Resource constraints threaten bottleneck in compliance

Compliance teams are buckling under the weight of global regulation and need the support of their board and supervisory authorities, according to a new survey by Thomson Reuters.

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Compliance teams are buckling under the weight of global regulation and need the support of their board and supervisory authorities, according to a new survey by Thomson Reuters. “All three elements need to understand and work together to deliver effective and stable risk management,” says the report, ‘Cost of compliance survey 2013’.

“The challenges all round are increased because supervisors themselves are under more and more pressure from politicians, and so have increased the intensity and intrusiveness of their approach. Boards are being targeted both collectively and individually to deliver on a cultural sea change, to set an appropriate risk-aware ‘tone from the top’ all within a demonstrably effective corporate governance framework,” the report argues.

For the second year running, Thomson Reuters surveyed more than 800 compliance practitioners from banks, brokers, insurers and asset managers across 62 countries to assess year-on-year trends and developments.

The volume of alerts tracked within Compliance Complete, Thomson Reuters regulatory news, analysis and tracking solution, to the end of 2012 was 35% higher than the previous year.

The survey results show 81% of compliance professionals are expecting an increase in the volume of regulatory information in 2013 with almost half expecting this increase to be significant.

“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. In the UK, for example, 31% spend more than 10 hours a week tracking and analysing regulatory developments, up from from 25% last year. “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,” Schlageter added.

Significant numbers of respondents said regulatory liaison would increase due to the need to coordinate with multiple global regulators. But, firms should not assume that regulators themselves will effectively co-ordinate their efforts, the report suggests. “It is essential that firms which operate across multiple jurisdictions ensure that their internal communications keep track of what is being said to regulators in different areas, and also what those regulators are requesting,” the authors contend. “Firms may find themselves under a duty to share information with different regulators, or to tell one regulator what another regulator is looking at.”

Although 2013 will see the maturity of significant regulatory reform programmes globally, the detail needed to put flesh on the bones of the new structures is still awaited.

While 67% of respondents expected their compliance budgets to rise slightly or significantly, the remaining third expect to have the same or fewer resources at the end of 2013.

The report also highlighted the need for greater internal communication on compliance issues. “If nothing else is tackled in 2013, there needs to be a critical and intense focus on the need to improve the alignment between risk and compliance functions,” the authors stress. “The continuing lack of interaction between internal audit and compliance remains a profound issue for many firms.”
Reporting by Richard Schwartz