Report: Compliance Teams Still Have Money

Thomson Reuters published on Tuesday another cost of compliance survey, this one polling more than 800 compliance executives in financial firms around the world. Among the bits of news: plenty of firms aren’t cutting their compliance staffs and aren’t cutting their budgets.

For example, 61 percent of respondents said they expect their budgets to increase in the next 12 months. Yes, that’s the lowest figure we’ve seen in at least six years, but another 33 percent expect their budgets to stay the same — which means 94 percent aren’t expecting any budget cuts. Likewise, only 5 percent of respondents expect the size of their teams to be cut.

On the other hand, the largest financial firms in the world are cutting their budgets and staffs to a greater extent than others. Eighteen percent of global systemically important financial institutions (G-SIFIs) plan to reduce their budget, and 11 percent plan to cut staff.

And for compliance professionals curious about your future paychecks, the Thomson survey also examined the expected cost of senior compliance staff. Canada had the highest percentage of respondents expecting senior staff to be more expensive (80 percent), followed by Asia (78 percent) and the United Kingdom (74 percent).

The United States placed last, with only 57 percent expecting to pay more. Sigh. So much winning.

We often hear anecdotes about cuts to compliance departments these days, as everyone assumes the Trump Administration will lead a deregulatory charge that prompts the CFO to cut every compliance staffer in sight. For a long while I’ve wondered how much that’s really true. For financial firms especially, regulatory compliance is a global challenge where much of the world isn’t on the deregulatory train with His Orange-Haired Madness.

CFOs might be cheap, and the largest firms may indeed be shrewd in how they invest in IT to shed staff. But these statistics suggest to me a deceleration of growth in compliance efforts. That’s quite different from shrinking compliance efforts.

From Time to Technology

The Thomson report also provides interesting statistics on how compliance executives spend their time. For example, 24 percent say they (and their teams) spend less than one hour each week preparing or amending reports for the board; 36 percent spend one to three hours; and another 24 percent spend four to seven hours.

Meanwhile, roughly 40 percent spend one to three hours each week amending policies and procedures to keep pace with the latest regulatory changes. One-third spend the same amount of time each week tracking and analyzing regulatory changes before you even get to amending policies and procedures.

The bigger picture to consider here (one we’ll consider in a later post, I promise) is how all these statistics about time, budget, and priorities affect your plans for investment in compliance technology.

Given that the cost of compliance personnel still seems to be rising, then whatever tasks consume the most time for your organization and are the most repetitive — those are the areas ripe for technology investment and automation.

Now, spoiler alert: Thomson Reuters, authors of this study, are also in the business of selling compliance automation technology. (They held a summit in New York that explored this subject just last month.) Thomson’s report is asking questions that naturally lead us to start thinking about compliance automation.

Those leading questions are good ones to ask nevertheless. It’s no secret that banks want to automate as many middle management jobs as possible, and lots of compliance jobs just below the chief compliance officer — compliance analysts, AML specialists, policy management overseers, and so forth — fall into that layer of people senior executives want to automate away. Finding the right blend of skilled staff and compliance process automation within a reasonable budget: that’s the CCO’s job.

Another telling item: when you look at where survey respondents expect to spend more time in the coming year, it’s on subjects such as assessing corporate culture, assessing corporate governance, and researching compliance technology solutions.

Well, that fits. Either you are figuring out how to piece together compliance tech with compliance talent (as we just mentioned above), or you’re working on more qualitative issues such as corporate culture, governance, or setting risk appetite — jobs that typically involve more time working with senior executives personally.

Compliance Tech Risk

The Thomson report also notes that if you’re going to spend more time examining compliance technology (I refuse to call it “regtech” or “fintech”), that means you will also focus on two more issues: the GDPR and cybersecurity.

Cybersecurity is the issue that nobody knows how to handle in financial services. It’s a risk of enormous importance, and regulators like to talk about it constantly. Last winter, the Treasury Department even flagged reliance on tech service vendors as a risk to the financial system and recommended that Congress give financial regulators the power to oversee it —  but let’s be serious; new regulation is opposite of what the Trump Administration wants.

Compliance with the General Data Protection Regulation is another primary concern this year, although that strikes me more as a temporary phenomenon, since the GDPR went into effect this year; of course firms are paying more heed to it now.

Cybersecurity and reliance on tech vendors, on the other hand, are more permanent concerns. We should expect to see them right back at the top of whatever report Thomson churns out in 2019.