Survey Says: Time to Consider Compliance Outsourcing

 

A Thomson Reuters global survey of financial services firms highlights the growing trend toward compliance outsourcing arrangements because of ever-increasing regulatory responsibilities, resource constraints, the scarcity of skilled compliance resources, and concerns over personal liability.  The survey reports that 25% of firms outsource at least part of their compliance functionality.  The survey recommends that “Risk, compliance and internal audit functions would be well-advised to include outsourcing in their monitoring plans.”   The survey finds that compliance officers are time-constrained, spending a day per week just monitoring regulatory changes.  And, although firms want and need more help, “continued scarcity of skilled compliance personnel” remains a major challenge.  Contributing to the scarcity is the fear of personal liability, raised by 60% of respondents.  This growing scarcity will result in higher costs, as 2/3 of firms expect compliance talent to cost more.  The report opines that a financial services firm cannot simply ignore or under-fund the compliance function: “If regulated firms are to thrive in the medium and longer term, they will need to make appropriate investment in their risk, compliance and control functions. A skilled, high-quality compliance function is expensive to build, but it will be one of the best investments (if not insurance policies) for firms and their senior managers.”

OUR TAKE: In the evolving regulatory system, compliance has become a highly skilled, specialized, and professional function.  No firm can aspire to do all and know all in-house.  Retaining an outside compliance firm will become as commonplace as retaining outside lawyers or auditors.

https://risk.thomsonreuters.com/sites/default/files/Cost-of-Compliance_2016_0.pdf