New Study Reports That Compliance Officers are Overworked, Overlooked and Overexposed

Thomson Reuters, the large information and news provider, recently conducted a study surveying over 500 Compliance professionals.

The results indicate that the deluge of new rules, regulations and enhanced vigor of regulators coupled with a lack of additional internal resources and headcount has pushed compliance departments to the breaking point.

This is the prevailing sentiment prior to all the aspects of Dodd Frank and other initiatives actually being implemented and enforced.

Over eighty percent of compliance professionals expect that they will have to cope with additional regulatory burdens in 2012. Nearly half of the respondents expect the level of regulations to be “significantly higher.”

Already overwhelmed, Compliance officers still face an onslaught of new global rules and changes including:

Enhanced regulatory power of European Supervisory Authorities;

The expansion of  new and existing regulatory agencies including the SEC, CFTC, FED,  CFPB and a bunch of anachronism regulators  courtesy of Dodd-Frank Act;

Changes at the U.K. Financial Services Authority;

The increasingly global reach of regulations such as the UK Bribery Act and the US Foreign Account Tax Compliance Act.;

Hedge Fund Transparency Act; and

New Capital Requirements.

Scott McCleskey, the global head of financial services regulation at Thomson Reuters GRC and a former Compliance professional, stated that “We have been tracking a fairly steady sixteen percent year-over-year increase in global regulatory activity, with nearly sixty new regulatory announcements every working day.”

He continued, “As a result, compliance teams are reporting that they are increasingly strained in their ability to fulfill their myriad of responsibilities, which are critical not only to their own businesses, but also in maintaining the proper coordinated functioning of markets around the globe.”

The avalanche of new rules, regulations and data, according to the survey, require Compliance professionals to allocate the equivalent of one day’s work to solely focusing on and learning about new regulatory changes.

A concern raised by the survey indicates that due to being pulled away from their core responsibilities, Compliance Officers are unable to find the time to collaborate effectively with their peers in internal audit, risk management and legal.

In excess of fifty percent of the Compliance professionals surveyed spend less than one hour a week reporting to their boards.  The lack of communication raises serious concerns about whether executive management is being adequately apprised of the real life circumstances and challenges of the Compliance professional.  This could become a problematic self-fulfilling prophecy.  If compliance is not able to alert their boards of their work overload, the boards are therefore unaware as to the alarming extent of the problem and will not allocate resources to help. Therefore, this situation will not change.

“Compliance officers at regulated firms are finding themselves under increasing pressure from all sides,” said McCleskey.  “ … Companies are increasingly struggling to keep up.”

Although there is an increase in expectations of the job, only eleven percent of companies are expecting a significant increase in their budget for compliance. This raises serious concerns that budgets will not be sufficient to cover the expected increases in regulatory changes, oversight, examinations and investigations.

For the daily reader of CompliancEX this survey codifies what most experienced Compliance professionals already know;  since Compliance is a perceived by management as a cost center they will be pushed to the breaking point before any assistance with resources or headcount will be approved.

Although the study didn’t cover this particular point; we have noticed that it often takes a regulatory action and appearing on the front-page of the Wall Street Journal to spur management into begrudgingly allocating funds to hire the sorely needed Compliance professionals.  Even then the compensation still remains well beneath their worth and disturbingly below what their contemporaries in other divisions earn.

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