Organizations walk a delicate tightrope: if they fall off one side of the rope, they may find themselves in hot water with regulators, but if the balance swings the other way, the weight of compliance may have a severe impact on the business.
Undoubtedly, compliance can no longer be viewed as a basic regulatory expense, but rather as a chance to reduce operational and reputational risk, improve customer experience, and contribute to high overall digitalization, eventually benefiting banking performance.
Last year, the cost of compliance report referred to a demand for compliance officers to emphasize planning for the future and creating a perception to achieve their firms’ progressing compliance as well as regulatory risks. However, this year’s evaluation reveals the challenges compliance officers are experiencing as they head toward planning for the future. Additionally, there are tightening resources and potential shortages of competent professionals.
Unfortunately, many financial services firms are stressed out to meet their liabilities despite maintaining a relevant risk and compliance culture. Considering the compliance challenges, one thing is certain for financial institution compliance officers in 2022: they are increasingly being expected to play a substantial role in managing risks that reach beyond what we have traditionally considered the purview of compliance. Combining this fact with current innovation, mutually among the industry and regulatory approaches indicates that appealing and maintaining a wider complement of services and experience are crucial to the achievement of any compliance department.
Lately, outsourcing and third-party management have been widely held policies for many organizations. It involves software development, data storage, cloud computing, and accountability functions. As a consequence of outsourcing compliance, a spectrum of activities is being initiated by third parties comprising second compliance testing, screening, the assessment and checking of email, transaction reporting, and compliance training.
Compliance is progressing backward, not onward. Despite the challenges including supply chain and pandemic issues, firms are receiving less budget and getting more inaccessible. However, compliance officers deal with uncertainty while trying to meet their demands:
Currently, the cost of compliance staff is likely to increase. In today’s economic environment, financial institutions seek to reduce their costs, however, compliance is a critical area where they must be exceptionally careful.
No doubt, compliance is expensive. Since the financial crisis, compliance costs for banks have gradually risen by more than 60%. Furthermore, large companies consume up to $10,000 per employee to stay connected with compliance, as per reports.
Although it is risky to comprehensively reduce your compliance budget, there are certain strategies you can save costs while continuing compliance integrity.
Initially, look at staffing. Tasks that require focused knowledge, experience, and conclusion, should be completed by experienced staff. Make sure it is utilized for work regarding compliance, not for the repetitive tasks that can be automated.
Financial institutions should focus on compliance-interrelated disclosures that involve frequent updates. A quick fix that can automatically deliver updates and can store thousands of updating disclosures, manually. Also, helps to cut down on errors caused by manual processes.
There is a way you can save costs by controlling resources previously paid by one team or department, to support each other. Moreover, multiple departments or teams can collaborate on compliance solutions as well.
Financial institutions must also ensure that their compliance management system is properly operational (CMS). Negligible financing in additional training can help make sure anyone who uses the system is taking full advantage of its prospects.
Using these guidelines, compliance could be a cost saver for your financial institution, avoiding costly consequences and charges for non-compliance while investing money where they belong. Institutions may not necessarily need to increase expenditure, but they must ensure that they spend appropriately to prevent regulatory compliance violations.
Compliance should be viewed as something other than an essential regulatory cost, but rather as a chance to decrease operational and reputation risk, improve customer experience, and lead to greater overall digitalization, eventually advancing banking performance.
Although, strong compliance functionality is challenging to progress, particularly in today's era. The challenges and possibilities may appear to be overwhelming. Where should you initiate? Who should lead? Which inventions appear to have the most promise? Will the altered compliance efforts be approved by the regulatory authorities? Navigating them is like putting together a difficult puzzle without a picture of the finished product.
Organizations will need to include diverse functions, processes, and technologies, as well as guarantee that the technologies used are effectively regulated and do not introduce unwanted or new dangers into the environment. A board-sponsored method requiring the compliance department to assess the post-pandemic situation, the impact of new geopolitical concerns, refresh skills, and continue to engage in digital transformation might help untangle competing agendas.