13.

  • A guarantee that consumers who exercise their rights under the CCPA will not be penalized with higher prices or lower levels of service than those who do not.




The Payment Card Industry Data Security Standard, or PCI DSS, is a regulatory standard developed by credit card companies to help protect cardholder data. 


The 6 major principles of PCI DSS:


  • Build and maintain a secure network

  • Protect cardholder data

  • Maintain a vulnerability management program

  • Implement strong access control measures

  • Regularly monitor and test networks

  • Maintain an information security policy




The National Institute of Standards and Technology (NIST) has developed the NIST Cybersecurity Policy Framework and is a powerful tool to organize and improve a startup’s cybersecurity program.


The 5 components of the NIST Cybersecurity Framework are:


  • Identify

  • Protect

  • Detect

  • Respond

  • Recover




The Health Insurance Portability and Accountability Act, or HIPAA is one of the most popular regulatory compliance frameworks in the U.S. and is specific to the way health data is secured. 


Key HIPAA principles include:


  • Receive, use and disclose protected health information (PHI) for purposes of treatment, payment and healthcare operations. 

  • Adopt reasonable measures to protect PHI from unauthorized access, use or disclosure.

  • Limit the amount of information you receive, use and disclose to what is reasonably necessary for you to do your job. 

  • Evaluate your agreements with vendors – especially those with access to our PHI or who create PHI on our behalf – and determine whether HIPAA business associate language is required for those contracts.


The Correct Compliance Framework for A Startup 


Choosing the right compliance framework is critical for a startup because the correct one can put them closer to bigger deals and move upmarket. In contrast, the wrong call can jeopardize compliance and affect company growth.


The risks are high, and startups need to understand the use cases and benefits of each compliance to make an informed decision. 


Compliance frameworks can relate to various topics from IT security to customer data protection and they act as guidelines that companies can follow. 


Deciding which frameworks will best benefit a startup is important, as it determines the amount of time, money and resources required. 


Become a Game-Changer in Finance, Investment, Risk & Compliance 


Global supertrends, pandemics, climate change and technological advancements will continue to bring about the complete disruption of the financial industry with risk and compliance in tow. While businesses have reasons to be scared, they also have plenty of opportunities to help solve problems through the use of innovation and technology. 


Esme Learning Solutions is bringing you a series of executive courses that prepare you to take these challenges head-on and arm you with the toolkits and frameworks to respond to change and drive innovation.


Our Cambridge Startup Funding: Pre-Seed to Exit Programme guides you through the fundraising journey, teaches you the Markides Framework to develop your own fundraising roadmap and acquaints you with new sources of funding. 


Our Oxford Fintech Programme teaches you about fintech innovation, regulatory changes in the financial sector, digital transformation and venture capital filter and techniques. 


Our Cambridge RegTech: AI for Financial Regulation, Risk & Compliance programme teaches you how to adjust to the changes in the regulatory environment with the help of technology and points out the opportunities for innovative solutions in this field.