But at heart I'm just like a multi-party parliamentary democracy and I'm all about consensus. It is with that spirit of equality and fairness amongst my fellow finance peers that the managing partner of Compliancy Services UK, Ben Mason has been kind enough to guest blog about the wonderful world of compliance and what the future holds for the industry.
As you can see from the photo and read from his Twitter feed @BenMJMason, he doesn't just have a fancy title, he's a handsome so and so with the gift of the gab so you should definitely follow this fellow.
Also you can connect with his company, Compliancy Services UK on Twitter, Google+ and LinkedIn.
Now with the official protocols adhered to, I'll let Ben stare into his crystal ball and tell us the future for compliance.
The Compliance Profession – Where To Now?
Last autumn the Wall Street Journal reported that two in five US regulated firms has compliance staff shortages. In October, the FT claimed that some companies were so short-staffed that they faced the threat of closure, while Reuters has reported that a third of UK financial services companies felt compliance staffing constraints would restrict their business prospects.
Most organisations have, in one form or other, a range of support functions: HR, finance, IT, marketing, etc. For financial services companies another has been added to the list: Compliance.
Firms’ requirements of their compliance functions are evolving at a phenomenal rate. This asks a set of questions of the compliance industry that it seems unlikely to be able to answer. Most obviously will sufficiently high-calibre compliance resource be available to deliver what the financial service sector needs?
I’ve never seen a survey of what CEOs expect from their compliance functions, but if I did I would expect it to include:
- The ability to identify the impact of current and future regulatory changes on the company’s strategy and business plan
- The implementation of monitoring and reporting processes that identify and mitigate regulatory and business risks
- The ability to evaluate the business impact of a wide range of regulatory changes
- And most importantly, the respect and leadership to take colleagues on a journey towards a new ‘compliance culture’
Of course, as we know, what some CEOs want is a compliance function of ‘yes men’ who are not able to provide the balance between constructive challenge and commercial support – and generally these are easily found by over-promoting someone not competent for the role. This can be a short term fix at best.
Supply and Demand
The compliance profession has developed sufficiently for us to say that there are indeed many able compliance staff, with some or all of the required skills. However, what everyone seems to agree on, is that supply is not growing as fast as demand. This calls into question whether the production line to meet the future requirements is robust enough.
So what has happened to place additional strain on the compliance industry? Globally, regulators are adopting a harsher stance, with penalties for non-compliance being severe enough to be of real detriment to a regulated company. In the UK, the 1st April addition of up to 70,000 (and no one really knows how many – it could be half that number) FCA regulated Consumer Credit firms to the existing 27,000 clearly brings a level of demand that’s totally unpredictable.
Who’s fixing the problem?
The disappointing thing is that nobody is really working to address this issue. It is apparently not the brief of government or the statutory objective of regulators to intervene (although, as was well documented at the time of the crash, this is an issue which affects regulators as well.) I am not aware of any politician championing the cause. This is likely to reflect the relative impotence and lack of resources of compliance industry associations, who might otherwise be lobbying government, compared to their practitioner colleagues.
Additionally, as a relatively new discipline, there is little academic research into the impact and role of the compliance function. My consultancy, Compliancy Services, is sponsoring a Cranfield PhD into the impact of regulation, but this type of project is relatively unusual.
Such variations in demand and supply might just be considered to be all part of a market sorting itself out over time. However, for the best long term outcome, I believe a more structured solution and career path for compliance professionals would be in everyone’s interest. Consider how the accounting and legal professions develop their future population through a proven qualification model, combining several years of practical experience with relevant formal qualifications, and fantastic backup and support. There is simply no sign of an equivalent compliance career development plan on the horizon. The current best alternatives are either very limited part time diploma style courses, or academic Masters degree courses. Worthy though these are they are not the same long term vocational development options as offered in other professions.
The Challenges Ahead
One of the great compliance challenges is that its scope is so broad that it welcomes professionals from a wide range of other backgrounds. I hold an MBA and have found my commercial and strategic experience of huge value within a compliance career that didn’t start until my 30s. Many compliance staff have legal or accounting qualifications, both of which have an important compliance role, as does the experience of practitioners, operational staff, risk managers and so on. Arguably this is indeed the challenge: the range of tasks that compliance staff are asked to carry out makes formulating a standard development programme very difficult. However, I believe there are ways of addressing this and a core set of competences could be identified.
There is no easy answer unfortunately. The entire regulated sector needs to recognise the challenge, encouraging new entrants and training them diligently in the broad range of technical and commercial skills the best compliance staff need. One thing that seems certain is that firms unable to staff their compliance functions properly, whether with internal or external staff, are likely to suffer, ultimately to the detriment of UK Plc.
My hypothesis is that:
- The supply of highly-skilled compliance staff is not meeting demand, pushing up costs of compliance for regulated firms
- However, when in post competence compliance staff can add significant value to a company
- The industry needs to collectively address this issue
- A structured vocational qualification is the long term way forward
I would value others opinions and to know who else is interested in this important subject for our sector. Get in touch by following Ben Mason on Twitter @BenMJMason and connecting with Compliancy Services on Twitter, Google+ and LinkedIn.