According to Accenture’s 2017 Compliance Risk Study, 89 percent of surveyed financial services industry executives around the world expect investment in compliance capabilities to increase over the next two years. In our view, regulatory requirements and emerging risks are driving more capital and operating expenditures as the digital era unfolds.

In a time where new customer-facing digital technologies are needed, the required investment far outstrips the available funding. In Compliance, institutions face three key complications when it comes to investment decisions: a huge requirement for digital data, a finite talent pool of compliance professionals to draw from and a more complex risk ecosystem. Balancing these issues while meeting regulatory needs and effectively competing for customers is a difficult task.

After surveying 150 senior compliance and risk executives across Europe, North America, Asia-Pacific and Latin America, we note that Compliance functions in the banking, insurance and capital markets industries still lag in their adoption of new technologies to manage the ever-changing demands across an expanded set of responsibilities. This point is particularly critical in that a thoughtful approach to technology can improve controls and lower operating cost.

Many institutions are still trying to understand and assess how robotic process automation (RPA) and Artificial Intelligence (AI) could help streamline operations and create more robust and efficient ecosystems, while alleviating reliance on talent alone to help them grow. Case in point, only 23 percent of those surveyed in the Compliance Risk Study say they view RPA as having an impact, while 27 percent consider AI to be one of the most impactful technologies.

The reality is control frameworks are being severely impacted by customer demand for increased digital services in such areas as online banking and online purchases of insurance products. (suggested pull quote) This demand is driving more business volume, which in turn, is introducing new risks, such as cybersecurity and privacy of data issues.

Not surprisingly, the top three Compliance risks study respondents identified as their biggest challenges over the next 12 months:

The top three Compliance risks study respondents identified as their biggest challenges over the next 12 months: 48 percent fraud and financial crime, 47 percent business risk, 45 percent cyber risk.

In our view, a key strategic priority for Compliance is to maintain a continued spirit of innovation that sustains capabilities at the level of sophistication needed to manage a more complex risk ecosystem.

We believe the focus should therefore be on investing strategically in the function for sustainable and adaptable solutions that not only maintain the integrity of the control environment but also strengthens it. (another suggested pull quote)

For instance, cost-effective compliance-ready technologies are available that help streamline the control environment, while giving Chief Compliance Officers and their departments, vital data to help them impact the direction of business.

Essentially, the risk of continued inaction is significant. In fact, we believe accelerated adoption is the only way forward.

Accenture sees three approaches Compliance functions can take as they envision the future:

Forward-thinkers, this group is focused on new types of technologies and methods that will help them adapt the function against future demands by strengthening core risk and control capabilities. For example, survey respondents in the insurance industry indicate a stronger inclination toward investing in AI, banks are aligning with big data analytics, while transaction monitoring capabilities are the focus for capital markets. In short, innovators understand how to use technology to leverage their people to perform higher level investigative work, and these actions help set the stage for institutions to lead their respective industries.

This group desires to create greater efficiencies through improved integration of capabilities within Compliance as well as with other functions. For example, establishing a common risk framework can result in streamlined governance and the strategic deployment of talent. The sharing of skills and infrastructure allows for an improved view of both external and internal risk exposure and the reduction of duplication in assessing the same process or control many times.   

The information gatherers, this group is focused on learning from the experience of their peers. These institutions ponder leap frog investments while earmarking foundational tooling such as governance and risk management for capital expenditure. Our Compliance Risk Study revealed that 52 percent of respondent institutions face difficulties understanding business needs, which can help explain the need to take this “watchful eye” approach.

Clearly, while some institutions are responding to the need to adopt to new technologies and new ways of thinking, a lack of commitment to invest in these among a majority of respondent institutions can only further reduce their Compliance functions’ effectiveness as risk managers and strategic advisors. Compliance should innovate to remain sustainable and competitive in the digital era. By strategically investing in technology, the function can support the business in realizing more harmonized operations, better customer service levels, and indeed, stronger institutional profits.

Stay tuned for our blog series on the following themes related to the 2017 Compliance Risk Study:

  1. Compliance Officer of the Future
  2. Compliance Technology Innovation
  3. Operating Model of the Future

For more in-depth details on Compliance function challenges, see Compliance: Dare to be Different 2017 Compliance Risk Study.

You might also be interested in reading our recent press release on this topic.