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We shall aim to avoid an overly legalistic culture with its associated compliance-driven style of regulation . . . We must reverse the seemingly inexorable trend towards more regulation and more regulators. That did not work in the past and is not the right response now.
Mervyn King, Governor of the Bank of England, June 2010
The times they are a-changin’.
Bob Dylan, 1964
Plus ca change, plus c’est la meme chose.
Alphonse Karr, 1849
ASSURANCE PROGRAMMES
The current onslaught of regulation in financial services shows no sign of abating. The only constant is change (to borrow a line from the Greek philosopher Heraclitus). So it is puzzling that so few firms have adapted their compliance frameworks to reflect the ever-changing nature of the regulation to which they are required to respond.
The result in firms is a constant scramble to adapt to regulations as they emerge; little thought or effort is given to anticipating change or approaching the regulatory challenge from first principles of effective management. As a result, compliance becomes an expensive annoyance that crowds out coherent approaches to risk, customer protection, management reporting and capital management.
There is a better way. We are working with firms to address the core requirements of compliance and to manage more effectively and considerably more efficiently the process of regulatory change. Although in their infancy, robust, adaptive compliance frameworks have considerable potential to reduce cost and improve the firm’s performance in key areas of regulatory attention.
Outside financial services, the picture is often just as dismal. Although the rate of change is less, the firm’s approach to regulatory compliance, to knowledge management and assurance over compliance is piece-meal and incoherent. Here, too, there is a better way – an approach that relates compliance requirements to each area of the firm’s business model.
The simple question that firms should ask themselves is: “Why spend more than you have to and why accept poor performance in compliance?” It just doesn’t have to be that way.
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