This year marks the 10th anniversary of the cost of compliance survey carried out each year by the Thomson Reuters Regulatory Intelligence. This cost of compliance survey looks at the challenges financial firms expect to face in the year ahead. Participants of this year’s survey include 900 senior compliance practitioners worldwide that represent banks, insurers, broker-dealers and asset managers. In this article, we’ll review the main points of this year’s survey.
For compliance officers, the last 10 years have been a time of unprecedented change due to challenges presented by the sheer volume of regulatory requirements. Respondents were asked to identify their greatest compliance challenges for 2019. The top 4 are:
- Volume and pace of regulatory change
- Increasing regulatory burden
- Financial crime, AML, sanctions
- Culture & conduct risk
Technology
The greatest change that has taken place over the last ten years is with technology. The successful deployment and the ability to automate future compliance activities is seen as one of the greatest potential innovations for the last 10 years. Is your compliance team using the most efficient technology and processes? While there are many challenges and difficulties with new technologies, the benefit is focused on processes with the potential to automate with increased accuracy and speed. The adoption of technological solutions and automation being approached cautiously to ensure that the promised benefits are deliverable.
To realize the benefits of new technology firms must be willing to make significant investments to upgrade their IT infrastructure. Technology will play a vital role in the personal liability and accountability of senior managers. They will be held responsible for the misuse or failure of any and all technology.
Regulatory Change
Regulatory change remains the single biggest challenge for compliance officers in the coming years. For 2019, the increasing regulatory burden, financial crime, AML and sanctions compliance, together with culture & conduct risk and the adequacy and availability of skilled resources, were all raised as challenges. In contrast, for 2018, data privacy and the General Data Protection Regulation together with enhanced monitoring and reporting requirements were highlighted, in addition to continuing regulatory change.
Budgets
Compliance budgets are expected to rise. Each year budgets continue to have a slight increase and this will remain for 2019. 63% of firms expect to have more available budget compared to 61% in 2018. Meanwhile, 65% of respondents report an expectation that the cost of senior compliance staff will rise in 2019.
Compliance Teams
Growth in compliance teams is expected to slow down. The majority of respondents, specifically 58%, expect the size of their compliance teams to stay the same. For this reason, reason leveraging technology to streamline compliance processes would be beneficial for compliance teams to optimize their time and productivity.
Outsourcing
Firms who outsource part or all of their compliance remains consistent ranging between 24%-28%. Over one-third of respondents now outsource at least part of their compliance function. This is the highest since 2016. The top reasons for outsourcing include cost and the need for additional assurance on compliance processes, lack of in-house compliance skills and cost. Firms should strongly consider the risks when outsourcing their compliance function. They might have to answer regulatory questions as to why the investment was not made in-house for compliance skills needed. It is difficult to find knowledgeable people who know and understand the regulatory requirements of compliance.
Predictions over the next 10 years
Many respondents made predictions for compliance changes over the next 10 years. The most anticipated were cited as the automation of compliance activities, continuing regulatory change, an enhanced role for compliance within the business, the ‘new normal’ of culture and conduct risk expectations and the rise of technology risk.
Survey respondent’s answers to the question: “greatest compliance challenge(s) I expect to face in 2019 is/are…
“Volume of oversight needed will increase but due to the size of the firm budgetary constraints could keep us from obtaining the technologies needed to provide the most efficient compliance oversight”
“Day to day compliance challenges are growing and so the personal liability of compliance-staff. We expect if the trend remains the same, it will become more and more difficult to find qualified and experienced staff specifically at a higher level”
“…the cost of technology adoption as a longer-term solution to hiring more people who are neither better qualified nor worth their salary adjustments”
The full report can be downloaded and reviewed.
As compliance teams continuing to face change at a rate much quicker than they are used to, the tools and capabilities available to make their job easier will be more vital than ever. Veriday has just launched an entirely new compliance section of our product that helps compliance teams be more efficient, have less manual processes and ensure that advisors are adhering to regulatory and brand guidelines.
