Four Top Compliance Challenges for Today’s Financial Service Provider
On Wednesday, April 29th, we’ll be hosting a webinar taking a look at the major compliance challenges being faced by companies these days. For more information and to register, click HERE.
With the rapid emergence of new regulations and transparency requirements, compliance has become extra burdensome for tax lawyers, accountants, wealth managers, bankers and other financial service providers.
Complying with all of these new rules now require additional time, money and administrative and logistical capacity and, in some cases, have taken a toll on a firm’s ability to grow its business, better serve its clients and even survive.
Taking all of this into account, we’ve decided to put together a list of the top four compliance challenges being faced (and to be affronted in the near future) by businesses in our sector.
Do you think there are others of greater importance? If so, get in touch and let us know!
1. Pursuing Data Protection
With the implementation of Europe’s GDPR almost two years ago, data privacy and protection has moved up the list of priorities for all companies out there.
Complying with GDPR has not been easy and has required great investment, meticulous organization and plenty of time. And this will only continue to grow in importance as more countries join the fray by developing their own data protection rules.
As explained by Jess Wilburn, Data Protection Officer for NAVEX Global, in his company’s e-book Top 10 Risk & Compliance Trends for 2020, “this state of constant change will create an environment where organizations will not only have to continually define and refine data privacy processes and procedures, but also define and refine organizational structures that process data, skillsets of individuals who manage data, and the relationship the company has with [personally identifiable information].”
Wilburn goes as far as writing that compliance with data protection regulations will require “a lifestyle change,” one in which companies “are expected to live and breathe privacy by design.”
2. Being Operationally Flexible & Resilient
Running a firm that can react swiftly and efficiently to change and remain strong during taxing times (pun definitely intended) is of utmost importance.
According to a white paper published by ACA Compliance Group, “firms must implement a crossfunctional approach that takes into account how the firm mitigates the risks inherent in the systems and technology it uses, whether in-house or through a third-party vendor, as well as how it responds in the event of an actual incident.
This process, it explains “includes sound governance, compliance, and cybersecurity and technology risk management policies and procedures that allow the firm to successfully adapt and respond to continued technological change and evolving risks.”
3. Building an Agile Compliance Practice Using Technology
Embracing technology and all of the solutions it offers has become paramount to firms that are looking to efficiently comply with all relevant regulations. A major challenge for companies in the financial services field has been to incorporate these tech innovations into their practice to help them remain in compliance and ultimately better serve their customers.
According to Thomson Reuters 2019 Cost of Compliance Survey, technology remains the greatest challenge out there for organizations in this sector.
On the one hand, Thomson Reuters’ Susannah Hammond writes, with the advent of fintech and the innumerable tech-suffixed innovations, “risk and compliance functions have had to consider and deal with substantive issues before firms can begin to realize the potential benefits offered by technological innovation.”
On the other hand, companies have not yet fully embraced technology when it comes to helping them automate and streamline their compliance functions.
According to Hammond, “the successful deployment of technology and the ability to automate future compliance activities is one of the greatest potential innovations for the next 10 years.”
Furthermore, “while there will be numerous challenges to overcome, there are huge possible benefits to firms and their customers alike from solutions deployed successfully on a secure IT infrastructure by highly skilled in-house specialists.”
4. Promoting Customer Trust and Ethical Behavior
A huge part of any business is to build a culture that promotes transparency, trust and ethical behavior. Without this, it would be very easy for a firm to fail its clients and fall into patterns of behavior deemed to be suspicious or outright criminal.
Therefore, considering the current trends in transparency and ramped-up compliance, it is essential for firms to train their teams to act properly, obey all rules, respect their clients and manage risk and compliance in an effective and ethical way.
As explained in Deloitte’s New Horizons: Compliance 2020 and Beyond, “organisations with strong cultures within which people understand the organisation’s ethical stance and principles will be better prepared to deal with unforeseen compliance risks.”
Therefore, according to their study, “many organisations are…placing increasing emphasis on the culture within the organisation and providing guidance on ethical business practices and principles.”
Despite these efforts, challenges remain; Deloitte’s findings suggest that “many organisations are struggling to effectively measure and assess their culture and are therefore potentially missing opportunities to influence and shape the culture of the business.”