Compliance risk management has come a long way, but compliance programs still have some distance to go to become — in their own estimation — true strategic business partners.
The results of Accenture’s 2014 Compliance Risk Study – based on survey responses from 100 compliance officers at banking and capital markets firms across Europe and North America – indicate that compliance risk management is at a critical juncture in its evolution to becoming a relevant control function with long-term stature and respect within financial service organizations.
Five key themes emerged from the report, “Compliance’s seat at the table – Hard to earn, Hard to retain,” including:
- The size and shape of compliance programs is continuing to evolve. While compliance organizations have made significant progress in increasing their stature and role within the companies in which they function, they report that challenges remain.
- However, nearly one-third (31%) of survey respondents said their compliance programs report to their Board, with another 40% reporting to the CEO.
- The growth in stature is considerable given that just over five years ago, 70% of respondents’ compliance programs had not yet been formally chartered.
- Further investment in compliance is needed to achieve strategic goals.
- Investment in compliance continues on an upward trajectory, and is expected to grow 10% or more over the next two years at 65% of the banking and capital markets firms who participated in the study.
- As a result, these institutions are looking harder for returns on the investment.
- Respondents in Europe and North America believe analytics and risk modeling could help them predict and mitigate future compliance events.
- And, there is growing interest in trend analysis – reviewing both structured and unstructured data – to help predict and mitigate compliance events. Respondents expressed concern about their firms’ performance in data intensive disciplines such as management reporting and issue management.
- The competition for talent has become a barrier to success.
- Securing sufficient compliance talent will be a key to addressing sources of financial and reputational damage to an organization.
- But in a fiercely competitive market, firms may need to re-think identification, recruitment and, especially, retention of talent.
- Over a third of survey respondents said they are trying to expand their headcount, while an additional 46% are planning such increases1.
- The demand for talent has contributed to increased recruitment costs. It has also pushed firms to consider how they can encourage their own compliance risk professionals to make longer-term investments in their careers and their institutions.
- Over a quarter of North American respondents, for example, offer rotational programs within compliance that contribute to skill building. These programs may include work across multiple disciplines and even international mobility.
- With a “perfect storm” brewing in compliance, firms will want to demonstrate effectiveness and think beyond traditional solutions.
- As they confront both a growing need to invest and a scarcity of talent, firms need to consider re-thinking their growth plans to foster long-term sustainability, help maximize human capital and demonstrate their success.
- There is general agreement in both Europe and North America on the areas needing improvement, but there is a greater sense of urgency for compliance programs to demonstrate the success of their investments to date.
- Compliance programs also may need to increase expenditures on performance management (and on communicating their results), but they will also want to consider new approaches to staffing and managing the compliance function, examining possibilities such as shared services and outsourcing to address concerns about the cost of compliance.
- The horizon is continually moving, and compliance programs are already setting priorities for the future of their compliance function.
- Compliance is still a relatively young corporate function and most firms are primarily focused on what they see as needed to comply with regulations.
- Proactive, strategic planning by compliance programs will be a critical factor in building and maintaining a competitive advantage.
- Some key priorities for compliance programs going forward include the management of regulatory change, model valuation and management reporting.
- In addition, programs should adopt a global mind-set that reflects local priorities as they plan for the skills and technology required to sustain their development.
As our research indicates, compliance programs within banking and capital markets firms are at an inflection point in their development.
Their role and stature have increased, but they are under greater scrutiny to demonstrate value to the business and their effectiveness to their regulators. Compliance has earned a seat at the table, but keeping that seat will require careful assessment of investment priorities, development of innovative solutions, a close watch on talent issues, and an ability both to measure results and to convey those results to senior management and the relevant external regulatory bodies.
For more information please visit www.accenture.com/compliancestudy2014.
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