Building Resilient Systems in Regulated Environments

Regulatory constraints in financial services are often seen as obstacles to good engineering. After building compliance systems across three major banks, I've learned the opposite is true: regulatory requirements force you to build more resilient systems than you would otherwise.

Immutability as a Design Principle

When I was building trade surveillance systems at Morgan Stanley, every transaction had to be preserved exactly as it occurred—no edits, no deletions, no "soft deletes" that aren't really deletes. The regulatory requirement for immutable audit trails forced an event-sourcing architecture years before it became fashionable.

This constraint made the system more resilient in unexpected ways. When business users wanted to "fix" data, we couldn't just update records—we had to model the correction as a new event. This prevented the data corruption that happens when different teams make conflicting updates to the same records.

When performance issues emerged, we couldn't just delete old data—we had to design proper archival and partitioning strategies. This forced us to think about data lifecycle management from day one, not as an afterthought when the disk filled up.

The regulatory requirement for immutability became a design principle that made everything more robust.

Auditability Drives Observability

Regulators don't just want to know that your system works—they want to know exactly how it made every decision. At Deutsche Bank, our risk platforms had to explain every calculation, every data transformation, every business rule application.

This requirement for end-to-end auditability forced us to build comprehensive observability before we knew that was important. Every data flow had to be traced. Every calculation had to be logged. Every decision point had to be recorded with its inputs and reasoning.

When production issues arose, we didn't need to guess what happened—we had complete traces of every system decision. When performance degraded, we had detailed metrics on every component. When business rules changed, we could verify exactly how each case was handled.

The regulatory requirement for auditability became an observability practice that made operations much easier.

Segregation of Duties Improves Architecture

Financial regulations require segregation of duties—the person who initiates a trade can't be the same person who settles it. The team that builds risk models can't be the same team that validates them. This seems like bureaucratic overhead until you see how it improves system design.

At BNY Mellon, these requirements forced us to design systems with clear separation of concerns. Input validation was separate from business logic. Risk calculation was separate from risk verification. Data ingestion was separate from data processing.

These boundaries weren't just organizational—they became architectural boundaries. Services had to have clean APIs because different teams owned different parts of the flow. Data contracts had to be explicit because handoffs crossed team boundaries.

The regulatory requirement for segregation of duties became an architectural principle that made systems more modular and maintainable.

Real-Time Constraints Force Better Design

When your compliance system needs to flag a trade in milliseconds—because the regulator requires real-time monitoring—you can't hide performance problems behind eventual consistency or batch processing. Every component has to be fast, every query has to be optimized, every integration has to be efficient.

These real-time constraints at Morgan Stanley forced us to design for performance from the beginning. We couldn't defer optimization until later—the regulatory requirements made performance a day-one requirement.

We had to understand our data access patterns before writing code. We had to design our database schemas for the queries we actually ran. We had to choose technologies based on actual performance characteristics, not marketing promises.

The regulatory requirement for real-time response became a performance culture that made everything faster.

Resilience Through Constraint

The pattern is clear: regulatory constraints that seem restrictive actually force better engineering practices. When you can't take shortcuts, you build systems properly. When you have to explain every decision, you design systems that are understandable. When you have to preserve everything, you build systems that are robust.

This applies beyond financial services. Any system with compliance requirements—healthcare, aerospace, automotive—benefits from the same dynamic. The constraints force discipline that makes systems more resilient.

The best engineering often happens when you can't compromise on quality, reliability, or observability. Regulatory environments provide those constraints by default.

Lessons for All Systems

Even if you're not building regulated systems, you can apply these principles:

Design for Immutability: Treat your data as append-only and model changes as events. It's more resilient and often simpler than trying to manage mutable state correctly.

Build Auditability First: Design your system to explain its decisions. Future you will thank present you when debugging production issues.

Enforce Separation of Concerns: Use organizational boundaries to drive architectural boundaries. Different teams should own different system responsibilities.

Make Performance Visible: If you have real-time requirements, measure and optimize for them from the beginning. Don't defer performance work.

Regulatory constraints aren't obstacles to good engineering—they're guardrails that prevent bad engineering. The discipline they enforce makes systems more resilient, more observable, and more maintainable.

The next time you're frustrated by compliance requirements, remember: they're probably making your system better than it would be otherwise.