More than a month into 2019 and a lot of the early noise around trends has died down. It’s now time to take an objective and measured view on what stands in store for compliance teams.
Here are 5 trends you need to be aware of and prepare for in 2019.
Trend 1: Pressure on keeping compliance costs low will be eased through some tactical wins.
There has always been a tension between the cost of compliance and the bottom line. Current estimates are that anywhere from 5 – 18% of a company’s revenue goes back into compliance. A majority of this is re-invested into more people, and in many cases 15% of the workforce could be working on GRC.
With the rise in regulatory monitoring, increasing the workforce isn’t an option for most organisations. Which means that the teams are spending less time on each change, just to keep up with regulation changes. For smaller organisations, this problem is even more acute, as resources are limited.
Automation has changed the game, and compliance managers are increasingly relying on automation to manage compliance processes. The software and technologies have not evolved enough to replace deep analysis and interpretation, but there are certainly repetitive tasks within the lifecycle that can be automated. More and more compliance teams will see the quick wins in this space by employing robotic automation solutions. No intelligence yet though, just dumb repetition.
Trend 2: The C-suite will become more aware of the importance of building a compliance-first culture.
The Senior Managers and Certification Regime (SMCR) is aimed at improving culture, governance and accountability within financial services firms. Individual accountability and awareness of conduct issues across the firm has certainly ramped up pressure on the C-suite. However, incentives and loopholes still exist, which can be exploited by firms that wish to do so.
One of the best ways to tackle this is through transparency. Knowledge that is locked away in emails, documents and charts can now be centralised within a single monitoring platform. However, such technology should not be viewed purely as a deterrent. It’s time for the C-suite to actively engage with the data, get their hands dirty and drive a cultural change top down. Recognise the teams that are aligned to a compliance-first approach and punish the ones who don’t. And use data as your friend to remove any subjectivity from that discussion.
Trend 3: Market leaders will start consolidating knowledge they have about regulations and controls.
The past few years has seen a steady build-up in E2E compliance processes. While some organisations have struggled to get past their size and complexity, others have embraced a standardised approach to how they deal with compliance. Their regulatory teams are lean and are ready to adapt to whatever situation new regulation puts them in.
These teams now have the bandwidth to stockpile knowledge about regulation across the firm in one place. They will be on the path to creating vast e-libraries of regulation, different types of compliance policies that address it, and clear accountability across the firm. A system where all the regulations and controls can be accessed becomes a go-to for compliance managers. While such a utopia may be a dream for the largest banks, the mid-tier banks are already well placed to leverage their size. The aim would be to adopt a single platform where all regulatory updates are compiled for employees to act on. This will in turn reduce the time spent on searching for policies and the appropriate compliance response.
" It’s time for the C-suite to actively engage with the data, get their hands dirty and drive a cultural change top down."
Trend 4: Operational Risk and Compliance will need to collaborate more than ever before. Organisations will start consolidating this by leveraging a new organisational structure.
Every compliance officer wants to reduce the company’s exposure to operational risk and make sure all regulatory processes are in sync. Until now, the vast workforce has meant that getting alignment, especially at the global level has been near impossible to achieve. But as with Trend #3, having a smaller, more nimble team that leverages a centralised platform allows the team to collaborate better. Which means that interpretations of the same regulation between legal, risk and even marketing can end up being aligned from the beginning.
A good solution will always involve role definition. If you don't assess the jobs that people do, any new shiny technology can fall into the same traps that the old one did.
Trend 5: Gaps in traceability and transparency will be exposed as organisations start to comply with SMCR.
While the first four trends have focussed on the positive and best aspects of where the world of compliance is moving to, this one is more of a challenge. Moving to a centralised, more streamlined model will also expose skeletons in the closet. Those firms that have had questionable practices and ethical standards have the most to lose with transparency. However, it is a tough road that must be navigated if they are to come out with a positive outcome.
Regulators demand more traceability, customers demand more transparency. That is only going to increase in the years to come. The sooner that you can prepare for such a scenario, the less the pain in the longer term. Relevant timely data with the help of AI can streamline the business processes to provide end to end transparency of workflow across the organisation. Supplemented with transparent communication between employees on the progress of tasks can help compliance to be completed in time and provide a sense of accountability to the regulators. And to the end customers.