Costs of compliance remain a key problem area for banking and financial institutions. When we talked to banks and financial institutions to source data for our whitepaper, most of them placed reducing costs of compliance among their top priorities for 2018.
Why reducing costs is on every company’s radar in 2018
Costs of compliance have always been a problem area for banking and financial institutions and they are increasing over time. Accenture’s report on compliance is based on surveys and interviews with over 150 industry professionals, and most of them agreed that costs of compliance will be increasing for their organization within the next two years. 48% expect costs of compliance to go up between 10% and 20%, while 18% of the respondents expect the increase in cost to be even bigger than 20%.
Accenture’s report is by no means an outlier. S&P Global’s report on costs of compliance paints a similar picture. More than 40% of their respondents said that costs of compliance accounted for anywhere between 10% to 20% of the organization’s annual expenses. Most of the respondents to their survey were from community banks.
It is easy to see why companies are looking for ways to reduce these costs – they account for almost 1/5th of the organization’s annual expenses. Reducing these costs means directly increasing revenue by a large margin. It isn’t just about profit – costs of compliance are also a major factor when it comes to competitiveness. A company that can reduce this significant chunk of expenses will be able to offer better services at better rates to clients, which will result in the company generating more business.
Strategies to reduce costs of compliance
The biggest obstacle to reducing the costs of compliance is that no organization can afford a lapse in compliance, and thus it is simply not feasible to scale back compliance.
The best strategy to reduce the costs of compliance is not to reduce the number of compliance employees, but to augment the existing employees so they can do much more in a much more effective manner. Costs of compliance go up because compliance officers and managers aren’t provided the right compliance management solutions. These managers and officers still manage to do their job, but their efficiency is much lower than it would be otherwise.
The compliance officers and managers who do not have the tools that they need end up using many different tools to manage their work. They will use multiple software and apps, and they will keep all the information in many different files. This leads to a lot of time spent in administration. Highly qualified and trained compliance officers and managers waste many hours on such administration because it is necessary for their work. Their time is wasted because the tasks they could accomplish in a few minutes with the right tools, end up taking hours to do instead.
Automation helps reduce costs
A compliance management solution based on automation will increase the speed and efficiency of your organization’s compliance measures. It will allow for better compliance, which will result in fewer fines. That’s not all – it will also decrease the number of labor hours spent on a task. Compliance management solutions pay for themselves in a very short time, as long as it is the right CMS for your organization. Legacy vendors who offer compliance management solution, almost always bundle it with other modules added with long-term contracts that run into millions of dollars. Small to mid-sized banks and financial institutions need to look at solutions specifically made for organizations of their scale.
If you want to see how a compliance management system can help your organization bring down costs of compliance, register for a live demo of the Predict360 compliance management system. If you want to see the benefits for yourself, you can get a 30-day free trial and test out our powerful compliance management solution.