In my 24 years in finance, I've rarely witnessed successful implementation or sustainable regulatory compliance. It is estimated that compliance costs anywhere between 5-10% of earnings to the financial services industry every year. It's time for a paradigm shift to unlock massive benefits.
Regulatory projects often suffer from delays, excessive focus on day one compliance, and an overlay approach that amplifies complexity, increases costs, and escalates risks. Too many firms focus on compliance for the sack of compliance and completely miss the "regulation fundamental".
Financial regulation isn't merely about having rules in place; it's about maintaining a stable financial system and safeguarding consumers. Regulators intervene when the industry fails, risking our society and way of life. This is about protecting "us" by keeping the interests of clients, consumers, and the financial system at the heart of what we do. And with that, ensuring medium to long term business sustainability.
To navigate the complex web of regulations, we need a proactive and comprehensive approach. Key to this is horizon scanning, enabling early detection of all applicable laws, rules, and regulations (LRRs). Financial firms are subject to numerous LRRs from various regulatory bodies, and overlooking non-financial regulations can lead to hefty fines and jeopardize employee safety. Diligence in compliance efforts across the board is crucial.
Creating a "regulatory radar" and involving subject matter experts from different functions can be a game-changer. By establishing a common understanding, sharing knowledge, and prioritizing assessments, we can stay ahead of the regulatory curve. Tracking progress, adapting processes, and designing compliance "by design" are essential. This enables effective management of targeted regulatory risks and avoids costly fines.
By shifting our mindset from viewing compliance as an add-on to integrating it seamlessly into our business operations, we can reduce costs, mitigate risks, and unlock new opportunities while delivering greater value to clients and stakeholders. The case for change is clear: break the cycle of failed implementations and ballooning regulatory costs. And it will bring 4 ket benefits
1/. Business simplification and growth, through streamlining and cost efficiency
2/. Improved risk management, through adequate and forward-looking capability build
3/. Standardisation and harmonisation, through holistic compliance and risk management
4/. Enhanced resource allocation, through effective prioritisation
This is multi-billion-dollar opportunity; but it is challenging and it will require significant mindset change. So who is up for this?
Read more - https://www.julienhaye.com/post/how-to-establish-a-sustainable-and-sound-approach-to-regulatory-compliance
