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The Future for Compliance – Best Practice and Delivering Value


Today, the directors and senior management of financial services firms demand a contribution and breadth of expertise from their Compliance Departments far beyond the traditional role of those departments. From internal audit to finance to Compliance, every department is being challenged to contribute to and meet the overall business objectives.

Against this background, Compliance has emerged as one of the most important areas of risk that an organisation faces. Perhaps least understood by senior management, Compliance risk, together with reputational risk, have “leapfrogged” more traditional risk areas, such as credit, market and financial risk to jostle with operational risk at the top of the agenda. Whilst most financial services firms have well developed identification, assessment and management expertise in the more traditional risks, new risks such as Compliance are now rightly the cause of both focus and concern of Boards and senior management, particularly in the UK in light of the Financial Services Authority’s (FSA) new senior management responsibilities regime introduced at N2.

However, Compliance should be viewed not only as a subset of risk, to be managed like all of its cousins, but also as an enabler or catalyst for significant value creation within an organisation. Many progressive financial services firms have woken up to the discovery that Compliance has a key role to play. The once narrow focus of Compliance as another internal control or watchdog function for the business is starting to erode and in less than a decade will probably be gone forever.

“Good Compliance is, and always will be, good business sense.”

Lori Richards, SEC Director1

More and more firms are encouraging or demanding that their Compliance Departments make a “Step Change” to a more value added frontier of: enhancing strategy, improving business processes, better managing risk, providing a consultancy to management and unlocking new possibilities in their markets of choice.

This “Step Change” requires a substantial refocus in the mindset, skills, and delivery of the traditional Compliance Department. To achieve this “Step Change” Compliance Departments will have to regenerate themselves both from within and from without by aligning themselves with the business strategy and the expectations of their major stakeholders.

For those that achieve this change, the rewards and benefits for their firms are significant.

1 Mid-Atlantic Securities Forum, Philadelphia, Pennsylvania, March 2002.



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