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More Sleepless Nights For Compliance Professionals

What 5 compliance issues keep you up all night?

My how time flies. It’s been nearly a dozen years since excessive risk-taking by banks and the collapse of the US housing bubble spurred a global financial crisis. It has been nearly 25 years since the collapse of Barings, the world’s second-oldest merchant bank, collapsed as a result of fraudulent investments by an employee in its Singapore office.

Now, in a pandemic-drive recession, what have we learned?

Not much. According to the “Cost of Compliance Report 2020” by Thomson Reuters Regulatory Intelligence (TRRI), which surveyed the industry before the Novel Coronavirus flipped the world on its head, we have learned so much, and we have learned nothing.

Co-authored by Susannah Hammond and Mike Cowan, the report underscores that while pandemic challenges may be uppermost on everyone’s mind, the underlying issues that have always impacted compliance and exposure management continue to percolate just below the surface.

The demand for regulatory change and oversight continues. At the same time, as Patrina often reports, there have been scads of rogue traders. There is still considerable regulatory change seeking to ensure both financial stability and positive customer outcomes. Nonetheless, COVID-19 or no, there still are many, many rogue traders, Ponzi schemers, and scandalisers in addition to the pandemic-pushed financial crisis rocking the world economy.

5 key compliance exposures to address…Now!

According to the TRRI Report, even before the COVID-19 pandemic disrupted the globe, 2020 was already shaping up to be another challenging year for financial services industry compliance professionals.

What keeps compliance professionals up at night? The following outlines five critical issues for chief compliance officers and their compliance teams now:

  1. Evaluating profitability v. compliance risk – More than one-third of firms surveyed say, “If a potentially profitable business poses too great a compliance risk, ditch it. It’s not always about the money. And in fact, many say they discarded potentially profitable companies because they failed to conform to their firm’s current culture standards or because the potential risk of questionable conduct by bad actors was too great. In 2020, compliance professionals are saying: Money is important. But staying out of compliance jail is more important.
  1. Keeping up with the regulators – In 2019, TRRI captured 56,624 regulatory alerts from more than 1,000 regulatory bodies, averaging 217 updates a day. And that was pre-COVID-19. This year, compliance teams expect to field even more information.
  1. Personal liability for company exposures – When the regulators move in, compliance is accountable. When bad actors misbehave, Chief Compliance Officers and/or members of their team often go down for the count. According to the TRRI survey, personal liability is a constant concern, and many expect their risk to exposure will only grow. Moreover, 73% of survey respondents also expect the regulatory focus on culture or conduct risk will increase the personal liability of senior managers.
  1. Technology to automate compliance – Compliance teams intend to automate many compliance activities. Many compliance professionals are already looking at the effective implementation of fintech, regtech, and insurtech. Identifying best of breed and best practices is considered a challenge.
  • Outsourcing compliance– More than one-third of financial services firms say they currently outsource some or all of their compliance functionality – an increase of slightly more than one-quarter of firms in 2019. Why are they outsourcing compliance? Respondents cite the additional assurance on compliance processes, cost, and the lack of compliance skills in-house.

Why the best compliance defense is always a great compliance offense

The pandemic accelerated what was already a fast-moving trend – the work-from-home workforce and enhanced opportunities for compliance exposures. Given the hand we’ve all be dealt, this is likely the “new normal” for the foreseeable future.

But here we are. And, there is no question that pandemic or no, bad actors will continue to sidestep compliance or neglect it altogether. That’s where Patrina comes in. For more than 25 years, Patrina has been helping compliance professionals like you stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective, designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered. Let’s talk.