Compliance

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Jeffrey Wallis, SunGard Consulting Services
Jeffrey Wallis, SunGard Consulting Services
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The Regulatory Pressure Cooker: Compliance Moves into the Boardroom

The impact of new regulations in financial services is threatening the ability of companies to grow, writes Jeffrey Wallis of SunGard Consulting Services.

The task of complying with regulations in financial services is getting harder. One of the major findings of SunGard’s new research report on the impact of new regulations in the financial services industry is that compliance is threatening companies’ ability to grow. At this critical stage in the recovery of the world’s economy, growth is a central issue which needs to be addressed.

The report also made clear how seriously compliance is being taken by senior management. Regulatory compliance is now keeping chief executives awake at night. Regulatory risk – the reputational and financial damage of non-compliance – is now a serious boardroom issue.

Jeffrey Wallis, SunGard Consulting Services
Jeffrey Wallis, SunGard Consulting Services

Part of the problem is that the definition of regulatory risk is starting to broaden, with regulators now concerned about areas including operational and technology risk. This is adding extra strain to financial services firms. Today, firms are challenged in their compliance function not just to meet requirements, but actually anticipate future regulatory changes as they evolve over time. The resources needed to address all this are inevitably seen as reallocation of resources a company could use to grow. Firms need to somehow marry the dual needs of regulatory compliance and agile growth that are necessary to compete in today’s industry landscape.

To do this, firms need to take a combined approach to compliance and growth. Compliance functions are often hampered by processes and procedures designed for the previous regulatory regime. In fact, 40 percent of survey respondents said they were facing challenges to move beyond this “check-the-box” approach to compliance. It’s this static approach to compliance that inhibits firms from responding efficiently to changing requirements.

What’s needed is a culture change towards compliance cross-functionality and centralization. For instance, an inability to gain regulatory clearance might limit a firm’s ability to grow, which could hinder its entrance into new markets. A lack of clear insight into business and regulatory issues can spill over into other domains – in this instance, business development.

By enabling a properly centralized compliance program, however, firms can gain transparency across the enterprise, outlining data and processes in an easily navigable way. The end product here is strategic insight into the current state of the business, which can be used to achieve a level of compliance not previously possible. This has the potential to open new doors to new opportunities previously buried in disorganized data, identify inefficiencies that may have once flown under the radar, and develop a future state target operating model that can drive real revenue growth.

Achieving this level of operational efficiency in the compliance department and across the enterprise will be easier for some firms than others. Readiness for such a development will of course depend on factors including staffing, technology, organizational structure and location. No two firms will have the same issues to deal with in getting there, but the underlying message is the same: compliance can no longer be viewed simply as an audit function. Long gone are the days when a retrospective, “check-the-box” approach could fulfill regulatory demands and spot-checks would suffice to reassure the board of directors. Instead, compliance needs to be an ongoing process that is a collaborative effort and a constant component of the overall running of the business.

If made a holistic part of a firm’s operations, regulatory compliance doesn’t need to be such a headache for chief executives. With the right approach, regulatory compliance can transform itself from a being a drag on business’s resources to representing a real competitive advantage. Today’s regulatory landscape leaves too much room for error to do otherwise.

This blog post is part of a series focusing on regulatory readiness in the financial services industry.

To learn more, download SunGard’s 2014 research report: “The Regulatory Pressure Cooker: Assessing Regulatory Stress in the Financial Services Sector.”

—Jeffrey Wallis is president of SunGard Consulting Services.

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