July 18, 2018 / 7:46 PM / 9 months ago

COST OF COMPLIANCE 2018: Budget, skilled resources, personal liability, typical week of a compliance officer

LONDON/NEW YORK (Thomson Reuters Regulatory Intelligence) - Ninety four percent of firms expect their compliance team budgets to remain the same or grow in the coming year, according to Thomson Reuters’s annual cost of compliance survey. The survey, now in its ninth year, generated responses from more than 800 senior compliance practitioners worldwide, representing global systemically important financial institutions (G-SIFIs), banks, insurers, broker-dealers and asset managers. As with all previous years, the report builds on annual surveys of similar respondents and, where relevant, highlights year-on-year and regional trends.

An employee of puzzle maker Beverly holds a piece of the company's white micro 1000 piece jigsaw puzzle at the International Toy Show in Tokyo June 14, 2012.


As with prior years, the vast majority of firms (94 percent) are expecting their compliance team budget to remain the same or grow in the coming year. While this is undoubtedly good news for compliance and risk functions, resources continue to be a challenge, as they need to keep pace with unrelenting regulatory change, evolving regulatory expectations and increasing personal liability.

Sixty-one percent of firms are expecting an increase in their total compliance team budget in 2018 (14 percent expect a significant increase). There were variations in the picture with 49 percent of G-SIFIs reporting their total compliance team budget would increase in the year ahead (14 percent expect a significant increase). There were also variations in the regions, with most firms in Asia (66 percent) and the United Kingdom (65 percent) expecting total compliance team budgets to grow in the coming year.

Click (bit.ly/2JxcOJ6) to view figure1:Firms who expect the total compliance team budget to be the same or more over the next 12 months

Practitioners said they main reasons why they expect compliance team budgets to be slightly or significantly more in the coming year are:

-additional legislation;

-need for additional skilled and senior resources;

-the need to develop internal policies and procedures;

-focus on implementing new regulatory requirements (the General Data Protection Regulation (GDPR)[here] and Markets in Financial Instruments Directive II (MiFID II)[here] compliance);

-more training required;

-outsourcing specific services;

-compliance monitoring tools and activities;

-greater personal liability.

In the overall population of firms, the year-on-year results are very consistent, with 52 percent of firms expecting the size of their compliance team to remain the same in 2018 and 43 percent expecting it to grow.

Click (bit.ly/2zOX98t) to view figure2:Over the next 12 months, I expect the size of my compliance team to....

There is a more changeable picture for G-SIFIs. For 2018, 43 percent of G-SIFIs expect the size of their compliance team to stay the same (50 percent in 2017), 46 percent expect the team to grow in 2018 (42 percent in 2017), while at the other end of the scale, 11 percent expect the team size to reduce in 2018 (8 percent in 2017).

G-SIFIs are often seen as leading indicators of future compliance trends, and the changing picture presented by the largest firms suggests they are beginning to reconsider the shape, size and skill set of compliance, as some teams grow and others are reduced when particular regulatory projects come to an end.

Regionally, there are some variances. More than half (51 percent) of firms in Asia and 45 percent of firms in Continental Europe expect their compliance teams to grow in the coming year. Only 29 percent of firms in the United Kingdom expect compliance teams to grow in the year ahead, however, the lowest percentage across all other regions.

Click (bit.ly/2NX7qCh) to view figure3:Over the next 12 months, I expect the cost of senior compliance staff to be....

There were also some clear regional variances on the cost of senior compliance staff. A fifth of firms in Canada and Asia expect the cost of senior compliance staff to increase significantly in the next 12 months, compared with just 4 percent of firms in the United States.

The top three reasons why firms expect senior compliance to be significantly more expensive in the coming year are:

-demand for skilled staff and knowledge (86 percent);

-additional senior staff required to cope with volumes of regulatory requirements (73 percent); and

-greater personal liability (52 percent).

Overall there is a clear picture that the majority of firms expect the cost of senior compliance staff either to remain the same or grow in the coming year. The increase in expected cost of senior compliance staff is reflected in the results for both total team budget and the expected size of compliance teams. It is also apparent that the consistent demand for high-quality compliance skills and knowledge has not abated, reflecting the diverse and often challenging remit of senior compliance professionals in financial services.

Across the board the expectation is that compliance budgets will grow, though it will be a firm-by-firm consideration as to whether the expected increase in budget is sufficient to cover the likely increase in the size of compliance teams. Overall a positive picture is painted with 43 percent of firms expecting the size of their compliance team to increase to be outweighed by the percentage of firms who expect the size of their compliance budget to grow (61 percent) in the next 12 months.

Click (bit.ly/2zRx5cL) to view figure4:Expected increase in the size of compliance teams


Personal liability and accountability continues to be a concern for compliance officers. While there has been some fluctuation in views during the last five years, the perception that the personal liability of compliance professionals will either stay the same or grow has been remarkably consistent.

Eighteen percent of respondents expect the personal liability of compliance professionals themselves to grow significantly in the coming year. This may reflect the roll-out of personal accountability regimes around the world, such as the UK Senior Managers and Certification Regime (SMR), Hong Kong’s Manager-in-Charge regime (MIC) and Australia’s Banking Executive Accountability Regime (BEAR). Almost a quarter (24 percent) of firms in Asia, and almost a fifth (19 percent) of firms in the UK, expect personal liability to increase significantly in the year ahead.

Click (bit.ly/2Jz6Qao) to view figure5:Over....months,....personal liability of complance professionals to be...

Click (bit.ly/2NXFRc6) to view Singapore's regional regulatory response

Ireland has also begun to move toward the introduction of a personal accountability regime. In January 2018, the Central Bank of Ireland (CBI) “strongly” recommended the adoption of reforms to assign responsibility to senior personnel, and said such reforms “should be modelled on the Senior Managers and Certification Regime in the UK”. The CBI noted that the UK Financial Conduct Authority had found the new approach “effective” and that “great benefit has been found in other jurisdictions in relation to the adoption of this policy”.

Culture and conduct risk are also likely to heighten personal liability concerns, as was highlighted in Thomson Reuters’ fifth annual Culture and Conduct Risk survey report, which found that 70 percent of firms consider the regulatory focus on culture and conduct risk will increase the personal liability of senior managers.

Click (bit.ly/2NZEJ7K) to view figure6 in response to:"Do you think regulatory focus will increase personal liability of senior managers?"


Financial services compliance officers have long had to juggle an expanding remit and expectations, potentially limited resources and the need for additional or enhanced skills, all with an overlay of increasing personal liability. The “core” compliance tasks of tracking and analysing regulatory developments, board reporting, amending policies and procedures and liaising with other control functions have to compete for attention with the sheer breadth of “other” compliance activities often deemed to be part of the role of the compliance function.

Click (bit.ly/2NnuhpB) to view infographic of a typical week of a compliance officer.

To download the full report click (here).

(Stacey English is head of regulatory intelligence and Susannah Hammond is senior intelligence expert at Thomson Reuters Regulatory Intelligence.)

This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on June 25. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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