With what is looking like a protracted lock-down and a continuation in remote working for 6 months we thought it would be timely and informative to speak to the Chief Compliance Officer (CCO) community about their experiences over the last 6 months and their expectations for the year ahead.
How have Compliance functions performed over the last 6 months? Have they maintained operating effectiveness as a second-line challenge and control function? What have been the key management and operational challenges from remote working? What does the future look like?
The COVID pandemic has come at a time of significant challenges for many financial services companies operating in the UK and EU wholesale markets. These include:
- Preparing for Brexit
- Ramping up organisational preparations for LIBOR Transition in 2021
- Improving financial crime and AML related controls
- Climate change, ESG and green finance
- Continued implementation and development of core EU regulations
- And much more: accessing and using wholesale data, data protection, cyber security, operational resilience, prudential changes and so forth.
5 Survey questions
1. What have been the key Compliance management challenges during COVID lockdown and remote working?
2. What were the main Compliance risk management issues during lockdown?
3. What changes in working practices have you adopted during remote working?
4. Which operational control areas have been under greatest pressure?
5. What do you consider to be the main regulatory risk concerns over the next 12 months?
We have interviewed CCOs from a broad spectrum of Investment Banks from the US, Asia and EMEA which have different business activities in the UK. The Compliance Teams range in size from 10-20 employees up to over 150+ employees.
The report reflects the key themes and observations the authors considered to be of most interest and materiality to the wider compliance community.
Executive summary of the key themes
Compliance management challenges
- The transition to a full remote working operating model was generally smooth and without major incidents.
- The majority of firms are focusing resources on run-the-bank controls to deliver the compliance programme, impacting change delivery.
- Virtual supervision of staff requires a more hands on managerial approach.
- The loss of face-face contact impacts information flows and relationships and is regarded as a step backwards.
- Risks to health and wellbeing of employees and team cohesion remain a key management challenge.
- Continued remoting working elevates compliance and conduct risks over time.
Risk management challenges
- Maintaining effective operational control and resilience from continued remote working.
- Enhancing front office supervision routines to strengthen control.
- Conduct and control risks by ‘bad actors’ multiplied by remote working.
Operational control pressure points
- Trade and communication surveillance platforms processing unprecedent alert volumes.
- Technology and IT security teams have maintained operational stability. Use of new technologies creates additional compliance risks.
- Staff-onboarding and training has been a challenge in many firms and a factor in the reduction of recruitment activity.
Strategic issues (including Working Practices)
- Workforce and return to work strategy issues which include: (i) future work patterns won’t be the same. There will be a ‘new BAU’; (ii) health and wellbeing of staff and burnout. Many employees want to return to an office environment, others do not; (iii) career development and progression may be impacted; and (iv) return to work strategy is going to require a balanced approach.
- Catching up with control remediation programmes and project ‘drift’. Change delivery programmes need to be re-energised.
- Concerns over team capacity and resourcing and winter illness impact. Pressure mounting on BAU and delivery challenges in 2021.
- Remote working has exposed increased operational risks with the use of third parties.
- Recognition that the use and set-up of disaster recovery facilities will come under strategic review.
If you wish to read the full Report please click on this link IB CCO Survey Report Final.