Compliance function for the information age

Today’s compliance function needs to lower costs, retain talent and keep pace with fast-changing demands, all at the same time, according to Accenture’s 2019 Global Compliance Risk Study.

Driving substantial change can be challenging for the compliance function, the study says. For the function to transform into one that is fit for the information age, the compliance function needs to focus on developing a next-gen compliance officer, defining new roles and incorporating new technology.

The latest iteration of the Global Compliance Risk Study suggests the following actions to drive the compliance function forward:

• Upset the pace
• Re-state the “first line of defense”
• Pivot and adopt the new
• Empower the next-gen compliance officer
• Accelerate to Compliance 2.0

The survey was conducted with 151 senior compliance executives at banking, capital markets and insurance institutions globally. Further highlights from the research include:

• 84% of respondents say they have a technology compliance officer within their compliance function
• 60% of the respondents agree that responsibilities previously performed by compliance in the second line of defense are now shifting to the firstline
• 13% of a compliance officer’s time can be spent liaising with other control functions
• 72% of the respondents with quantitative cost reduction goals are targeting reductions of more than 10% over three years
• 50% of the respondents face a level of unmanaged employee attrition that is above expectation

Reshaping the compliance operating model

With financial institutions fueling growth with new business models, traditional approaches to compliance seem to be no longer fit for the future.  Compliance should take steps to modernize its thinking to remain relevant as an advisor to business amidst the pace of the fourth industrial evolution. The focus must be on tools to identify, monitor and manage the newer dimensions of risk emerging from the information age.

Financial institutions are reshaping the compliance operating model, with the front office stepping up to its position as a true “first line of defense,” and allowing Compliance functions to focus on the highest risk activities. A couple of years ago, keeping up with innovation was required compliance function to change the culture within their firms and reposition themselves from being “just” a second line of defense to a central guiding force in future business and technology decisions.

Many financial institutions have experimented with emerging technologies. However, accelerating through this inflection point requires larger-scale transformation. New and powerful capabilities and technologies are required to deliver a microservices-led architecture fit for the future. More industrialized collaboration with peer institutions will drive down “costs of ownership”. It is required in areas such as anti-money laundering and regulatory change.

Compliance 2.0

Re-confirming roles and responsibilities and continued clarity of the responsibilities is key to compliance function going forward. This will help in retaining the stature and “seat at the table”. The compliance function earned it for the first time post the financial crisis and should maintain it amidst a new business environment.

Compliance function needs a more dynamic and higher touch work environment. Such an environment will identify risk and connectivity to bad actors earlier in business transactions. Empowering a new generation of compliance officer will bring value at the outset. Delivering a Compliance 2.0 state will require a clear and inspiring strategy. Such compliance function will be able to apply innovation at scale to support and empower a new generation of compliance officer.