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Compliance Teams Continue To Struggle, Says Thomson Reuters Annual Survey

Posted: 28 February 2013 | Source: Thomson Reuters

Increased regulatory scrutiny, maturing regulatory frameworks and expectations around risk framework delivery are piling pressure on constrained compliance resources.

Compliance professionals globally continue to struggle under the weight of global regulation and need the support of the Board and supervisory authorities within their firms to deliver effective and stable risk management, according to a new survey by Thomson Reuters. Already stretched compliance functions will need to find ways to build and maintain relationships with regulators as well as help their Boards deliver an increasingly risk-focused agenda.

The annual Thomson Reuters survey covered more than 800 compliance practitioners from financial services firms including banks, brokers, insurers and asset managers across 62 countries covering Africa, the Americas, Asia, Australasia, Europe and the Middle East. It builds on a survey of similar respondents conducted in early 2012 so presents year-on-year trends and developments. Key findings from the latest report include:

  • 81 percent of compliance professionals expect an increase in the volume of regulatory information in 2013 with almost half expecting this increase to be significant
  • In the UK, a greater proportion of compliance professionals than any other region globally (31 percent), spend more than 10 hours per week tracking and analyzing regulatory developments. This figure has risen from 25 percent last year
  • 65 percent of companies thought that their liaison with regulators would increase in 2013
  • A third of respondents expected their compliance budgets to be the same or less at the end of 2013. When contrasted with 81 percent of compliance professionals who expected an increase in the volume of regulatory information this year, this may indicate that in around one third of firms budgetary constraints will lead to increased pressure on existing resources to do more

“The results of this year’s survey again show that compliance officers are finding the environments in which they operate increasingly challenging,” said Mark Schlageter, managing director, Governance, Risk & Compliance, Thomson Reuters. “Shifting supervisory expectations, the volume and pace of regulatory change and the start of big implementation programmes for major complex legislation continue to pile diverse pressures on compliance functions. It is therefore essential that the effective management of risk and compliance has key contribution not only from a firm’s compliance function but also from its Board and supervisory authorities.”

Continued increase in regulatory information

Although 2013 will see the maturity of significant regulatory reform programmes globally it is clear that while many major debates on regulatory structure may have finished, the detail that will be needed to put flesh on the bones of the new structures is still awaited. This year’s survey found that the vast majority of respondents (81 percent) expected volumes of regulatory information to increase slightly or significantly this year, compared with last year.

Respondents' views about the increasing volumes of regulatory material being published in 2013 chimed with Thomson Reuters own experience of tracking regulatory activity; although analysis of internal volumes of tracked material is dissimilar to respondents' experiences of change tracking; the trend is the same, and the volume of alerts tracked within Compliance Complete, Thomson Reuters regulatory news, analysis and tracking solution, to the end of 2012 was 35 percent higher than the previous year.

Strained compliance resources

As the amount of regulatory information that firms have to handle continues to grow compliance teams are showing signs that resource constraints are limiting their ability to perform vital compliance functions and allocate compliance resources effectively. This is especially acute in the UK where nearly 31 percent of respondents said that they would be spending more than 10 hours per week tracking and analysing regulatory developments. This figure was significantly higher than any other region and is likely to be a reflection of the move to the new regulatory structure, regulators' increased focus on enforcement action and proposals around the ring-fencing of banking assets.

It is likely that in the largest, most complex firms some compliance staff may find most of their working week taken up with redrafting policies and procedures to reflect developing regulatory requirements however Thomson Reuters survey found that 40 percent of firms spent at least half a working day or more completing this task. While important, the role of compliance should be to advise and assist the business, and in the current environment where compliance resource is stretched, the business itself should be encouraged to own its policies and procedures.

As the effective management of risk and compliance increasingly becomes the responsibility of the Board and senior managers it is critical that Boards are aware of the risks faced by the firms they govern and understand that detailed board reporting forms are an essential component of effective corporate governance.

Plugging budget gaps

In last year’s survey, only 11 percent of companies expected a significant increase in their budget for compliance. This year, the figure has risen to 17 percent and overall 67 percent of respondents expected their budgets to rise slightly or significantly. This may indicate that those who make budgetary decisions are increasingly risk aware and appreciate the need for a well-resourced compliance function to mitigate the myriad risks which firms may face in the coming year.

While this overall message is positive, this year, still a third of respondents expected their compliance budgets to be the same or less at the end of 2013. When contrasted with 81 percent of compliance professionals who expected an increase in the volume of regulatory information this year, this may indicate that in around one third of firms budgetary constraints will lead to increased pressure on existing resources to do more.


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