Compliance goes against the wall

By Justin Lim

MANY compliance professionals within the financial services sector have expressed fears that the current economic downturn has the potential to adversely affect their organisation’s compliance programs, according to the Australasian Compliance Institute (ACI).

The professional body for compliance professionals has formed a working party to develop a white paper that will assess whether the economic downturn has affected, or is affecting, compliance programs.

Due to be released in October, the study will address concerns that with a vast majority of compliance programs developed against a backdrop of prosperity, their capacity to respond under resource pressure and during economic downturns is unproven.

Clayton Utz national compliance head and working party member Randal Dennings said: “One of the things indicated clearly [is members are] currently overhauling their control systems in order to meet the new external environment,” he said.

According to some respondents to a preliminary survey conducted by ACI, there is a belief that compliance is “an obvious area where budgets can be cut without implication”.

“Management has withdrawn support tools for compliance functions and not replaced staff as they leave,” said one respondent, while another commented, “Compliance staff [are] always the first to go, whilst sales staff are retained”.

Dennings added: “We noticed that within financial services institutions there was a tendency to limit expenditure in compliance, which was not the case in the wider economy.”

Some respondents felt more compliance resources will be required in a bear market: “As business units try to squeeze greater returns from fewer resources, they (possibly) take more risks in doing so.”

According to Dennings, the study was designed to ensure that reductions do not cut too deeply into programs and compromise their integrity, in turn helping to avoid inadvertent corporate compliance and cultural problems.

“We think this bear market paper will produce some real and positive feedback that will be of use for boards. We would say that the research done so far indicates that whilst there are some concerns, there doesn’t appear to be any major cause for alarm.

“Clearly, organisations are demanding that compliance people demonstrate the value they are delivering, because in really tough times, unless you can demonstrate value, the risk is that you’ll be de-prioritised.”