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How the cost of compliance is changing

20 May 2020 Richard Rattue, MD of Compli-Serve SA

It’s always interesting to discover how others feel. The 2020 Thomson Reuters’ Cost of Compliance survey, launched in mid-May, shares the views of compliance officers (COs) and boardroom members from around the world (some 750 risk and compliance practitioners from institutions like banks, insurers, wealth and asset managers, broker-dealers and payment service providers).

Their top concerns have changed since the last report and are likely constantly shifting as Covid-19 continues to shape the world we are experiencing. The survey closed before the pandemic became a global concern but reveals how the conversation around compliance is changing.

Top concerns to contend with

Keeping up with regulatory change, data protection and budget and resource allocation, are among the top three challenges that face compliance teams, according to the survey. Regulation comes at a furious pace as it is, and Covid-19 already has (and will continue) to bring out even more regulatory updates.

The survey respondents cite the top skills required in compliance as having subject matter expertise, communication skills and integrity. Being able to deliver tough news to senior management is a key communication skill for a CO to have. Tough conversations may be more common these days too.

As to whether compliance officers will reduce or increase, it is difficult to say. Covid-19 has changed the landscape of financial services (and beyond) in some (or many) ways, and many answers will only unfold in time.

The Reuters’ report pointed out that a bigger task force of compliance officers might be on the horizon, or with the aid of technology and how capabilities and costs are improving, allowing for automation, fewer human resources may be needed to complete the compliance process.

In with the old

Automation could already be impacting the compliance workforce, but one group of a compliance team may have more to offer, given the current landscape. Aided by experience, senior compliance staff who have been in the field for some time will have worked through the 2008 Global Financial Crisis and survived it. The lessons from that – the process of recovery – are invaluable.

Even so, turnover of senior compliance staff was expected to increase in the coming year, with 43% anticipated to take place among Globally-Systemically Important Financial Institutions (G-SIFI). Some senior staff may be retiring or staying home earlier than if Covid-19 hadn’t come to town, which will also have an impact on the team costs.

A total of 34% of survey respondents expect their compliance team will grow (which is down from 43% in 2018 and 38% in 2019). Only 7% expected compliance teams would shrink, which is up from just 3% last year.

Outside In

Whether it’s that senior staff (or others under lockdown) are leaving the office, or there is an internal lack of resource available, outsourcing is the only option to keep compliant.

Respondents who make use of outsourcing for some, or all their compliance functions, has increased from 28% to 34% since last year. There is a persistent lack of compliance skills in-house, and the pandemic makes way for leaning on external resources anyway, with many staff out of the office.

Compliance you can count on

Working with a trusted external compliance team, however, makes all the difference. Remember that it is still your brand on the line, and your company that needs to comply, so you should stay in touch with your CO to ensure everything is on track. The cost of compliance need not include wasted external resources.

Keep in mind that no visits in person are likely to happen for some time. You may be working with an outsourced compliance team who are sitting at home. Ensure they can assist you efficiently remotely, realising this could very well be the new way of the working world.

Quick Polls

QUESTION

ASISA’s lobbying of the SARB to suspend Circular 15, which contained significant changes to foreign exchange controls. What is your take on this accusation?

ANSWER

[a] ASISA was right to seek clarity on Circular 15
[b] Large asset managers are conflicted & will suffer financially if Circular 15 stands
[c] Savers get enough exposure to offshore assets under existing Reg 28
[d] Who cares?
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