Compliance Costs for Financial Institutions Will Continue to Increase Over the Next Two Years Driven by Regulations & Emergin...
April 10 2017 - 11:59AM
Business Wire
Firms spending more than 5 percent of net
income on compliance jumps 40 percent year-on-year
Nine out of 10 (89 percent) financial services industry
executives globally expect continued cost increases in their
compliance departments over the next two years, according to a
report by Accenture (NYSE:ACN) based on a survey of 150 compliance
executives conducted between December 2016 and January 2017.
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“An explosion in digital data, a finite talent pool of
compliance professionals to draw from and a more-complex risk
ecosystem are presenting serious cost, resource and efficiency
challenges for compliance,” said Steve Culp, senior managing
director and global head of Accenture’s Finance & Risk
practice.
Among the executives predicting the continuation of higher
spending on compliance over the next two years, nearly half
(48 percent) anticipate increases of 10 percent to 20
percent and nearly one in five (18 percent) expect increases of
more than 20 percent, according to Accenture’s fourth annual
compliance risk report, “Dare to be Different.” The number of
institutions that currently spend more than 5 percent of their net
income on compliance jumped from 16 percent in December 2015 to
23 percent in December 2016, despite compliance headcount
numbers largely remaining flat.
When asked to identify the top three compliance risks they
believe will be the most challenging for their organization to
manage within the next 12 months, respondents most often cited
fraud and financial crime risk (cited by 48 percent of
respondents), business risk (47 percent) and cyber risk
(45 percent).
“With the cost of maintaining compliance rising and new risks
continuing to emerge, it’s imperative that firms find a path to
more sustainable compliance costs,” said Culp. “Firms should be
thinking and investing strategically in terms of advanced
technologies that can bring stable, cost-effective solutions that
will enhance the function’s performance.”
Compliance functions are struggling to keep pace with the
industry’s rapid digital transformation, according to the report.
Customer demand for digital services such as online banking,
robo-advice and the online purchase of insurance products is
driving a significant increase in business volume across the
sector, which is in turn stressing control frameworks and giving
rise to new risks, such as those related to cybersecurity and data
privacy.
“Technology-adoption inertia is the greatest risk to the
compliance department’s future effectiveness as a strategic advisor
and risk manager,” said Samantha Regan, a managing director in
Accenture Finance & Risk who leads the company’s Regulation and
Compliance practice. “The pace of change will only accelerate and
the risk ecosystem will continue to grow in complexity,
underscoring the critical importance for compliance departments to
make effective use of advanced technologies if they want to remain
effective and relevant in the digital age.”
The report identified three specific models towards a more
sustainable compliance function – Innovators, Integrators and
Improvers. Innovators are investing in advanced analytics,
artificial intelligence and managed services as they seek to
establish leadership positions, while Integrators are taking a
collaborative internal approach with other functions to build a
strong second line of defense, which includes shared
infrastructure, skills and capabilities. The final group,
Improvers, are taking a more cautious approach with a view to
potentially leap-frogging competitors with emerging best
practices.
Methodology
For the report, Accenture surveyed 150 compliance officers at
banking, insurance and capital markets firms across 13 countries in
the Americas, Europe, Asia-Pacific and Latin
America. Countries represented include Australia, Brazil,
Canada, China (Hong Kong), France, Germany, Italy, Japan,
Singapore, Spain, Switzerland, the United Kingdom and the United
States. Of the respondent organizations, 45 percent have
annual revenues between US$1 billion and US$10 billion;
9 percent have annual revenues between US$10 billion and
US$20 billion; and 46 percent have annual revenues
greater than US$20 billion. The online survey was conducted
between December 2016 and January 2017.
Accenture Finance & Risk is part of Accenture’s
Financial Services operating group, providing management
consulting, technology and outsourcing services to banks, insurers
and capital markets organizations. Its services are designed to
help financial services companies leverage the critical functions
of risk and finance as competitive differentiators in executing
their business strategy. It provides updates on the latest news and
analysis of regulations across major global economies through
the Accenture Regulatory Insights blog.
About Accenture
Accenture is a leading global professional services company,
providing a broad range of services and solutions in strategy,
consulting, digital, technology and operations. Combining unmatched
experience and specialized skills across more than 40 industries
and all business functions – underpinned by the world’s largest
delivery network – Accenture works at the intersection of business
and technology to help clients improve their performance and create
sustainable value for their stakeholders. With approximately
401,000 people serving clients in more than 120 countries,
Accenture drives innovation to improve the way the world works and
lives. Visit us at www.accenture.com.
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AccentureJames Murphy,
917-452-0588james.p.murphy@accenture.com
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