Heightened levels of global regulation combined with increasing scrutiny and cost pressures place Chief Compliance Officers (CCOs) and compliance teams under mounting pressure. Over-burdened teams that are stretched too thin are more likely to experience burnout and make mistakes, exposing firms to risk.
The outsourcing model is becoming increasingly popular among financial services firms.
- 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).
So it's clear that outsourcing is an area where there are definite benefits for financial services firms, and where we see a few key themes emerging. These include:
- Delegation not abdication: Outsourcing work to a third party doesn't relinquish you from your regulatory responsibility. Your firm is ultimately responsible for its compliance programmes, 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 cheaper way than the firm doing it itself without exposing the firm to regulatory risk.
- In or out?: In-sourcing (or secondments) is another consideration for firms to take advantage of during exceptionally busy times. For example, firms can tap into a 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 (e.g. SM&CR), to undertake specific projects (e.g. a market abuse review) or to simply bolster your team during staff absences such as during maternity or paternity leave or for shorter-term illness or holiday coverage.
- When it comes to service providers, not all are equal: For quality assurance, seek personal referrals and assess the competence, capability and capacity of potential service providers including whether they are members of the APCC (Association of Professional Compliance Consultants). Enquire as to the attrition rate of the provider’s staff, and how many firms they service with the same strategy as yourself and how they can support your firm as it grows.
- With experience comes efficiencies: Keeping up with the sheer volume and pace of regulatory change can be a challenge. Professional compliance consultants are constantly scanning the regulatory horizon, maintaining their own competency and capability and as they often work with wide range of firms they can have a good sense of market standards. They develop compliance programmes based on shared learning, best practices, current regulatory requirements and with robust oversight processes.
Ultimately, turning to a professional consultancy firm for governance, risk and compliance support — whether for secondments, out or co-sourced arrangements — allows firms to focus on their core business, while reducing risk and improving standards. This model creates operational efficiencies, which in turn can bring about cost savings.
How We Help:
We help thousands of firms globally mitigate regulatory, operational and reputational risks inherent in their business functions through a range of solutions. These include:
- Outsourcing/co-sourcing services: The dedicated team at ACA’s UK and US Analysis and Review Centres are available to help reduce the workload of Chief Compliance Officers (CCOs) and in-house compliance teams by allowing them to pass on executional regulatory responsibilities, freeing up valuable time and resources. Services include Financial Promotions, Marketing and Advertising Reviews, Expert Network Chaperoning and Electronic Communications Reviews (E-Comms).
- In-Sourcing/Secondment services: Gain access to ACA’s skilled resources to assist during times of need, such as personal transitions or extended absences. For example, firms turn to ACA in providing maternity and medical leave cover, supporting firms while they work to identify a full-time hire, lending additional support for compliance-related projects, assisting in building or rebuilding compliance programs, and handling regulatory review issues.
- Retained support: In the UK we have collectively over 500 years’ consulting experience. Our compliance team comprises of specialists drawn from global regulators, financial institutions and advisory firms. Choosing ACA’s Comprehensive Customised Compliance (C3) retained service provides you with core regulatory compliance assistance with ongoing support to ensure your firm’s compliance programmes are up to date and effective.