Building an Effective Compliance Program

  • September 15, 2021
  • Quantivate

Compliance risk remains one of the most dynamic landscapes for financial institutions to manage. In the wake of the financial crisis of the 2000s, the regulatory environment continues to change, making effective compliance program management more complex.

Penalties for non-compliance have dramatically increased relative to earnings and credit losses, while the scope of regulator focus expands. Compliance risk now extends to nearly every aspect of an institution’s operations and business, including conduct, risk culture, Bank Secrecy Act and anti-money laundering (AML/BSA) policy, third- and fourth-parties, personnel, reputation, policy management, and business continuity.

To effectively address regulatory burden, the financial services industry needs solutions to mature their risk and control frameworks to meet short- and long-term compliance management needs.

A New Perspective on Compliance Management

Compliance in financial services has often been viewed as a headache — a regulatory obligation rather than a competitive advantage that supports organizational health. Next-generation compliance programs need to shift from a checkbox approach to avoiding penalties to managing and forecasting risks to support strategic decision-making.

5 Components of a Mature Compliance Program

Financial institutions should take steps to future-proof their compliance program through capabilities that facilitate a mature, sustainable management strategy, including:

  • Visibility – Management needs to understand what’s happening inside their organization at all levels through reliable data and reporting. Regulators increasingly expect a data-driven approach to compliance that enables effective testing and monitoring.
  • Liability Forecasting – Managers must understand relevant laws and regulations and how they apply to the organization’s areas of practice.
  • Risk Management Framework – Institutions need to develop a common framework for defining, assessing, managing, and monitoring risks to keep their risk appetite and tolerances in alignment with performance goals.
  • Checks and Balances – Managers must play the role of physician to keep the institution healthy—monitoring key vitals, seeking independent opinions and reviews, employing tools that help manage organizational health, and providing training for ethical conduct.
  • Culture – Organizations need to develop a risk culture that views compliance as part of doing good business, not as an impediment.

Compliance Management Reading and Resources:

  • Keeping Pace With Data-Driven Compliance: Learn how data analytics and integration offer a path to compliance management maturity and efficiency.
  • Compliance Risk Toolkit: Download a 3-part resource kit designed to help compliance leaders explore some of the challenges, best practices, and processes for unlocking the value of an integrated compliance management program.

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