Compliance bloat in finance – how to ensure your business stays afloat

Sabu Samarnath
Sabu Samarnath
2 min read

There was once a time – a simpler time, perhaps – when managers could run a skeletal operation of compliance workers taking on a variety of legislations. Nowadays, mammoth projects such as the implementation of Mifid II and the Brexit fallout require the creation of larger teams of specialists. 
For financial services firms, there are hardly enough specialists in the world to deal with such cataclysmic shifts – which is why demand is outstripping supply in these areas, leading to disproportionate wage growth among compliance professionals. For companies resettling on the European mainland post-Brexit, getting the right compliance staff will be a pain point. “You cannot just relocate people from London, you have to replicate them,” PwC partner Amanda Rowland told the FT recently.

Ominous commentary floods the business news, with dark clouds being cast by Brexit and IR35 reforms. Brain drain is forecast, and for businesses looking to strengthen compliance in the face of oncoming regulatory change, the headcount boom of the past decade is an unsustainable way of dealing with the problem. 

Regulatory changes and the compliance boom

For banks and financial services firms, there has been an alarmingly rapid rise in the compliance and risk management agenda over the past decade to cope with an increasing abundance of regulation. HSBC’s chief compliance officer, Colin Bell, recently stated, “You have to build an industrial-scale operation just to digest all the regulatory changes.”
This is far from exclusive to banking. Whether it’s ISFR 17 in the insurance sector, IR35 in the accountancy space, the transition away from LIBOR, or any number of logistical challenges associated with Brexit, businesses are having to scramble for the right tools to react to the impact of legislation.

Compliance and fincrime personnel now equate to 3% of a bank’s headcount, a figure that’s doubled in six years, according to Boston Consulting Group. But throwing money and resources at the problem, as banks have been doing, is not a sustainable way to continue.

Scale knowledge, not resources

There is a scalable and more efficient way for businesses to ease the load when it comes to matters of risk or compliance assessment. With just over half of Britain’s businesses believing the country is at risk of a brain drain after Brexit, capturing and maximising the expertise of specialists should be a priority.

The intricacies of legislation, and the often fine margins between complying or overstepping boundaries, require the nuance of an expert. These are decisions that contain an ounce of subjectivity; one assessor’s green light may be another’s red light. To be able to make judgements at scale, and consistently in line with a company’s recognised best-practice, then technology needs to be devised with human subject matter expertise at the heart of it all. 

The looming brain drain, as a result of the regulatory turbulence of Brexit and IR35, will mean financial companies can no longer rely on increasing manpower to improve compliance. Download the eBook below, in which we explore ways around an upcoming talent exodus from financial institutions. 

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