Banks Face New Era of Non-Financial Risks: Compliance Functions Must Adapt
As banks navigate an increasingly complex regulatory landscape, it’s clear that compliance functions must adapt to emerging non-financial risks.
Rising Regulatory Scrutiny Drives Compliance Headcount Growth
A recent report from Boston Consulting Group highlights the need for compliance functions to adapt to emerging non-financial risks. The study finds that rising regulatory scrutiny has led to a surge in compliance headcount at many banks, with larger institutions and those with global footprints requiring more dedicated resources.
Impact on Compliance Employment Levels
The level of regulatory scrutiny has a lasting impact on compliance employment levels, even after regulatory investigations or monitorships have concluded. This emphasizes the importance of prioritizing compliance functions to ensure long-term success.
Key Trends Shaping the Future of Compliance Functions
The report identifies several key trends shaping the future of compliance functions:
Pressure Testing
- Banks must regularly assess their own compliance programs to identify areas for improvement and increase robustness.
- Effective pressure testing helps ensure that compliance functions are prepared to respond to emerging risks.
Agile Working
- Compliance functions can benefit from adopting agile ways of working, allowing them to gain speed and efficiency while maintaining effectiveness and independence.
- Agile working enables compliance teams to adapt quickly to changing regulatory requirements.
Staying Ahead of the Curve
Survey participants identified five key topics that will shape the compliance landscape over the next three years:
- Efficiency
- Data availability
- Regulatory developments
- Availability of qualified employees
- Comprehensive risk assessment
Banks must start addressing these issues now to ensure their compliance functions are fit for the future.
Prioritizing Non-Financial Risks
The report warns that banks must prioritize non-financial risks, including:
- Environmental, social, and governance (ESG) concerns
- Resilience
- Anti-money-laundering enforcement
Effective compliance is critical to a bank’s long-term success. By prioritizing non-financial risks, banks can ensure they are fit for the future.
Quote from Norbert Gittfried, Partner & Director at Boston Consulting Group
“We believe that effective compliance is critical to a bank’s long-term success,” said Norbert Gittfried, Partner & Director at Boston Consulting Group. “Our report highlights the need for banks to adapt to emerging non-financial risks and prioritize compliance functions to ensure they are fit for the future.”
About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. With a diverse global team of experts, BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures.
The full report can be accessed on the Boston Consulting Group website.