Why regulatory compliance remains such a pain
Regulatory compliance is a major pain for compliance professionals. Read about our thoughts on why compliance teams across almost every vertical in the financial services space struggle with the same pain.
Regulatory compliance is a major pain for compliance professionals. I would know because in my time as a compliance professional, I experienced this pain firsthand. Allow me to explain: on any given day, a compliance officer is already working on a bunch of things which can include, delivering training, resolving policy-related questions from employees (that sometimes veers into examining the philosophical underpinnings of what is considered ethical) or performing risk assessments of new business products or initiatives. It’s a busy day on most days of the week. Now imagine learning by word of mouth that there is a major regulatory development occurring in one of the countries under your remit that’s due to come into effect in the coming months which will significantly impact how your company does its business. Great news right – because who doesn’t want more work. And guess who’s responsible for assessing the implications, performing (even more) risk assessments, operationalising the requirements and managing the entire implementation project? That’s right, your trusty compliance officer. And as if things weren’t stressful enough – let’s throw in the fact that getting things wrong can become very costly for the company (think fines, reputational damage, clean-up costs, legal fees, suspension of business licenses) and depending on where you’re from – could also mean personal liability or imprisonment for some folks in the company.
Like I said, regulatory compliance is a major pain and it is only getting worse because the regulatory environment is only becoming increasingly more complex. So it’s painful to get it right and it’s even more painful if you get it wrong. I’ve seen and experienced this in my time as a compliance professional and now as a vendor, I’ve seen compliance teams across almost every vertical in the financial services space struggle with the same pain – and in my view this is primarily due to the fact that compliances teams don’t have sufficient resources to effectively mitigate the pain.
1) Resources, what resources? Compliance teams are notoriously understaffed – just ask any compliance officer. All sorts of issues arise when the folks who are there to help the company do the right thing don’t have sufficient manpower to do so, which in itself is a statement of how seriously the senior management of the company takes regulatory obligations (Note: regulators tend to frown on these kinds of things). For the compliance team, it’s not just a question of the volume of work they have to deal with, it’s also got to do with the type of work they are performing. Ensuring an entire company is meeting its regulatory obligations on an ongoing basis is a full-time job and in some cases we’re talking about multiple regulations, multiple jurisdictions and multiple business lines. Let’s also not forget that the breadth of work performed includes both manually intensive work and tasks such as regulatory analysis and interpretation that require real expertise. Now because compliance teams don’t have adequate resources, this sets off a chain reaction that just spells more trouble for the company and this includes:
2) Missing out on key regulatory developments. This happens more frequently than most people would like to admit as most folks are in fact playing catch-up when they would rather prefer to managing this proactively. The problem gets compounded when you have to track developments across different jurisdictions, for different business lines and products.
3) Inadequate impact assessment: Being notified of regulatory developments is the start of an uphill task, what comes next is understanding how new developments will impact your business. That takes time and effort and in most cases, is a painstaking and manual process that involves carefully reading regulations, understanding and agreeing on interpretation and identifying the impact on internal functions, controls and systems. It’s a time-consuming and resource intensive task.
4) Inadequate implementation: One problem contributes to the other. If you fail to perform adequate impact assessments, then your implementation efforts are doomed from the start. What’s more, compliance teams tend to trip up here also because of ineffective project management. In most cases, folks are still relying on Microsoft Excel – which is great as a fuss-free, low cost solution but doesn’t do much to help reduce the time and effort it takes to manage multiple tasks, stakeholders and deadlines.
5) Inadequate change management: If you are already drowning in work, how much of an effort are you making to proactively monitor change and developments in the business to ensure they stay on the right side of the law? Even if your company does a great job with change management – this still results in more work for the compliance team which will require more time and effort to perform more risk assessments and changes to internal control amongst other things.
Think tech. RegTech.
Inadequate resources for a compliance team means the compliance program itself is inadequate which then means the company itself (and its managers) are at risk. But having a bloated compliance team doesn’t necessarily mean the issue disappears because as we have seen, the work associated with regulatory compliance can be painfully manual and we already know most companies are also struggling to contain the cost of compliance (which includes soliciting advise and assistant from external advisors). The real question is how do you empower your compliance team to improve productivity and to perform higher-value work? How do you help them do more to manage regulatory risk better, in less time and at less cost? You guessed it: regulatory technology. I am a big believer in the potential that technology offers in addressing some of the pain points that I experienced personally and that regulatory compliance professionals continue to struggle with today. This is why I set out, together with my co-founder, to build MICA, a platform that’s designed to help compliance teams become ridiculously efficient at managing regulatory change. Our goal is to make it easier for compliance teams to track, understand and act on regulatory change. We help address many of the pain points typically associated with the regulatory compliance process such as keeping track of regulatory developments, having the means to collaborate on regulatory analysis and task management or even understanding how new regulations will impact your business with artificial intelligence and intuitive workflow tools.
Ultimately, the main promise of technology is that it can help us lead more productive and meaningful lives at home and at work, and this is what we hope to realise for our clients. So if you’re in regulatory compliance and you’re looking for ways to improve productivity, then consider RegTech solutions…if you can find the time that is. 🙂