25/05/2015 01:53 AST
Ever-growing regulatory requirements, resource challenges and the threat of personal liability are expected to increase the overall cost of compliance throughout 2015, according to the annual Cost of Compliance Survey published by Thomson Reuters.
In the Middle East, 80 per cent of respondents expect the cost of compliance to increase, up from 57 per cent in 2014. The regional variations show divergence, with the Middle East peaking as the region that expects senior compliance staff to cost significantly more in 2015.
According to the survey, global systemically important financial institutions (G-SIFIs), given their larger operations and resources, are better equipped to manage these 2015 findings as opposed to smaller non-G-SIFIs.
The findings also highlights the diverse pressures which compliance functions continue to face, with broadening compliance remits, no let-up in the volume of regulatory change and a growing pressure on compliance budgets.
Thomson Reuters surveyed nearly 600 compliance practitioners from financial services firms including banks, brokers, insurers and asset managers around the world encompassing Africa, the Americas, Asia, Australia, Europe and the Middle East.
“The survey has become a voice for compliance practitioners. The open concerns and views that participants shared provide real insight into the practical reality and challenges of compliance functions around the world,” said co-author, Stacey English, head of Regulatory Intelligence, Thomson Reuters.
Ever-increasing regulatory changes resulting in regulatory fatigue and overload in the face of snowballing regulations are expected to escalate compliance costs. About 70 per cent of firms are expecting regulators to publish even more regulatory information in the next year, with 28 per cent expecting significantly more.
“For any regulated firm to thrive or at least survive into the medium- and longer-term, consistent investment needs to be made in the risk, compliance and control functions,” said Phil Cotter, managing director, Risk, Thomson Reuters. “We have seen an ongoing rise in compliance leaders expressing regulatory fatigue as they are being held to increased accountability amidst an ever-escalating volume of regulation, the expectation of being knowledgeable, and the added pressure of being exposed to record fines for non-compliance.”
Globally 59 per cent of all respondents (53 per cent in 2014) expect the personal liability of compliance officers to increase in 2015, with 15 per cent expecting a significant increase, compared to 21 per cent of G-SIFIs who expect a significant increase in personal liability.
“With heightened scrutiny and accountability, it has never been more vital for boards to continue to support the compliance function and senior leadership with the budget, resources and tools to help ensure a culture of transparency, trust and adaptive-change in behaviours throughout firms,” said Cotter.
The speed and sheer breadth of regulatory change is an ever-present challenge for firms. According to the survey, 70 per cent of respondents expect an increase in information published by regulators and exchanges. The last few years have seen a gentle decline in the level of the expected increase in regulatory information being published by regulators and exchanges.
One particular area that is beginning to affect the compliance arena is technology, IT risk and the issues relating to cyber crime and to resilience. For firms, cyber risks are multi-faceted and must not simply be left to the IT function. Compliance functions need to be engaged in the consideration of risks to the business from an attack on the wider financial services infrastructure, as well as the implications of a direct attack on the firms themselves.
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