Managing Expanding Compliance Expectations With Limited Resources

February 14, 2020 by ACA Compliance Group

For compliance professionals, the beginning of a new year is a great time to open the hood of their compliance program and dig into the what works (and what didn’t) the year before. With the forecasted regulatory changes and developments on the horizon, this year brings with it interesting new challenges and considerations for CCOs. With change comes more obligation, more oversight, and heavier workloads.

Last year, there were a number of growing constraints on CCOs that appeared as a common theme within survey responses:

  • Over 48% of surveyed CCOs wear two or more hats and perform other non-CCO/legal roles (IAA/ACA’s 2019 Investment Management Compliance Testing Survey).
  • 16% of surveyed firms have had compliance personnel go on extended leave (i.e. medical or maternity leave) within the last year (ACA 2019 Alternative Fund Manager Survey).
  • The number of firms choosing to outsource all or part of their compliance function has remained consistent, ranging between 24% and 28%, year-on-year since 2016. Over a third (36%) of global financial services firms now outsource all or part of their compliance function. Of the firms surveyed, 53% said they chose to outsource any or all of their compliance functionality for additional assurance on compliance processes, while 48% cited a lack of in-house compliance skills as the reason for outsourcing (2019 Thomson Reuters Cost of Compliance report).

It’s an unfortunate reality that while risks, regulatory expectations, and the volume of compliance team tasks are all increasing, the skilled resources needed to keep up with this demand may be difficult to obtain. We have seen this trend develop over a number of years and, as a result, have enhanced our support options to meet these growing and evolving needs. In particular, we continue to see overwhelming demand for our ever-evolving suite of managed services, which are driven by both client collaboration and industry demands.

More and more we’re seeing a few key themes emerging. These include:

  • Delegation not abdication: In an era of increasing individual accountability, outsourcing work to a third party doesn't relinquish you from your regulatory responsibilities. Your firm is ultimately responsible for its compliance program, policies and procedures and monitoring. This is where a 'co-sourcing' approach can come into play; a long-term one-to-one business collaboration with a trusted provider where both partners have a vested interest in the outcome of the relationship. This collaborative approach allows the service provider to support a firm and its compliance activities in a better, quicker, and often more cost-efficient way than the firm doing it itself without increasing the firms exposure to regulatory risk.
  • In or out?: In-sourcing (or secondments) is another option for firms during exceptionally busy times. For example, firms can tap into a large pool of compliance professionals on a contracted basis to work in-house for an agreed number of days per week/month, or even full time for an agreed period. This can be to implement a new regulation or control, to undertake specific projects (e.g. a regulatory reporting or market abuse review) or to simply bolster your team during personnel transitions, support while working to secure a full-time hire or to cover staff absences such as during maternity or paternity leave or for shorter-term illness or holiday coverage.
  • With added support comes efficiencies and deeper insights: Keeping up with the sheer volume and pace of regulatory change, not to mention the volume of data flowing into and out of a firm, can be a challenge. Fortunately for compliance teams, regulatory technology, or ‘RegTech’, is here to help. RegTech can bolster operational efficiencies by allowing for the automation of manual tasks, the generation of instantaneous reports, and the capturing of data for recordkeeping purposes. All of these tasks would otherwise be done manually and laboriously and thus consume precious time and resources. Not only this, but RegTech provides an opportunity to connect structured and unstructured data sets in order to derive deeper insights for identifying additional potential risk.

When implemented appropriately, strategic outsourcing provides a beneficial tool at a firms’ disposal to maintain flexibility and continuity of resourcing.

How ACA Can Help

In addition to our centralized managed service centers of excellence located in Pittsburgh, PA and Birmingham, England, our Staffing Support solutions continue to grow in popularity. In 2019, we provided staffing support solutions to over 100 firms. The Secondment and Staffing Support Offerings provide a customizable scope of onsite staffing assistance to financial services institutions. All levels of seniority are available for onsite staffing support to allow seamless temporary additions to a compliance team without the variable risks and costs associated by staffing internally. Most notably: recruiting, onboarding, training, retaining and other employee related benefit demands.

Below are examples of how firms have partnered with ACA to gain time, support, and expertise through staff augmentation and outsourced services.

Senior-Level Support at a Crucial Time

  • Following the departure of a CCO at a private equity firm, we provided a seasoned in-house compliance professional for four months to simultaneously assist through an SEC exam and successfully onboard a new CCO.
  • For a hedge fund client, we expanded our testing support while a CCO was on maternity leave. One of our Managing Director’s scoped out the testing responsibilities and divided them between our Analysis and Review Center as well as additional onsite time provided by the Managing Director.

Alleviate Bottle-Necks and Add Scalability

  • Following the departure of two key members of a Communications Compliance Team, we provided two onsite resources for a period of two months to alleviate a quarter-end peak of marketing materials. The team then worked to shift the volume of materials to the managed services marketing review specialists in our Analysis and Review Center.
  • While facing the challenges of a long-time employee’s departure and training a new compliance team member, our client required a secondee for an onsite/offsite schedule that covered necessary tasks while improving internal processes. Our consultant identified tasks that could be shifted to our managed services model in the Analysis and Review Center, eliminated the key-person risk associated with those tasks internally, and alleviated internal burden.

Gain Extra Hands With Less Effort and Investment

  • We provided various seconded employees to a large investment manager dealing with an organizational restructure. Two ACA secondees supported annual testing. Another secondee was onsite for six months supporting system integrations, compliance testing, and rule building for the client’s OMS.
  • Following the departure of a junior compliance team member, we provided a large hedge fund with a Senior Compliance Analyst to manage the client’s personal trading dashboard while assisting with other testing responsibilities.
  • After a departure in the trade compliance team during the implementation of a new OMS, a large asset management firm required a secondee to support with rule coding and system configuration.

For More Information

If your compliance program is ready to look at evolving efficiency in 2020, or simply needs assistance in the New Year, please reach out to your ACA consultant or contact us here to discuss how ACA can support your firm’s needs in 2020.

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