Nine out of 10 (89 percent) financial services industry executives surveyed globally during Accenture’s 2017 Compliance Risk Study, expect investment in compliance capabilities to increase over the next two years. As regulatory requirements and emerging risks continue to mount, they are driving the need for more capital and operating expenditures.In a time when new customer-facing digital technologies are needed, the required investment far outstrips the available funding. Financial institutions Compliance functions face three key complications when it comes to investment decisions: a huge requirement for digital data, a finite talent pool of compliance professionals to draw from and a more complex risk ecosystem. Aligning these issues while addressing regulatory needs and effectively competing for customers is a demanding task.
After surveying compliance and risk executives across Europe, North America, Asia-Pacific and Latin America, our findings indicate that Compliance functions in the banking, insurance and capital markets industries still lag in their adoption of new tools and technologies. This point is particularly critical in that such behavior can only further reduce Compliance’s effectiveness as a risk manager and strategic advisor, and a thoughtful approach to technology can become an important platform for improving controls and lowering operating cost.
The study also indicates that many institutions are trying to understand and assess how robotic process automation (RPA) and artificial intelligence (AI) could help streamline operations and create more robust and efficient ecosystems, while reducing reliance on talent to drive growth. Case in point, only 23 percent of Compliance Risk Study respondents say they view RPA as having an impact, while 27 percent consider AI to be one of the most impactful technologies.
In our view, a key strategic priority for Compliance is to maintain a continued spirit of innovation that sustains capabilities at the level of sophistication needed to manage a more complex risk ecosystem. The focus should be on investing strategically in the function for sustainable and adaptable solutions that not only maintain the integrity of the control environment but also strengthens it.
Case in point, cost-effective compliance-ready technologies are available that help streamline the control environment, while giving Chief Compliance Officers and their departments, vital data to help them impact the direction of business. Essentially, the risk of continued inaction is significant, and we believe accelerated adoption is the way forward.
Accenture sees three approaches Compliance functions can take as they envision the future:
Forward-thinkers, this group is focused on new types of technologies and methods that will help them adapt the function against future demands by strengthening core risk and control capabilities. For example, survey respondents in the insurance industry indicate a stronger inclination toward investing in AI, banks are aligning with big data analytics, while transaction monitoring capabilities are the focus for capital markets institutions. In short, innovators understand how to use technology to get their people to perform higher level investigative work, and theseactions help set the stage for institutions to lead their respective industries.
This group desires to create greater efficiencies through improved integration of capabilities within Compliance as well as with other functions. For example, establishing a common risk framework can result in streamlined governance and the strategic deployment of talent. The sharing of skills and infrastructure allows for an improved view of both external and internal risk exposure and the reduction of duplication in assessing the same process or control many times.
The information gatherers, this group is focused on learning from the experience of their peers. These institutions ponder leapfrog investments while earmarking foundational tooling such as governance and risk management for capital expenditure. Our Compliance Risk Study revealed that 52 percent of respondent institutions face difficulties understanding business needs, which can help explain the need to take this “watchful eye” approach.
Clearly, while some institutions are responding by adopting new technologies and new ways of thinking, a lack of commitment to invest in these among a majority of respondent institutions is troubling. Compliance functions are encouraged to innovate to remain sustainable and competitive in the digital era. By strategically investing in technology, Compliance can support the business via more harmonized operations, improved customer service levels, and stronger institutional profits.
In the next blog of this series, we’ll explore in greater detail the talent and people issues financial institutions face in strengthening their Compliance function.
For more information on Compliance function challenges, see: Compliance: Dare to be Different 2017 Compliance Risk Study.
You might also be interested in reading our recent press release on this topic.
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