BLOG: Evolving Challenges As Compliance Looks To The Future

The challenges, priorities and focus for financial services compliance officers continue to evolve. That evolution has been borne out by the results of the annual Thomson Reuters Regulatory Intelligence cost of compliance survey report which over its lifetime has had nearly 6,000 participants and over 40,000 downloads by firms, regulators, law firms, governments and consultancies. The 10th annual report showed that the top 4 challenges compliance challenge firms expected to face in 2019 were:

  1. Volume and pace of regulatory change
  2. Increasing regulatory burden
  3. Financial crime, anti-money laundering & sanctions
  4. Culture and conduct risk

This was in contrast to the prior year when the greatest compliance challenges were identified as:

  1. Continuing regulatory change
  2. Data privacy and General Data Protection Regulation (GDPR)
  3. Enhanced monitoring and reporting requirements
  4. Increased regulatory scrutiny

Thomson Reuters Regulatory Intelligence recently hosted three global webinars to discuss the findings from the 10th annual cost of compliance report, as part of the interactivity the polling question was asked ‘what do you see as the greatest regulatory challenge for financial services firms?” The results show that the challenges perceived by compliance officers around the world continue to evolve:

  • 41% saw the greatest challenge as the volume and pace of regulatory change (with a peak of 53% in APAC)
  • 24% saw the greatest challenge as technology (with a peak of 31% for the UK and Europe)
  • 16% saw the greatest challenge as data privacy (with a peak of 22% in North America)
  • 14% saw the greatest challenge as budget constraints (with a peak of 26% for the UK and Europe)
  • Other more minor challenges were seen as outsourcing and personal liability.

As part of the 10th annual cost of compliance report participants were asked what they predicted as the biggest change for compliance in the next 10 years.

The crystal ball gazing gave the top 5 predictions for the next 10 years as:

  1. Automation of compliance activities
  2. Continuing regulatory change
  3. Enhanced role for compliance in the business
  4. Culture and conduct risk
  5. Technology risk

Risk and compliance functions, and the expectations placed on them, continue to evolve. New ways of working are being adopted and increased recognition for the compliance function has become a welcome new normal.

While the volume and pace of regulatory change, technology and data privacy are all perhaps to be expected as the greatest regulatory compliance challenge, it is the rise of the spectre of potential budget constraints which may be the cause of most concern. Without appropriate levels of consistent budget and resources being allocated to the compliance function then, almost by definition, any compliance function will struggle to rise to the myriad challenges which continue to arise.

An additional concern arises with the increasing potential for personal liability as accountability regimes proliferate around the world. In the webinar polling results, personal liability was not perceived as the greatest challenge but that doesn’t mean that individual accountability isn’t a real concern. The 10th annual cost of compliance report found that 60% expected the personal liability of compliance officers to increase in the coming year – a substantial concern which is in no way diminished by other challenges being seen to be greater.

Compliance is an acknowledged core competency for financial services firms. As priorities, challenges and priorities continue to evolve firms must be prepared to invest in appropriately skilled in-house compliance resources and infrastructure.

Written by:

Thomson Reuters Regulatory Intelligence and Compliance Learning

Thomson Reuters Regulatory Intelligence and Compliance Learning on:

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