Risk Control and Compliance Functions May be Combined, Experts Say
Combining Risk Control and Compliance Could Streamline Operations and Reduce Costs for Financial Institutions
A recent development in the world of banking and finance has sparked debate about the possibility of combining risk control and compliance functions. According to experts, this move could streamline operations and reduce costs for financial institutions.
Combining Functions Can Lead to Greater Efficiency and Coordination
“By combining these two functions, we can reduce duplication of effort and create a more efficient use of resources,” said Anna Andersson, a banking expert at the Swedish Bankers’ Association. “This would also allow for greater coordination between risk management and compliance, leading to better overall risk assessment and mitigation.”
New Regulations and Guidelines
The Swedish Financial Supervisory Authority (SFSA) has recently released new guidelines on outsourcing agreements, which require banks to exercise due skill, care, and diligence when entering into, managing, and terminating such arrangements. The SFSA has also introduced new regulations on remuneration policies and practices for banks licensed in Sweden.
Guidelines on Outsourcing Agreements
The SFSA’s guidelines on outsourcing agreements require banks to:
- Exercise due skill, care, and diligence when entering into, managing, and terminating outsourcing agreements
- Establish a documented remuneration policy that promotes sound and effective risk management
- Conduct thorough assessments of candidates’ qualifications, experience, and reputation before appointing them to key positions within the bank
- Ensure that at least 40% of variable remuneration to specially regulated staff is deferred over a period of not less than three to five years before it is paid or the right of ownership passes to the employee.
Potential Risks Associated with Combining Functions
However, some experts have raised concerns about the potential risks associated with combining risk control and compliance functions. “While there may be benefits to combining risk control and compliance, we must also consider the potential risks of duplication of effort or conflicts of interest,” said Björn Lindström, a compliance expert at the Swedish Financial Services Authority.
Conclusion
Ultimately, whether or not to combine risk control and compliance functions will depend on each bank’s specific circumstances. However, as the financial industry continues to evolve and regulations become more stringent, it is likely that we will see more banks adopting this approach in order to stay ahead of the curve.