A new survey by Accenture on compliance risk, (Compliance at a Crossroads: One Step Forward, Two Steps Back?) further highlights the challenges Chief Compliance Officers (CCOs) and the compliance function overall face in managing risk. The report highlights:
- Rising expectations that CCOs play a stronger, more strategic role in front-office processes and be more connected to and involved with overall corporate strategy ;
- The increase in regulatory volume and complexity; and
- Lagging data and technology architecture.
Accenture’s survey of more than 150 compliance officers at banking, insurance, and capital markets firms across the Americas, Europe, and Asia-Pacific identified the following:
- Customer-centricity can minimize corporate exposure. Nearly half of the survey’s respondents say they must get a better understanding of how their firm’s customer expectations are changing to ensure compliance takes a stronger and more proactive role in such front office processes as product design, sales, and distribution, or, for example, advising management on the risks of originating new business with politically exposed persons.
- Declining access to management. At Patrina, we think this is the big issue. According to the Accenture survey, only 31 percent of the compliance functions responding currently report to their CEO. This is a nine percent decline from 2014.
- Porous boundaries. How can CCOs balance the need to advise while serving as an objective control? It’s a tricky balancing act. More than half (63 percent) of the survey’s respondents believe that permitting compliance to take a stronger role in front-line processes will create added risks to the function’s independence. CCOs will have to carefully assess their relationships with other such first- and second-line functions as operational risk, human resources, and technology.
- More risk. Fewer resources. Nearly as many (81 percent) of respondents reported they are managing a more complex set of risks with fewer resources. Two-thirds of respondents also said that improving systems and adopting new technology tools will be the most important change that the compliance function will need to make in the next year if it is to manage risks effectively.
Doing nothing is not an option
Compliance is neither a siloed nor solo activity. Accenture’s survey underlines the importance of ensuring the function has a visible and participatory seat at the C-suite table. It also emphasizes the need and value in creating a compliance infrastructure to:
- fully support reporting requirements;
- pre-empt tracking and addressing compliance breaches; and
- anticipate regulatory requirements, new markets, investments and so on.
No one is immune from regulation
With increased oversight come more paper, more files, and more data. Regulatory compliance requirements are getting more all-consuming and complying can often times feel like an undertaking without end. If the compliance function is under pressure to do more with less, what are the options?
Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliance recordkeeping specifically designed for the financial services community.