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Fear of a scandal has put compliance at the top of management agendas

Many compliance professionals are 'under immense strain' across all sectors, new research finds

25 November 2015

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By Manju Manglani, Editor (@ManjuManglani)

The rising volume of regulation and fear of a scandal are now the biggest drivers of compliance in organisations, according to global research released today.

Protecting the company's reputation is considered the primary role of compliance professionals, along with developing appropriate policies and processes.

"The era of paper compliance is… rapidly coming to an end," commented Bill Waite, Group CEO at The Risk Advisory Group, which conducted the global survey of more than 200 compliance officers.

"Beyond pure 'compliance' the fundamental challenge for business is to recognise that knowing precisely who you are doing business with is fundamental to commercial success. Viewed through this optic, value - not just cost - is added; and where boards see value, rhetoric becomes real."

Also highlighted as important roles for compliance professionals are: keeping their organisation out of trouble; advising management on regulatory matters; and helping their business to make the right strategic decisions.

Key priorities for in-house compliance teams

The recent VW scandal has brought the risk of reputational damage as a result of compliance breaches to the top of many corporations' management agendas.

Organisational culture can be a key determinant of whether firms treat compliance as critical risk management tool or a regulatory burden.

"Defining and articulating the desired organisational culture is a critical first step on the journey to strengthening it," said Stephen Gould, Stephen Lucas and Russell Davis in their Managing Partner article 'Cobwebs and skeletons: Cast light on your law firm's real culture'.

"However, a greater challenge is embedding and sustaining the desired culture across the organisation. To do that, leadership teams must be able to measure progress on their culture change or transformation programmes so that they know which techniques are working to strengthen the firm's culture."

In addition to the fear of a scandal and negative exposure (51 per cent) and a rising volume of regulation (49 per cent), the increased focus on compliance today is also being driven by greater scrutiny (47 per cent) and an increased focus on compliance at board level (45 per cent), according to The Risk Advisory Group survey.

In addition, a fear of financial penalties (32 per cent) is acting as a key focal point for compliance.

Risks and challenges for compliance professionals

The rising level of regulation across all industries is creating significant compliance obligations on organisations of all sizes.

The majority (83 per cent) of compliance professionals said they think compliance has become more complex in the past two years, with those at large organisations feeling this more acutely.

Worryingly, compliance has become so elaborate that more than three quarters (78 per cent) of compliance professionals said it now represents a risk in itself.

In addition, 69 per cent said their business is a more exposed to risk than it was two years ago. Among these, 21 per cent said their business is "a lot more exposed" to risk.

Increased regulation is cited as the top challenge facing compliance departments over the next 12 months by 55 per cent of respondents.

This is followed by geopolitical events (41 per cent), with the EU referendum ranking as the event most likely to have the biggest impact on compliance over the next 12 months.

Also ranking highly in the list of the biggest external risks and challenges facing respondents' compliance departments in the next 12 months are: big data and data privacy (37 per cent); cyber attacks (33 per cent) and anti-corruption legislation (34 per cent).

For around a quarter of respondents, skills shortages (26 per cent), the threat of another economic crisis (24 per cent) and increased use of social media (22 per cent) are also risks and challenges to be managed.

Ability of compliance professionals to protect the business

Confidence in the ability of the compliance team to protect the business to the required levels are relatively high. Two thirds of survey participants said they are confident and less than a fifth (19 per cent) said they are very confident in their abilities.

Respondents said that having more people with the right knowledge of the business would make the biggest difference to their compliance team's ability to protect the business over the next 12 months.

Indeed, an in-depth understanding of the business was ranked as the most important skill required for compliance (72 per cent), followed by knowledge of regulation (67 per cent).

Credibility within the business (48 per cent) and communication skills (44 per cent) also ranked highly in the list of skills needed in compliance professionals.

"Compliance professionals have an increasingly difficult job to do," said Waite.

"There is a huge amount of change and a huge amount of legislation, and the need to keep up with it and understand its impact on business is putting compliance professionals under immense strain across all sectors."

The majority of respondents (57 per cent) said they are uncertain if the new talent coming into the industry has the skills required to succeed. Indeed, less than a third (31 per cent) are confident about the skills of new compliance professionals.

Many said the industry would benefit from a stronger pipeline of new compliance professionals (34 per cent).

In addition, respondents said more investment in internal training (70 per cent) would help to ensure the industry has the skills it needs.

Respondents also asked for qualifications to be developed in collaboration with the industry (55 per cent), more compliance role models (53 per cent) and more industry-run initiatives, such as mentoring schemes (41 per cent).

They also said they would like more efficient processes, more staff, more appropriate technology, more training in new areas and more support from the board.

The research findings are based on an October 2015 global survey of 217 compliance professionals from a cross-section of businesses in terms of size and sector. The results are published in The Compliance Horizon.


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