The Evolving Compliance Industry
The business landscape is experiencing a compliance shift. Consider GDPR, cognitive technologies and the #MeToo movement - these global changes are responsible for rapidly shifting how businesses operate and the role compliance needs to adopt. This ever-changing and often unpredictable environment has left modern compliance at the epicenter of all organisations, not just those companies operating in the banking and finance sector.
Delving further, below looks to the major events responsible for reshaping compliance to what it now looks like in 2019.
The #MeToo movement brought ethical culture to the spotlight and called for transparent reporting channels to be a business norm. In response, Europe announced their EU Whistleblower Directive and more regulations are not far behind. #MeToo is just one example among hundreds of how global movements are driving compliance frameworks.
Risk Management meets Compliance
Compliance is not the only function to become a modern business cornerstone, risk management is also experiencing continuous change, particularly in this era of digital transformation. Now approached more homogenously, modern compliance strategies often address risk management and look to reduce business risks as part of their compliance programme. Changing regulatory landscapes create the need for both a seamless integration of regulations and awareness of the risks brought through continual changes.
The Technology Burden for Compliance
In short, technology has modernised the compliance function. Cognitive technologies create the potential to automate routine processes which frees compliance professionals to focus on higher-value work and more complex dilemmas.
Regulatory Technology or more commonly coined as RegTech, is melding the two worlds of compliance and technology in the financial industry. Whilst a relatively young concept, RegTech looks to advanced technological solutions to address the growing compliance demands. If successful, RegTech may be a viable solution for compliance across all industries.
Coming into play May 2018, GDPR has caused waves. People are realising the potential of their personal data, with Cambridge Analytica just one of the many catalysts for this drive for individuals to regain control. GDPR has been the catalyst for heightened regulations worldwide with the upcoming California Consumer Privacy Act just one of many coming into play in 2020. The coming years will see even tighter regulations and enforcement surrounding personal data.
Regulations like GDPR burden companies to continually evaluate their structures or risk the financial and reputational ramifications experienced by Mariott, British Airways and Google in 2019.
The above events have called for increased diversity throughout compliance and ethics teams. Hiring has traditionally looked to compliance professionals with industry-relevant regulatory and legal backgrounds. Whilst this familiarity and knowledge is beneficial, cognitive technologies have shifted the needs and skillsets most highly valued in employees. Now more than ever, compliance is hiring for broader skillsets beyond regulatory expertise.
Rising Compliance Cost
There is a misconception throughout industries that achieving compliance is financially unachievable especially in smaller companies. However, a 2018 report by the Ponemon Institute found noncompliance cost 2.7 times that of meeting and managing compliance requirements.
The perception that compliance is financially unachievable is mostly just that – perception – as research from PwC revealed lack of reporting surrounding the cost of meeting and maintaining compliance to blame.
The past five years have seen compliance failures ruin companies' reputationally and financially. As the pace and complexity of compliance accelerates, continual reevaluation and technological advancement best positions the compliance team and wider company to evolve.