Banks Eye Major Overhaul of Compliance Function to Stay Ahead of Regulatory Curve
In an effort to stay ahead of the regulatory curve, banks are undergoing a significant transformation of their compliance function. This move comes as financial institutions grapple with an increasingly complex and evolving regulatory environment.
Key Principles Behind the Transformation
The key principles behind this transformation include:
- Integrating compliance into overall risk management
- Adopting a more proactive approach to compliance
- Increasing transparency through data-driven metrics
Achieving the Goals
To achieve these goals, banks are implementing targeted changes to their operating model and processes. This includes:
- Developing a single integrated inventory of operational and compliance risks
- Establishing standardized risk taxonomies
- Coordinating risk assessment and remediation methodologies across functions
The transformation is also driving a shift in the organizational structure of compliance functions within banks. Some institutions are moving compliance reporting from legal to risk organizations, while others are elevating compliance to a stand-alone function with clear separation from business operations.
Measuring Progress
To ensure successful implementation, it’s essential for banks to rigorously measure progress against desired outcomes. The 10-point scorecard provides a framework for assessing key indicators such as:
- Demonstrated focus on the role of compliance
- Integrated view of market and operational risks
- Evidence of senior-management involvement
Audit plays an important role in this process, providing an independent view of program status and effectiveness with respect to commonly agreed-upon transformation objectives.
The Future of Compliance
The future of compliance is likely to be shaped by:
- Technological advancements
- Changes in regulatory requirements
- The increasing importance of data-driven decision-making
Banks that successfully navigate this landscape will be well-positioned to deliver better service, reduce structural costs, and significantly de-risk their operations.
As the regulatory environment continues to evolve, it’s clear that banks must adapt quickly to stay ahead of the curve. The transformation of the compliance function is a critical step in achieving this goal, and one that will have far-reaching implications for the industry as a whole.