Will compliance take flight?
The compliance function for financial institutions is maturing, but is it sustainable? Accenture's fourth annual Compliance Risk Study surveyed 150 compliance officers at banks, capital markets and insurers around the world, who agree that innovation holds the key to the function's future.
Our study finds compliance has confirmed its stature, with institutions anticipating an 89 percent increase in compliance investment over the next two years. Compliance's strategic role continues to grow, with two-thirds of respondents (66 percent) now reporting directly to either the Chief Executive Officer or the Board of Directors.
But the picture isn't that simple. Compliance's scale of responsibility is rapidly expanding to include risk management and strategic advisory support at a larger scale, while institutions' digital models are ratcheting up business volume enough to stress control frameworks and drive increasing complexity in the risk ecosystem.
As the financial marketplace innovates, so should compliance. Our study finds institutions choosing different paths to compliance optimization, all leading to a common challenge: the need to innovate and sustain operations in a digital age.
Three paths to sustainability
Despite its increase in stature, the compliance function is still in the hot seat. Financial institutions know a sustainable model is essential for business growth and digital transformation.
Our study finds firms choosing one of three approaches:
- Innovators: Firms taking the innovator path use new tools and methods to strengthen core risk and control capabilities, and to extend the breadth and depth of compliance's coverage. They are establishing leadership positions through investments in capabilities such as advanced analytics, artificial intelligence, or managed services.
- Integrators: Some firms are gaining efficiency by better integrating their compliance-related capabilities, as well as second-line-of-defense functions. Because they share infrastructure, skills and capabilities, integrators create a more holistic view of risk exposure, both externally to regulators and internally to key stakeholders. These firms are laying building blocks for further innovation.
- Improvers: Adopting a more watchful approach, some institutions are waiting to see what works for their peers. While these firms can benefit by adopting more informed solutions that build on others' experiences, they also limit their ability to truly innovate. More than half (52 percent) of institutions we surveyed struggle to firmly grasp business needs, perhaps validating their need to watch wider industry practice before placing more strategic bets in capability.
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Innovation is not always easy. Knowing where to start can be difficult. The "Imagineering" challenge—to build the compliance function of the future—needs both creative thinking and investment in the right technologies.
According to our study, compliance functions aren't channeling investment increases toward the tools and technologies they need to build sustainability.
The danger of failing to invest? If the compliance function can't keep up, it will fall behind the rate of change in the financial risk ecosystem. It won't be able to meet new demands from counterparts throughout the business. As a control function—and as a strategic business advisory function—compliance could lose its stature.
The financial marketplace won't stop changing. It's time for compliance leaders to support their functions, so they won't stop changing either.