In 2024, the Securities and Exchange Commission (SEC) charged dozens of firms for non-compliance, with resulting fines nearly totaling over $8 billion.
According to the 2023 KPMG Chief Ethics & Compliance Officer Survey, 84% of CCOs expect to be met with further regulatory scrutiny in the near future, with 34% citing evolving regulatory requirements as the biggest compliance challenge they are facing. Regulatory fines, lawsuits, and sanctions are top of mind when it comes to keeping up with evolving compliance challenges, with protecting a firm’s reputation coming in at a close second.
Needless to say, while maintaining compliance has always been important in the realm of financial services, today’s challenges make it even more pivotal. With increased risks and increased scrutiny, compliance departments from boutique firms to enterprise-level U.S. firms face an unprecedented level of pressure to be proactive. They must go beyond the status quo, implementing up-to-date practices and regtech designed to stop non-compliance before it can occur.
While compliance pressures continue to mount, creating a plan, staying up to date on the latest technology, and relying on a robust system can help firms navigate the nuances of these challenges in order to stay protected. Learn how to recognize if it’s time to upgrade and leave the manual labor in the past.
How to Identify if Current Processes Are Insufficient
When deciding if it’s time to make the switch to more advanced compliance technology/regtech, you’ll want to identify the current compliance processes that are working for your firm – along with the ones that aren’t. Whether you’re still relying on manual processes or considering the jump to a new compliance platform, there are several ways you and your team can pinpoint which systems aren’t positively serving your firm any longer. Start by asking yourself the following questions:
- Are your employees spending too much time navigating systems? Is your firm relying on a setup that isn’t user-friendly? Is your compliance team struggling to operate within your current system? If so, the impacts may be more detrimental than you initially realize. If your employees are constantly getting held up, struggling to log in or out, or are simply facing challenges around every corner, it may be time to make the switch. Spreading employees too thin can cause frustration and inefficiencies within your firm, impacting overall success. In addition, this extra difficulty can pull your compliance team away from more important tasks, such as focusing on strategic decisions and following regulatory updates.
- Are important items slipping through the cracks? Whether employees are operating on a primarily manual system, are using a semi-manual process, or are relying on outdated technology, important information has a higher chance of getting lost in translation without a streamlined process. Information and data silos may be present if you’re dealing with several disparate systems, creating additional burdens on your firm. In fact, advisers polled in a recent study assert that administrative burdens due to unintegrated systems take up about 28% of their workday. If your system lacks accurate reporting and auditing trails, this also can affect compliance, causing further hardship.
- Does your firm feel bogged down by manual processes? Do you have automated calendars? Are you able to easily track your firm-wide compliance? If you’re relying on outdated manual processes, like email, you may be covertly using a large amount of resources, taking up valuable time that could be reallocated somewhere else. These processes are also susceptible to human error, making this an even more unsustainable practice in the long run.
- Are you constantly looking for faster workarounds to your technology? When the same technology is used by a firm over a long period of time, firms often find their employees creating manual workarounds in order to solve new problems and compensate for a system’s limitations. This can reduce productivity and lead to unexpected costs.
- Is your program state-of-the-art or simply adequate? If you’re still using legacy technology or a home-grown solution, you may be inhibiting your firm’s growth, making it hard to keep up with competitors and meet evolving client needs. Older systems can be inflexible and costly, coming with their share of issues, outages, and technological difficulties.
- Does your current compliance system ease stress? A thriving and advanced system should give you and your firm peace of mind – not create more work or stress. The proper compliance technology also helps ensure that relevant info is on-hand at all times, enabling you to run your firm more smoothly and efficiently.
While updating to a new compliance management system can require extra funds up front, assessing your firm’s current struggles can help you weigh your options. You may find that updating your technology will save you time, resources, and stress in the long run, making the switch well worth it in the end. With 90% of advisers stating they would consider changing firms due to bad technology, the positive effects only continue to multiply. Learn more about choosing the best-fit compliance technology for your firm.
Going Beyond the Status Quo – Investing in Advanced RegTech
Let’s face it. It’s almost too easy to settle for the status quo, all in the hopes of avoiding the growing pains associated with making a critical technology shift.
Because of this, firms may opt to operate on a stripped-down model or rely on homegrown or niche solutions in order to meet the minimum requirements dictated by regulators and the law. However, non-compliance has irreparable consequences.
- Risk of being fined or sanctioned: Achieving compliance is often directly correlated to the technology in use. Regulators may notice outdated compliance technology and call into question your firm’s other practices. With the SEC continuously charging firms with recordkeeping failures, this risk can’t be ignored.
- Chance of lawsuits and financial settlements: Firms that fall behind on their compliance practices are at greater risk when it comes to more severe legal action. Firms may be faced with lawsuits that are much more serious than simple fines or sanctions, having the potential to permanently alter a firm’s standing.
- Falling behind competitors and the industry: As regulators evolve, so must your firm, staying current on all critical compliance and regulatory matters in order to protect investors from harm. Utilizing dynamic tools to capture critical insights about the industry can push firms ahead of their competitors, build credibility – and help secure future clients.
- Data overload and security risks: Is your scope of work larger than you can handle? If you’re feeling overwhelmed by mass amounts of data, you run the risk of a poorly managed process. This can lead to inconsistent information and compliance errors, along with a failure to keep up with changing regulations. This also poses a security risk, as sensitive information becomes inadvertently less protected.
There comes a time when it may be necessary to break away from the status quo and leave your firm’s old ways behind. There is a great deal on the line when it comes to regtech. Be sure to think carefully about your priorities, gaps, needs, and resources. Only then can you move forward in finding a solution right for your firm.
Choosing the right compliance technology isn’t always an easy task, as it requires research, resources, and valuable time to compare your firm’s needs with what’s currently available – and most desirable. However, implementing the right technology with the right compliance solution partner ensures your firm runs more efficiently, all while helping propel you into new levels of success.
Ready to make the switch? We’re here to help. Download our buyer’s guide for a full rundown on upgrading your compliance technology, from looking at the big picture and choosing your vendor to planning your budget and developing your use cases.
Explore COMPLY’s top-of-the-line compliance solution or contact us today for more information.