Compliance professionals continue to express regulatory fatigue and overload, with no perceived let-up in the volume of regulatory change, according to Thomson Reuters seventh annual Cost of Compliance Survey.
Like last year’s survey results, 69 percent of firms expect regulators to publish even more information in the next year, with 26 percent expecting significantly more. More than one-third of the firms spend at least an entire day each week keeping track of steadily rising regulatory change.
On resource challenges and costs, 83 percent of global systemically important financial institutions (G-SIFIs) expect senior compliance staff to cost more, this year. Meanwhile, the scarcity of skilled compliance personnel is forcing two-thirds of all firms surveyed not only to do more with less, but also to expect senior compliance staff to cost more this year.
“Over the years our survey has become a much-awaited benchmark,” co-author Stacey English, head of Regulatory Intelligence, Thomson Reuters, said.
“The candid ‘real world’ feedback we elicit confidentially from participants enables the findings to be a true finger on the pulse of global compliance functions. Comparing resources, challenges and expectations against industry peers provides valuable insight and a sense of comfort for compliance practitioners and senior managers against a backdrop of rising personal liability and an evolving remit.”
Focus on regulatory risk
Spurred largely by the greater regulatory demands placed upon the management of conduct risk, three-quarters of all firms surveyed expect the focus on managing regulatory risk to rise further in 2016. For G-SIFIs, the main influence driving their heightened focus is the impact of harsher regulatory penalties imposed upon them.
In keeping with results from 2015, a full 60 percent of all respondents (compared with 59 percent in 2015) expect the personal liability of compliance officers to increase in 2016, with 16 percent expecting a significant increase; even more (27 percent) of G-SIFIs expect a significant increase in personal liability this year.
Outsourcing is on the rise
Given the resource constraints they are experiencing, a quarter of all firms have elected to outsource at least a portion of their compliance functionality. Reasons cited for this are a lack of in-house compliance skills and the need for additional assurance on compliance processes.
With only half (50 percent) of all compliance functions spending more than one hour each week with internal audit, firms may be missing opportunities to leverage increasingly and persistently scarce resources.
“The chaos that resulted from the financial crisis did have a silver lining of sorts – it raised the value proposition of the compliance function, especially a highly skilled and suitably resourced one,” says Phil Cotter, managing director, Risk, Thomson Reuters.
“The world took note of the vital role compliance professionals can play. Nearly eight years later, however, compliance officers and their boards are finding it increasingly tough to secure appropriate levels of resources, despite escalating regulatory change.
“Our report suggests that perhaps there is a limit to firms’ ability to continue to expand their risk functions – outsourcing is one option being used, but it is the growing use of tailored technological solutions which will enable compliance functions to do more with less and free-up skilled resources to tackle greater value-added compliance activities.”