Compliance Budgets Rise, But Not Fast Enough

The results of Thomson Reuters' cost of compliance survey released this week highlight concerns about the use of resources, and time being spent on compliance, that are relevant to data managers whose work is the backbone of firms' efforts to be compliant with regulation.

The survey collected feedback from about 600 professionals, including compliance executives from firms in all financial services sectors in all regions of the world, between November and January. Responses generally indicate that compliance functions, especially at firms outside the global systemically important financial institution (G-SIFI) category, are "already feeling the strain of being stretched too thinly," wrote Stacey English and Susannah Hammond, authors of a report on the survey. English is head of regulatory intelligence and Hammond is senior regulatory intelligence expert at Thomson Reuters.

Still, as English and Hammond point out, coordination of interaction and alignment between control functions is lacking, and about half the compliance professionals surveyed said they or their firms are spending less than an hour per week on internal audits. Furthermore, the number of firms spending more than 10 hours a week overall on compliance is decreasing, respondents said.

Nonetheless, about 68 percent of those surveyed said they expect compliance budgets to become either slightly or significantly more in the next 12 months. Although 38 percent of all firms are dedicating a full working day each week to tracking and analyzing regulatory developments, and 15 percent spend more than 10 hours a week to review the effects of new regulatory developments and information, it's debatable whether those compliance departments are going to get enough resources to devote more time to staying state-of-the-art in regulatory compliance, or even to keep spending the amount of time they currently spend.

English and Hammond themselves appear doubtful, writing, "It is not that compliance budgets are not expected to continue to rise; it is more that, increasingly, they may not be sufficient to give beleaguered compliance functions a fighting chance of dealing with the mounting challenges." They do, however, point to one silver lining to this black cloud: Fatca. Response to the US Foreign Account Tax Compliance Act was actually taken as an opportunity to review client databases, refresh that information and fill in any gaps, in their view.

Whether the industry can or does respond to the situation that English and Hammond identify around compliance resources probably depends on more than just reacting to this evidence. Firms will have to internalize the findings and realize the business and risk management needs that are being highlighted, and gather resolve—and resources —to respond.