Are you aware of the four steps you can take to turn compliance into a competitive edge in your market?
It’s hardly new news that the cost of compliance continues to escalate for companies’ year on year. Ask a senior manager in any industry and they’ll tell you that they have become subject to a growing range of legislation, regulations, rules and guidance that are supervised by increasingly intrusive and intensive regulators.
This is particularly true within the financial services sector. During the course of the various crises and scandals that have occurred, firms have been fined, publicly censured and/or prohibited from trading (as well as enduring expensive remediation and redress exercises).
Executives may have also found themselves personally in the spotlight over their oversight, control or conduct and may have also been subject to this.
All this has led to a large investment in the design, implementation or evolution of compliance frameworks at firms that have been directly caught in the regulator’s crosshair, or have seen or heard about their competitors doing so.
It’s time for a compliance makeover
In theory, compliance frameworks should safeguard the organisation and its customers; however, the conduct related scandals that continue to occur across the financial services sector suggest that isn’t the case and that many of the compliance frameworks in place are failing to achieve their objectives.
Why is that?
Much of the investmentin making sure that the actions of firms and employees are ethical, legal and deliver the right outcomes has been spent reactively and under pressure.
This being the case, firms may not have taken the time to consider and define what an efficient, effective and value adding compliance framework looks like or focussed their investment and activities undertaken on delivering this.
Over time, this may have led to complicated structures, unclear allocation of responsibilities, confused reporting lines and multiple players of procedures and checking that lead to inefficiencies and duplicated effort.
As a result, compliance is often seen as a costly overhead that makes it harder for the business to hit its goals, without providing any answers, values or insights.
Our survey says…
It suggested that very few banks and building societies use technology to improve the coverage, efficiency or effectiveness of their compliance monitoring.
And, at a time when Boards are demanding that any investment be as cost-effective as possible, executives are rightly wondering whether they should tweak existing frameworks, or hit reset and take a completely new approach.
Most compliance frameworks are focussed on testing for problems and solving those that they are able to find.
Given that early prevention of those problems is considerably less costly and cumbersome for the business, it makes far more sense to design a new framework that focusses on:
Compliance needs a new image: it should be viewed as an opportunity for positive change and not a negative burden.
Now is the time to SPEAK up for compliance!
An improved compliance strategy, tailored to the needs of your individual business, rests on four simple interlinking steps. They are not particularly revolutionary or ground breaking, but sometimes the best way to fix a problem is do the basic things better.
Systems: Innovative technology solutions can now be used to automate checks and controls at vital points in the compliance process, which will highlight and prevent possible compliance breaches before they occur. The technology will also continuously learn improving the accuracy and confidence of control over time.
This not only improves confidence through increased compliance coverage of more areas, it also decreases risk and lowers the total cost of compliance. Solutions available on the market include Smart QA, continuous compliance monitoring, automated decision tools, total regulatory obligations capture and horizon scanning.
People: Having clarity over compliance related roles, responsibilities and expectations in terms of how these are fulfilled across the compliance operational framework is essential.
This needs to be facilitated by a robust recruitment, training and performance management framework that gives staff the skills, knowledge and experience required to discharge these responsibilities/satisfy these expectations.
This will ensure that compliance input is relevant, insightful, value adding and that there are no gaps (which will lead to errors or omissions and remediation costs) and no duplication of effort.
Engagement: Having a corporate culture that fully embraces regulatory compliance, the value of treating customers fairly and continuous improvement is essential.
Different areas of the business should actively discuss compliance issues and constructively work together to resolve them (ideally to their mutual satisfaction).
Different areas of the business should also embrace any new approach to compliance as inertia or unwillingness to work collaboratively, do things a little differently or embrace new tools/technologies will undermine that new approach and its ability to deliver the expected benefits.
If everybody moves forward with a common sense of direction and purpose, motivation is increased and disagreement (and the loss of productivity associated with this) is reduced.
Attention: All compliance activity should reflect the company’s strategy – and the business model it has in place for implementing it. Likewise, compliance-related decisions should be driven by a prevention based mindset and detailed knowledge and understanding of a firm’s operations and risk exposures.
That way, the compliance-related systems, controls, policies, procedures, monitoring and reporting can really focus on priority areas and avoid any unnecessary duplication.
Taken together, these simple steps will help you achieve a compliance framework that that isn’t overly costly or burdensome and delivers real value to the business.
KPMG has extensive experience of reviewing or enhancing the design and effectiveness of compliance frameworks and their scope, activities undertaken and technologies employed so that they focus on what’s important and do the right things in the right way.
We can help you reduce the cost of your compliance and your overall risk exposure, without impacting its ability to deliver the right answers, insights and value to your business or the right outcomes for your customers.