Thomson Reuters has released its 2021 Report on the Cost of Compliance, finding that radical change may well emerge from post-pandemic reviews of and by financial regulators. With some financial services firms changing strategic direction, the report highlights a need to support wider cultural, operational and staffing requirements through future investment and resources.
While the pandemic presented many challenges, it also presented the financial services industry and compliance officers with opportunities. In shaping the future, compliance officers must now build on the changes the pandemic necessitated.
Key findings include:
- About one-third (34 percent) of firms outsource all or part of their compliance functionality — its highest rate since the question was introduced in 2016. This can be attributed to: additional assurance on compliance processes, a lack of in-house compliance skills, and the need to access third-party know-your-customer functionality. Firms will need to ensure their approach is strategically aligned with that of their organization, particularly with regard to the adoption of digital solutions and outsourcing compliance functions.
- Following the peak of the COVID-19 pandemic, boards cited cost and operational obstacles as the main challenges they faced in the past year. Financial limitations present a barrier to successful change and in the aftermath of the pandemic, firms will seek ways to reduce cost and maximize revenue. Compliance officers are also having to keep up with more stringent regulatory demands and expectations — political changes in the United States and Brexit added further uncertainty.
- 78 percent of respondents expected the amount of information published by regulators to increase in 2021 — the highest percentage since 2013. The expectation for this volume of change was particularly driven by a new administration in the U.S. and the aftermath of Brexit.
- Financial services boards identified their biggest challenges as: the volume of regulatory change, instilling a culture of compliance, and meeting regulatory expectations. Meanwhile, the biggest compliance challenges were: keeping up with regulatory change, increasing regulatory demands and expectations, and a lack of skilled resources.
- Thomson Reuters saw the lowest percentage of respondents who expected the cost of senior compliance staff to increase (47 percent). The potential reasons given for the significant decrease were due to budget cuts and remote working. Furthermore, 68 percent expected the turnover of senior compliance officers to stay the same in the next 12 months.
- Risk-aware culture is perhaps the single most valuable asset that a firm can develop, especially in a changing environment, and while boards have responsibility for culture, survey respondents found that installing a culture of compliance remained high on the list of challenges that boards foresaw in 2021. When asked what the single biggest challenge to managing culture and conduct risk, respondents cited balancing competitive pressures and managing a remote team as the top two reasons.
Download the full report below to read more.