PWC says this comes at a time when customers and stakeholders expect greater integrity and accountability from its financial services providers. While eight out of ten organisations believe that the compliance function adds value to their business, many are finding it difficult to pinpoint exactly the value and benefits of compliance. Organisations are not rising to the challenges posed by the shift from rules-based to principles-based regulation or supervision by taking a more holistic approach that moves beyond statutory expectations to strategic and tactical decision-making.
Managing corporate reputational and brand risk has jumped to the top of the agenda of board directors following recent high profile cases, pushing the compliance function well into the spotlight. The study found that many board directors do not yet fully appreciate the tangible benefits of instilling compliant behaviour into the DNA of their organisations.
However, with little progress in developing standards for measuring the value of compliance or in thoroughly assessing compliance risks, some respondents are concerned that the compliance function could quickly be relegated from the corporate priority list if regulatory pressure were to be relaxed in the future.
The study, which carried out in-depth face-to-to face interviews with senior compliance and risk executives of 73 major national and international financial institutions, also shows the frustrations of many respondents with the challenges of aligning the scope of the compliance function with corporate values and the lack of an appropriate technology infrastructure, which is hindering their ability to generate relevant management information.
Charles Ilako, Global Financial Services Regulatory Partner, PricewaterhouseCoopers, commented: "As the sector is grappling with the biggest shake-up in regulation for a generation, compliance teams have an increasingly important role to play in protecting and enhancing corporate value and reputation in the face of stakeholder demands for greater integrity, accountability and financial stability. Organisations are missing a trick if they do not see the longer-term commercial benefit of instilling a compliance culture into the business. However, they also need to quantify the value of the compliance function: this will reduce regulatory pressures and also safeguard value in the business for the future."
Given the constantly changing regulatory environment, the role of the compliance function is being re-shaped. Two complementary roles are emerging: the Å’police officer responsible for compliance oversight and the Å’counsellor1, a trusted adviser to the business. In the UK, Canada, US and Australia, there is a distinct shift from the traditional role of Å’police
officer1 to Å’counsellor1. Elsewhere, more emphasis is placed currently on the Å’counsellor1 role. A growing number of compliance executives would like to see compliance going beyond laws and regulation, and encompassing ethical and social values expected by shareholders, clients and the community.
Charles Ilako, Global Financial Services Regulatory Partner, PricewaterhouseCoopers, added: "The right balance needs to be struck between the Å’police officer1 and Å’counsellor1 roles against the backdrop of the relative, and hopefully growing, strength of the compliance culture within the organisation. Management needs to configure its compliance framework carefully looking closely at the interaction between the compliance function and other risk and controls functions, in the context of its businesses overall. No one model will fit all, and all models will need to evolve."
The survey finds that management remains frustrated by the continuing rise in the cost of compliance. However, whilst recognising that compliance, like performance, is fundamental to doing and staying in business, there is a requirement for more innovation in the approach to achieving compliance in a cost effective manner.
Charles Ilako, Global Financial Services Regulatory Partner, PricewaterhouseCoopers, concluded: "Boards and senior management should focus more on measuring the real cost of compliance, including non-compliance costs such as financial penalties, suspension of business and impact on cost of capital, in order to identify scope for cost efficiencies, as well as to elucidate better the true value of compliance. Higher priority should also be placed on the appropriate use of technology to improve operational compliance and information sharing within the compliance function, as this both improves effectiveness and reduces costs."
