Since the 2008 crisis, regulatory fees have increased relative to financial institutions’ loan gains and losses. Moreover, the scope of the regulatory approach continues to expand. Missions performed in the United States at the time offered a learning opportunity for regulators, which after the crisis led to increasingly tighter controls in many other areas (for example, mortgage compliance, deposits and cards). crossed the borders of North America.
According to a survey by financial advisory Duff and Phelps, Compliance costs The financial sector is on track to double down globally by the end of 2022. In this regard, financial experts said that they currently invest 4% of their total revenues in compliance, but they expect this to increase to 10% over the next five years.
For example, according to the McKinsey firm, some banks $50 million per year in technology to support compliance without seeing much progress in its mature application. Among the 24 leading global banks surveyed, the average share of technology in overall compliance costs was only 9%; this ratio differed among independent banks where the share of technology in this area was between 1% and 20%.
How is this investment managed now? At this point, the intervention of experts fitAccompanying companies are responsible for optimizing compliance throughout and at all times, so that what was an a priori investment does not turn into an unnecessary expense.
The traditional compliance model for its part was conceived many years ago and is therefore designed for a different purpose: as an enforcement arm for the legal function and through manual protocols. Compliance bodies would announce internal bank policies and regulations in an advisory capacity only, with a focus on identifying and managing real risks, but without concrete solutions tailored to the specific needs of each company.
That’s why it’s so common for business managers to ignore the fine print that’s often involved in the running of what they need to sell, due to the desire for rapid business growth. custom controls and regulatory requirements. The specific controls necessary to address regulatory requirements are then neglected, which tends to lead to an accumulation of labor and intensive control activities with indefinite effectiveness. Many banks still grapple with key control environment issues at the forefront of defense, such as compliance literacy, accountability, performance incentives, and risk culture.
Finally, compliance activities tend to be approached in isolation rather than as an interrelated series. As a result, there is a clear lack of linkage with transaction monitoring, automatically to the broader risk management, governance and processes framework (e.g. operational risk management, new client onboarding processes, KYC and KYB activities-related tasks). , etc.). Without the corresponding compliance optimization, often the result is a substantial increase in compliance and governance spending, which has a limited or unproven impact on a company’s risk matrix.
For these reasons, startups focusing on solutions for compliance today offer technological tools to provide financing for companies to comply with national regulations. In the example of Argentina, we are talking about AFIP, the Central Bank, the National Securities Commission and the Financial Information Unit. With these tools, not only for regulatory compliance, but also for all processes that ensure compliance, companies can they win 80% of the time compared to those who have not yet optimized their respective processes.
In short, the time saved can be used to think creatively and deliver improvements in user experience to retain and also grow the business. Likewise, the healthy functioning of compliance processes also affects the development opportunities and evaluations of companies. For example, investor expectations typically depend on three key factors: 1) control positioning, 2) investor risk appetite, 3) initial stage of growth. Points 1 and 2 are directly related to harmony.
In summary, a correct compliance program, which tends to promote good practice, will focus on the growth of the company’s economic activity, but at the same time significantly reduce its legal risk, improve its reputation abroad, reduce internal time, simplify control and monitoring tasks, etc. One line compliance is an investment, not a cost.
#company #lose #capabilities #effective #compliance #process