New survey highlights compliance challenges, priorities and objectives.

Thomson Reuters has issued its latest annual survey into the costs of compliance. Compliance professionals from more than 300 financial services firms worldwide shared their views on compliance challenges,  costs and priorities.

The survey is designed to ‘help regulated firms with planning, resourcing and direction and to allow them to benchmark their own practices and experiences’.

What are the key findings?

The survey highlights a number of themes and concerns among Compliance professionals worldwide.

  • Regulation continues to increase. The rate of change that Compliance teams are required to deal with shows no sign of slowing down. 69% of firms taking part in the survey expect regulators to publish new legislation in 2016. 26% expect to see ‘significantly more’ legislation coming through.
  • Firms continue to spend significant time keeping track of regulatory change. Over a third of firms spend more than a day a week tracking regulatory change, to keep on top of constantly-changing requirements.
  • Skilled Compliance professionals are at a premium. Firms continue to struggle to find Compliance resource to deal with the workloads they face. In line with other surveys we have written about, firms are expecting Compliance professionals to cost more in 2016. 67% of respondents to the Thomson Reuters survey said this. This increased cost is due both to the increased number of staff needed to handle increasing regulations, and the skills and knowledge those people need to have. The role of the Compliance professional is changing – as we detail in this blog – with Compliance teams needing to move from reactive policing to a proactive advisory role.
  • Firms are outsourcing their Compliance functions. A quarter of the survey participants have outsourced some part of their compliance work. This is another trend we have previously written about, predicting an increased role for Compliance consultants and contractors in 2016.
  • The focus on regulatory risk is increasing. Largely due to harsher financial penalties (Perivan Solutions blog on the trend towards fewer, but larger FCA fines has more on this), firms are increasingly focused on the need to reduce regulatory risk. Three quarters expect this focus to gain more weight in 2016.
  • Personal liability is expected to increase – 60% of respondents expect Compliance professionals’ personal liability for non-compliance to increase in 2016 – which will focus the minds of all Compliance teams on the need to avoid breaches.
  • Technology and reporting are high on the radar for two reasons. Firstly, because of the need to expand the Compliance remit to include more recent risks, like cyber security. Secondly, due to the potential benefits of technology to help with increased reporting requirements. Technology issues are at the front of Compliance professionals’ minds.
  • Firms need to do more with scarce resources; co-ordination of control functions can be improved. The survey notes that – despite scarce resources which might be expected to drive efficiencies – there continues to be little co-ordination between control functions; for example, between Compliance and Internal Audit teams. This is something that could be improved to deliver greater efficiency, economies of scale and better resource management.

A familiar list of concerns

Many – if not all – of the issues flagged in the survey will be familiar to all Compliance teams.

  • The lack of resource, and the challenges of dealing with increasing levels of regulation when expertise is scarce.
  • The need to avoid the FCA’s attention, and the financial penalties, reputational damage and personal liability that can result.
  • The potential for technology to tackle some of the reporting challenges they face…
  • …and the flipside: the role of technology in increasing the Compliance workload as a result of cyber security and other technology-related risks.
  • The need for increased outsourcing of Compliance work, to meet the skills and resource gaps faced. (And the resulting challenges brought about by an outsourced approach.)

How can Compliance teams respond to the issues the survey raises?

Recognising these challenges is easy. Tackling them is another matter. Doing more with less has become a constant struggle for Compliance teams – and is also a familiar battle for their colleagues in other areas.

Compliance teams can take steps to address them, though.

  • Automating the compliance approval process can help to reduce the administration burden that takes up so much Compliance time. With the evolution of the Compliance role, teams need to minimise the amount of duplication, administration and rework they do.
  • This can be a particular issue when it comes to financial promotions approval. The pressure to get marketing communications out faster and products to market quickly is hindered by ineffective processes. Automating your Marketing and Compliance workflows can improve efficiency.
  • Collaborating more effectively with your Sales and Marketing teams will also make a difference. Work with them so they understand what you need – in terms of process and end result – and you will minimise the amount of corrections you need to make before you can sign off a financial promotion. This reduces your workload, minimises the potential for non-compliance and improves speed to market.
  • If you do fall under the FCA spotlight – either because they are doing a thematic review of your sector, or because they have issues with your firm specifically – don’t panic. You can avoid the negative publicity and potential financial penalties that come with FCA attention with some forward planning. This blog, with 10 tips on preparing for an FCA visit, has more on this.

We hope the survey results and our tips on how to tackle the issues they raise are helpful. If you are concerned about recent changes to the Compliance role, you can read in more detail about the expectations of Compliance teams in Perivan’s whitepaper on The changing role of the Compliance Officer.

Author: Steve Coleman – Perivan Solutions

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