The Need for Compliance Officers to Stay the Course in a Difficult Regulatory Environment

A new 38-page report from KPMG titled the Compliance journey: Boosting the value of compliance in a changing regulatory climate, highlighted the need for Compliance Officers to stay the course. A total of 62 CCOs from large international organizations operating in the U.S. were surveyed, these organizations spread across different sectors which include energy, financial services and healthcare.

KPMG stated that the survey showed that there is room for organizational growth, as the survey showed that 93% of these organizations had their boards knowledgeable of mitigation efforts and compliance risks, and 15% of these organizations strongly agree that their line-of-business managements take ownership of the compliance culture and agenda, while 36%, on the other hand, are not aware or simply disagree.

Another major annual report on compliance in the financial services industry put forward by Accenture showed that from 150 executives surveyed worldwide, only 89% of these respondents anticipate an increase in compliance department costs over the next two years. When further examined, 18% pegged the increase above 20% while only 48% of these respondents that anticipate an increase in compliance department costs pegged the increase around 10% – 20%.

Established Trends
KPMG established that good risk governance, conduct and culture are now trending in the business world irrespective of expected U.S. regulations rollbacks under the political leadership of Trump. This phenomenon is not only limited to the U.S. as current global trends also support the need for risk management and improved corporate governance.

The report by KPMG had stated in its introductory statement that there is a need for a continued focus by CCOs on the larger compliance picture and emphasis on how to enhance effectiveness, efficiency and agility through tactical efforts. Amy Matsuo, who is a KPMG partner and Regulatory Risk Network Leader buttress this introductory statement by saying that in a constantly changing regulatory environment, the course of action is to continue to remain compliant, even in instances where leaders are not certain how matters may turn out. Matsuo went further to explain his position by stating that the reasons for staying the course are that global regulatory trends indicate an emphasis on expectations to enhance corporate governance and risk management.

Proliferating Data and Intricacies
A recent report released by Accenture on April 10th, titled Dare to Be Different, attributes the expected increase in cost to be largely due to the profusion of digital data and increasing intricacies in the risk ecosystem. Accenture had interviewed compliance officers at insurance firms, capital market firms, and banks in 13 different countries, the survey showed that when participants were requested to identify the three main expected compliance risks over the next 12 months, fraud and financial crime, business risk and cyber risks were cited by 48%, 47% and 45% respectively.

After the release of the report, a Senior Managing Director and global head of Accenture’s Finance & Risk practice said that with the cost of maintaining compliance increasing, and new risks continuing to appear every day, it is imperative that companies find a path to more sustainable compliance costs. Companies should be thinking and invest strategically in advanced technologies that can bring about stable, cost-effective solutions that will improve performance.

Key Learning Points
The KPMG report shows the areas of strength and weakness in current compliance practices as corroborated by the statements of world-class compliance executives from major companies across the world. The strongest areas of compliance programs include governance and culture; policies and procedures; communication and training; these are all preventive in nature. This was supported by the survey results which showed that 94% of CCOs recommended annual review and approval of compliance programs by the company board or a committee of the board; 93% believed that their boards are aware of compliance risks and mitigation efforts; and 82% believe that compliance officers are directly engaged in governance.

98% believe that employees must be trained on key compliance policies and procedures; 94% provide compliance-related training to new employees, corresponding to their operation roles in the firm; and 84% have already established comprehensive training programs that equip employees with a complete knowledge of key laws, rules and regulations.