What are the issues facing compliance monitoring functions?

06 August 2024

With the ever-changing regulatory landscape, firms’ compliance monitoring departments are expected to adapt and provide the relevant levels of assurance to senior management and the board that regulatory expectations are being met and the firm is operating in line with regulatory requirements.

The continuous iteration of the UK and other regulatory regimes requires firms to adapt, often at short notice, to address new regulatory initiatives, requiring additional resource and expertise. Firms need to address these changes, often dealing with multiple regulators with finite resources, while also maintaining business-as-usual services.

Common concerns from heads of compliance monitoring

  • Short-term specialist needs.
  • Increasing scope of monitoring remit.
  • Ever-changing regulatory focus.
  • Enhancing board/regulatory expectations.
  • Inability to flex resourcing needs.
  • Lacking the ‘value add’.
  • Financial services being a secondary industry.
  • Lack of resources.
  • Absence of technical knowledge.

The solution to compliance monitoring function issues

As pressure on the compliance monitoring function grows, several firms are adopting a co-source model, allowing them to adapt their approach to meet the needs of the board and regulators. While this approach is common for internal audit functions, more firms are now following a similar approach for their compliance oversight in an attempt to mitigate some of the key concerns noted. Co-sourcing comes with a number of benefits, such as:

  • Depth of skill set.
  • Flexibility.
  • Reduced cost.
  • Staff education.

What value do I get from a co-source monitoring agreement?

Access to a resource pool

Hiring skilled resources is often a challenge for firms due to a buoyant market, the specific skill sets required and the need for a cultural fit. A co-source allows for the easy identification of a proven resource without the challenge of recruiting.

Develop existing team

Firms are facing pressure to enhance the knowledge of team members to meet ongoing regulatory demands. A co-source allows existing staff members to work side-by-side with the temporary resource to learn new skills and retain the knowledge within the firm.

Cost-effective

The breadth of knowledge required within compliance monitoring teams is ever-expanding, and hiring a resource with a specific skill set is often challenging and costly for firms.

Access to insights

Firms often operate in silos, lacking the opportunity to gain insights from their peers. This hinders their ability to identify potential improvements to processes and systems that could enhance and streamline their ways of working. 

What type of co-source is right for me?

Defined

A defined set of monitoring reviews are identified to be delivered via a co-source partner. Timescales are agreed upon upfront, and the co-source provider will then take responsibility for the full engagement, keeping you updated on progress and key observations.

Draw down

A master contract is agreed upon with both parties. Subject to relevant notice being provided, the firm can draw down resource on an ad-hoc basis for time periods that suit their needs. This could be to deliver a specific review, provide cover during periods of pressure, or deliver urgent reviews not originally included within the annual plan. Due to the master contract, there are no onboarding delays, meaning resourcing needs can be met and allows the firm the flexibility to draw down as often as they require.  

How we can help with your compliance monitoring 

Our proven experience in co-sourcing provides access to employees with relevant experience to meet your individual needs. This allows for the flexing of headcount for a defined period of time, reducing the expense/time required for identifying a resource and the ongoing costs associated with a permanent employee.

We conduct a range of regulatory projects across all sectors, from skilled persons reviews to compliance monitoring activities. These unique experiences allow for in-depth insights into peer firms, allowing us to share best practice approaches.

To discuss any of the points raised above, please get in touch with Paul Jennings or your usual RSM contact. 

Avatar Gender neutral person
Tom Petty
Risk Assurance Director
AUTHOR
Avatar Gender neutral person
Tom Petty
Risk Assurance Director
AUTHOR