Financial services firms face compliance staff shortages as regulatory pressure increases

Regulatory change, skills shortages and budget constraints are increasing pressure on financial services compliance teams, with firms facing potential shortages in compliance staff, according to a report by Thomson Reuters.

Related topics:  Finance News,  Regulation
Rozi Jones
30th August 2022
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"Financial services firms face extremely high levels of regulatory activity yet headcount within compliance functions is expected to remain relatively flat."

The research shows that, following years of high regulatory activity, three-quarters (74%) of financial services firms expect to see their regulatory burden increase further in the next twelve months, without being able to increase staff numbers to handle the additional work.

Despite an overwhelming majority of firms expecting regulatory activity – and therefore their workloads – to increase next year, most respondents (61%) think their teams will stay the same size. Just over a third (35%) said they expect the size of their compliance teams to grow, with 4% predicting a decrease. In the UK, 65% of firms said they expect compliance teams to stay the same size.

When asked which areas they expected to make the largest demands on compliance resources, the most common answer was assessing cyber resilience (55% of respondents), followed by implementing a demonstrably compliant culture (addressing concerns of regulators) at 47% and post-pandemic reviewing and planning (42%).

Regulatory developments in areas such as crypto-assets, fintech and AI has meant that the remit of compliance functions is growing. As a result, compliance professionals are under pressure to keep up with the pace of change. Compliance teams within financial services firms are also having to contend with the ever-growing threat of cyber attacks, as these become increasingly sophisticated.

A reason as to why firms do not expect team sizes to increase significantly may be the increased cost of senior compliance staff. Two-thirds (67%) of firms said they expect the cost of senior compliance officers to increase due to the competitive labour market and skills shortages.

Budgetary restraints are also being cited as another source of pressure amongst compliance functions. Only 12% of firms said they expected budgets to increase significantly in the next year, with 50% saying they expected them to rise slightly. Given the increased scope of regulatory activity, this suggests that firms expect to find themselves under greater pressure to deliver more work without a commensurate increase in resources.

Regulatory requirements for compliance professionals to be held accountable for their actions means they expect to face an extra burden of responsibility. 45% of firms said they expect personal liability of compliance professionals to increase in the next year. This risks making compliance an unattractive career choice for junior employees, causing staff costs to rise even higher.

Susannah Hammond, senior regulatory intelligence expert at Thomson Reuters, said: “Financial services firms face extremely high levels of regulatory activity yet headcount within compliance functions is expected to remain relatively flat. This means teams will be forced to pick up more work, putting them under considerable pressure.

“Some businesses are planning to deal with this excess workload by outsourcing more regulatory work and deploying more technology.”

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