How The Compliance Function Is Evolving In 2018?

10/12/18 Mon by

Every year since 2013, Accenture has conducted a Compliance Risk Study to gain insight into the different strategies that firms are pursuing to create compliance functions that meet the demands of a rapidly changing financial services industry.

Over that time, compliance functions have made a dramatic turn towards innovation-fueled strategies, as they seek to deliver the risk management outcomes required in an era of digital transformation. The compliance mandate has also shifted; while remaining a key advisory function it has embraced risk management responsibilities as well.

As the industry continues its rapid evolution, the time between major change events decreases. Open banking, cryptocurrency and quantum computing are just examples of shocks to the industry that create uncertainty and test the resilience of compliance. Compliance needs a new, forward-thinking and stress-tested approach to continuously monitor its situation and evaluate and improve its ability to remain resilient in a financial services landscape that is subject to disruption and overnight change. Annual plans, driven by once-a-year risk assessments that help the function and the organization navigate a better approach to managing risk and improving control, are no longer effective.

Our 2018 Compliance Risk Study, based on interviews with over 150 compliance officers at banks, insurance companies and capital markets firms across the globe, identified key obstacles to compliance functions as they seek to mature their skills and capabilities to become risk advisors, regulatory change overseers and surveillance agents. Key study findings include:

  1. Compliance can no longer rely upon adding headcount to increase its effectiveness. Only 22% of respondents said they now have more than 500 people in their compliance function, representing a 9% drop since last year.
  2. Despite reductions in headcount, compliance spending is slated to increase. In line with findings over the last four years, 89% of respondents indicated that investment in compliance will increase over the next two years. Compliance technology transformation is the top spending priority for respondents, both over the next 12 months (57%) and within the next three years (51%) as compliance moves towards deploying technology to support and improve the effectiveness of their people to fulfill its mandate.
  3. To realize returns on technology investments, compliance needs to re-train its people. More than three-quarters (76%) of respondents see a gap between skills currently available and those required. We see this skills gap preventing compliance from understanding the ecosystem of risks it faces. Planned investments in technology may have a limited return if compliance officers cannot effectively deploy and make effective use of the tools acquired.
  4. Data quality issues are also a significant barrier to progress and realization of technological capabilities. Nearly one in three (31%) of respondents said that data quality issues were key barriers hindering their organization from delivering on its key mandates over the next three years. And this is not a one-off fix, but a need for a different approach and culture of data focus and quality for the long term.
  5. The skills gap and the challenges with data may also be hindering a proactive approach to important risks on the horizon. Compliance may be too focused on the key risks facing the industry today — such as cyber risk, financial crime and fraud — and not focusing on the risks that are now coming to the fore, such as the proliferation of virtual currencies, new concerns about corporate conduct and a responsible approach to the use of artificial intelligence. As pace of change increases, the need to spend more time looking ahead becomes a base requirement.

Time is running out for the compliance departments who want to take a more watchful, cautious stance towards innovation. The rules of the road have changed, and leading compliance organizations are embracing a new, innovation-driven mindset. As our 2018 Compliance Risk Study demonstrates, industry players able to retain focus amidst increasing volatility and complexity can identify needed changes in their operating model, their technology, their data and their talent. Organizations able to implement these changes while remaining keenly aware of shifts in the risk ecosystem can create a compliance function that is fit for the future of financial services.

Author: Steve Culp from Forbes

10/12/18 Mon by