LONDON/NEWYORK(Thomson Reuters Regulatory Intelligence) - Thomson Reuters Regulatory Intelligence has published the results of its 13th annual survey on the cost of compliance, focusing on the challenges expected to be faced by risk and compliance functions at financial services firms in 2022[LINK: tmsnrt.rs/3c9VXQE]. The survey generated responses from almost 500 practitioners worldwide and closed before the Russian invasion of Ukraine and the consequent widespread sanctions. The shifting priorities highlighted in the survey results will only have been exacerbated by the myriad sanctions imposed on Russia.
The 2021 cost of compliance report pointed to a need for compliance officers to focus on planning for the future and developing a vision to manage their firms’ evolving compliance and regulatory risks[LINK: here].
This year’s survey shows a frustration among respondents that, despite compliances widening remit, staff numbers are unlikely to grow, with staff costs increasing and budgets remaining tight. Added to this, increases in personal liability for compliance officers may deter capable individuals from joining the profession and spur experienced personnel to leave.
---“For several years now, chief compliance officers (CCOs) in the financial sector have voiced a sustained tide of concern […] from increased enforcement actions holding CCOs personally liable […] for actions that do not result from fraud or obstruction on their part. These career-ending enforcement actions discourage individuals from becoming or remaining compliance officers and performing vital functions that regulators stretched too thin would otherwise be unable to perform, particularly when other options […] involve less personal risk.”
Framework for Chief Compliance Officer Liability in the Financial Sector New York City Bar, June 2021---
Outsourcing, technology and regulatory technology may step in to plug some of the gaps but will need to become more sophisticated to make the type of changes required by compliance functions.
The 2022 report briefly explores some of the main regulatory developments, and other drivers for the heightened demand for skilled compliance officers. It also reports on the challenges compliance officers are facing.
CULTURE REMAINS A KEY ISSUE
2022 has seen a slight increase in the number of respondents reporting that they had not discarded a potentially profitable business proposition due to culture or conduct risk concerns, as compared with 46% in 2021 and 2020. A similar trend can be seen among globally systemically important banks, with 40% stating they had not discarded a potentially profitable business proposition due to culture or conduct risk concerns (31% in 2021, 48% in 2020).
Regionally, half of firms based in continental Europe said they had discarded a potentially profitable business decision due to culture or conduct risk concerns, compared with just 26% of firms based in the United States.
---What is the single biggest culture or conduct risk your firm is facing?“The business tries to be too much to too many. It is a challenge to have the business understand that it should turn away business that doesn’t make sense.”
Anonymous, United States of America---
Strong compliance functionality is difficult to achieve especially in the current climate. Firms should consider a wholesale review of compliance strategy. A board sponsored directive that the compliance function evaluate the post pandemic position, the impact of new geo-political tensions, refresh of skills and continue to invest in digital transformation, may go some way to untangling competing priorities.
The special report will be featured on the Compliance Clarified podcast which is available on Google[LINK: here], Apple[LINK: here], and Spotify[LINK: here].
Further information on Thomson Reuters Regulatory Intelligence can be found [LINK: here].
Report co-author Susannah Hammond speaking about the report on Reuters Insider can be viewed clicking the link: bit.ly/3nQX6iz
Our Standards: The Thomson Reuters Trust Principles.