Any compliance professional will tell you that the regulatory landscape is a fast-growing, ever-changing arena. It is the type of environment where as soon as the regulation is complied with, two or more, quickly take its place. Irrespective of the industry or sector, those responsible for managing compliance challenges have a mountainous effort to stay abreast of regulations while at the same time ensuring their company complies with them.

Besides, the ever-changing and escalating demands of the regulatory environment are not likely to drop anytime soon. Couple this with the residual effect of economies rebuilding in a post-pandemic era, it is a challenging period for compliance practitioners.

10 Regulatory Compliance Challenges Facing Financial Services Firms

After a monumental year of disruption, financial services firms are increasingly challenged to mitigate risks as they ramp up their adoption of digital technologies, adjust to remote working and navigate climate and ESG-related financial & non-financial challenges, as well as innovate their own products, analytics and systems.

According to KPMG, the current ten key regulatory challenges include:

  1. Change management: Further economic uncertainty will force financial services firms to embrace change management amidst remote working, flexible operating models, stimulus fund distribution and the evolution and expanded use of digital platforms.
  2. Credit risk and LIBOR: Credit and securitisation sectors are experiencing additional pressure from economic indicators and low interest rates. Businesses will need to develop early warning sign indicators within potentially impacted loan portfolios whilst focusing on risk controls, risk rating accuracy and periodic assessments.
  3. Climate and ESG: Increasingly, regulators are expecting financial services companies to identify climate-specific risks, including stress testing and scenario analysis, credit risk and due diligence monitoring.
  4. Core risk management: Companies need to embrace a strong risk management foundation, including three lines of defence to ensure regulatory supervision and enforcement. Financial services firms need to ensure that risk management is adequate whist evaluating current frameworks for scalability.
  5. Operational resiliency and cyber security: The expanded use of digital platforms and remote working models require financial services companies to establish resiliency against cyber and vulnerability threats, thereby impacting management decisions and business activities.
  6. Compliance risk: Compliance professionals must deal with the dual challenge of new government stimulus funds that have created new compliance risk challenges as well as existing and expanded mandates to include culture/conduct, data privacy and financial crime.
  7. Fraud and financial crime: The current economy has expanded risk in the areas of fraud, insider threat, conflicts of interest, KYC, CDD, sanctions and AML requiring expanded use of data analytics and real-time misconduct surveillance.
  8. Consumer and investor protections: Regulator attention on consumer and investor protection will require financial services firms to implement and evaluate technology-enabled surveillance, monitoring, and testing controls for real-time feedback.
  9. Payments: Digital transformation has impacted payments channels and platforms with regulatory attention focused on security, protections and expanded business models.
  10. Expanding regulatory authority: Regulatory authority is anticipated to expand to account for rising numbers of mergers, alliances and partnerships as well as the growth of FinTech’s and extended financial services offerings.

Adapting to Compliance Challenges

The never-ending changes enforce a momentous task on compliance staff. When the ever-increasing list of compliance challenges are not performed with excellence, it can have a significantly detrimental impact on the credibility of organisations, impact the share price as well as the viability and management of relationships with regulatory bodies.

When looking forward, there are concerns on how the available talent gap may have an impact on the implementation of upcoming compliance strategies. As far as the availability of professionals that can successfully navigate the current regulatory environment, the big question is, is demand exceeding supply? And, if so, what can the industry do about it?

Current and future compliance officers have a bigger responsibility as influencers in the industry, as they are also advising their board of potential risks that new products bring. The compliance outlook currently represents a massive opportunity. Professionals are working with leadership and management to understand why and how compliance can support operations to deliver sustainable long-term growth.

This additional perk and responsibility have an impact on the types of competencies, expertise and skills that a compliance professional should possess and master. The current market and future outlook have elevated the professional role of compliance from its current position to a more strategic place in key leadership circles.

Compliance Specialist Skills

Compliance teams today, not only require individuals with technical compliance skills, but also individuals who are flexible, assertive and creative across all fast-changing business and industry environments. Yet, findings across various industries revealed that most companies do not realise how to conduct effective and meaningful talent acquisitions to support their compliance functions.

Companies are increasingly challenged to find skilled compliance professionals amidst a limited talent pool at a time when skills requirements and job responsibilities are expanding. In addition to a solid understanding of, and ability to assess and interpret regulatory guidelines, increasingly compliance staff need to possess greater digital and analytical skills, as well as hands-on experience with emerging RegTech platforms.

When hiring, one of the biggest challenges lies in the lack of compelling employee value proposition in the compliance function. Compensation packages (as outlined in our 2021 salary survey) and job offerings are often not tailored to professional needs. The problem also arises that front office jobs often pay more and are regarded as more prestigious, which causes companies to lose out on new entrants to the profession. Companies and the wider industry need to address the reputation of compliance as a viable career option if we are to address future talent requirements.

Many companies also lack the ability to measure and reward professionals for outstanding performance in the regulatory field. Evaluation of professionals in the industry is time-consuming, often complex and often also highly subjective. Companies are becoming increasingly aware of the shortage of highly skilled compliance personnel. To remediate the skill shortage, dedicated initiatives will enhance and build up existing staff and collective talent management capabilities.

Delivering compliance recruitment from entry-level to C-suite

We make it our mission to ensure that your compliance recruitment process is smooth and efficient. For nearly 20 years we have matched highly skilled professionals with leading financial services firms to achieve their mutual ambitions – and we are on a first-name basis with the most sought-after professionals in the compliance sector. To learn more about how Compliance Professionals can help navigate the current talent challenges posed in a post-pandemic regulatory world, request a confidential consultation.

Want to expand your team? Talk to a knowledgeable member of our team today.

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