Regulatory compliance requirements are proliferating. Media attention has grown, and mistakes are being punished severely with record fines and well-known firms being shamed in public. Naturally, companies are responding with bigger compliance functions to deal with the growing burden.
However, customer-facing teams are spending time on paperwork instead of service provision and growing the business. And, as we saw with the implementation of Sarbanes-Oxley and Markets in Financial Instruments Directive (MiFID), the increased burden affected the whole organisation: finance, legal, risk management, human resources and product development.
Balancing compliance needs with business needs is not straightforward. The firms that are achieving this most successfully have realised that an integrated, value-driven compliance function gives you efficiency today, and the ability to adapt easily to new regulatory challenges tomorrow. Ultimately this creates competitive advantage – by ensuring that staff are focusing their effort on the business, not only on achieving compliance.
An integrated, value-driven compliance function is about adopting four principles to minimise the impact on the business and avoid the frustrations that compliance can bring.
Creating the right structure and governance
Consider splitting responsibilities between a small central team, and accountable people within each business area. The central team bring together the different requirements – understanding issues, dependencies and overlaps. Teams within the business concentrate on implementation, using their knowledge of the realities faced by the front-line staff.
Understanding the overlaps
It is not unusual to see separate teams address each new regulation. This can result in large programmes of work, which constrain the ability of the business to serve customers. By analysing the overlaps in both rules and the activities required, firms can substantially simplify their approach.
For example, for insurance firms the IFRS 4 and Solvency II teams are likely to see overlaps in meeting requirements around technical provision.
Taking a process-based view
A process-based view of the organisation covering process steps, responsibilities and systems helps build new regulatory requirements into the business rather than as an additional layer.
This helps the business focus on the long term benefit rather than compliance because it outlines an end-to-end view.
Making it business as usual
Implementation is only half the battle. Compliance requires constant management to sustain efficiency. A preventative environment can be created through accountability, ongoing monitoring and a culture where compliance is part of day-to-day business.
To learn more about creating an integrated value-driven compliance function or to speak to one of our consultants about our work in financial services, please contact us now.