How to make compliance (cost) effective?

Jul 30th '18

How can you maximise compliance’s effectiveness – without compromising cost-efficiency?


A new report from PWC on The Business of Compliance explores how organisations can balance cost and effectiveness. Here we summarise their findings and advice.


Balancing compliance cost and effectiveness

Compliance is a necessary business function for regulated firms. Corporate responsibility is taken increasingly seriously, in terms of regulatory compliance but also in terms of legal obligations, ethical considerations and general good governance.


As the report points out, ‘Beyond financial penalties, a compliance failure can wreak havoc on an organization’s reputation and customer relationships and negatively impact growth and profitability targets for the foreseeable future’.


And yet, as the report says, many organisations ‘struggle to fully understand their cost of compliance and manage compliance as effectively as possible’.


PWC suggests that compliance can be optimised if firms run compliance teams along the same lines that they manage their overall business.


What does this mean in practice, and how can firms run their Compliance teams along the same lines as their business operations?


PWC identify five key principles:


  1. Strategically-aligned organisational structure
  2. Cost-focused operating model
  3. A future-ready talent strategy
  4. A technology-enabled organisation
  5. Sustainable innovation


What can you do to achieve all of these, and align your Compliance function with your overall business?


  1. Strategically-aligned organisational culture

The report says that ‘When running a business, successful leaders … enable their people with technology. They push to constantly innovate new products and services, and new ways of delivering them. And, they have metrics in place to monitor cost performance. Why not optimize compliance through these same actions?’


Doing this means giving your team the right technologies to do their jobs efficiently. It means taking a proactive approach to innovation – while making sure you innovate in a compliant way.


It might mean devolving compliance responsibility back to business units, with Compliance teams sitting within the business rather than centrally; something that can help to reinforce accountability and the fact that compliance is everyone’s responsibility.


  1. Cost-focused operating model

Businesses are run with a close eye on cost. Why should Compliance teams be any different?


The cost of compliance means not just the obvious costs – the Compliance team’s salaries; any specific systems or solutions the team uses. There is a wealth of ancillary costs, many of which are often not taken into account.


The time spent by fee-earners or Marketing teams, for instance, in responding to compliance queries, making changes, resolving issues and manually tracking reviews and approvals.


You need to make your approvals process as efficient as possible. Automating the Compliance review and approvals process can achieve significant efficiencies in terms of cost- and time-savings. Get it right, and your investment in compliance technology can really pay for itself in terms of the benefits you achieve.


  1. A future-ready talent strategy

Successful organisations recognise and pre-empt their talent requirements. In today’s fast-changing environment, this is particularly difficult as, as the report points out, talent ‘no longer means what it did ten years ago; many of the roles, skills and job titles of tomorrow are unknown to us today’.


How can you plan for the future against this uncertain background?


With automation playing an increasing role, you need to think about how its impact can be managed and optimised. The report suggests Compliance officers should be asking questions like:


  • What compliance processes can be automated?
  • What technologies are agile to adapt to changing compliance needs?
  • What impact will automation have on people strategy, specifically, with respect to hiring and retention?


Outsourcing, PWC suggests, may be a solution to talent shortages, with emerging compliance service providers delivering ‘Centre of Excellence’ structures to support in-house teams. Just make sure you adhere to the FCA’s strict rules on outsourcing if you go down this route.


  1. A technology-enabled organisation

The report claims that ‘Technology-led compliance programs enable practitioners to streamline processes and collaborate with cross-functional teams’.


Improving cross-team collaboration is essential, and technology can play an important role here.


Technology speeds the compliance approval process and reduces risk by minimising regulatory breaches. The report suggests that ‘Just as CEOs are technology-enabling their business, so should leaders technology-enable compliance’.


However, nearly 40 percent of the companies PwC interviewed to inform the report do not have governance, risk or compliance technology in place. Among those that do, the technologies are frequently not used to their full capability.


Streamlining compliance via technology, as you would in purchasing, HR or other functions, makes perfect sense. And, as the report points out, technology not only drives efficiencies, it can also improve monitoring.


  1. Sustainable innovation

First, by understanding the organisation’s innovation strategy – via closer links with new product or service development teams – Compliance can ‘gain a better understanding of what groups are focused on across the organization and [provide] more guidance to the first line on how to comply’.Compliance teams face ‘a complex, evolving risk landscape’. New innovations can help react to these changes and sharpen their approach. The report identifies two ways that Compliance teams can harness innovation.


This applies to financial promotions as well as operational compliance – find out how Compliance teams can help their Marketing colleagues produce promotions that can be signed off first time.


Second, developing a ‘continuous monitoring’ approach to identify and tackle risk can help organisations to meet their compliance challenges.


The full report goes into more detail on all five areas, and makes a good read for anyone trying to optimise their compliance effectiveness and efficiency.


Operating within an ever-evolving landscape – with ever-increasing regulatory requirements – is something all Compliance professionals have had to adapt to. Nonetheless, it remains a challenge.


What do we do?

At LS Consultancy, we offer a complete solution with a range of cost effective, regulatory compliance and marketing products and solutions that are uniquely suited to supporting firms.


Explore our full range today.