Forget Brexit: what trends do you need to keep your eye on?
As March 2019, the official date for the UK leaving the EU, draws ever nearer it seems Brexit is constantly in the news. But is it the biggest external trend risk managers and compliance experts are contending with? Rebecca Palser, Global Product Director at The Risk Advisory Group, explores why recent survey results suggest not.
Each year, The Risk Advisory Group, a global intelligence, investigations, security company, canvasses the opinions of global compliance professionals through a series of surveys and focus groups to find out what they will be concentrating on in the year ahead. The Compliance Horizon 2017 survey highlighted some interesting trends; here are some highlights.
Forget Brexit. International sanctions are the number one external risk
Interestingly, 45% of respondents we surveyed see international sanctions as the biggest external risk they face in 2018. This was a big departure from previous years when external threats were bigger political events; Brexit and the US elections loomed large in 2016. While Brexit and the US administration have not been forgotten - they were second and third on the list of key risks - it seems that compliance professionals have become more comfortable with the uncertainty. Not so with sanctions - and with good reason.
Ever-changing sanctions regimes means that they are constantly reviewing the third parties that they deal with to ensure that they do business legally.
So far, 2018 has delivered a rapidly changing sanctions landscape. We have seen more sanctions imposed on Russia, Russian businessmen and their companies and measures put in place in relation to Venezuela. But most people have been focused on Iran. The US has exited the Iran deal, snapping back sanctions. For US businesses, this means the end of business with Iran. For the other countries who are party to the agreement - the UK, France and Germany - the position is less clear. The governments of those countries want to preserve the deal and protect their businesses. Whether that will be possible remains to be seen.
For companies, these ever-changing sanctions regimes means that they are constantly reviewing the third parties that they deal with to ensure that they do business legally. Given any potential exposure can be buried under layers of opaque ownership structures, this can be time consuming. Liaising with the business to unwind problematic relationships can be equally time consuming.
The drive for efficiency continues
Unsurprisingly, given this backdrop, the drive for efficiency also featured high on the agenda for compliance professionals. With almost three quarters of compliance professionals (78%) not expecting any budget increases in 2018, there is a sense that they are trying to optimise what they are already doing. They tell us that the three things that would make the biggest difference to their ability to protect the business are:
- staff taking responsibility for compliance;
- more effective use of technology, and;
- greater buy-in from the management teams.
In previous years, technology hasn’t been a major focus for the compliance professionals we’ve surveyed, but that has changed. 52% of survey respondents this year told us that more effective use of technology would make the biggest difference to their ability to protect the business. This would explain why 59% expect to use compliance technology more in 2018 (a mere 2% think they will use it less than they do now). Compliance professionals see the top benefits of using technology as efficiency (31%) and transparency and traceability (27%).
The one thing compliance professionals say would make the biggest difference to their ability to protect the business is all staff taking greater ownership of compliance
Whether it is improving efficiency or enhancing workflow, one thing is obvious: compliance professionals see technology as a way to improve their effectiveness. And the benefits of technology go far beyond helping compliance teams manage third party risks. Technology can also help address what compliance professionals say is the biggest challenge they face in their role: encouraging staff across the business to take responsibility for compliance. 30% of survey respondents said this. And monitoring staff to ensure that they are following company procedures is their second biggest challenge. It therefore comes as no surprise that the one thing compliance professionals say would make the biggest difference to their ability to protect the business is all staff taking greater ownership of compliance (66%) – with company-wide compliance training one of their top priorities for the year ahead.
We know that compliance professionals struggle with how best to get the support of their colleagues across the business. So in our survey, we asked them how they achieve this. 74% told us that they audit and monitor as best they can, and it is clear that technology is starting to play an important role in how they do that. 51% said that they use data analytics to identify problem areas. Several attendees at our Compliance Horizon focus group discussed how they use personal and financial penalties to help drive compliance. This might be withholding bonuses or even delaying promotion until staff comply. 36% of respondents to our survey agreed that personal financial penalties are the only way to ensure that staff follow their compliance process. But there is no silver bullet, and it is clear that compliance teams are still trying to find the perfect mix of tools to encourage compliance.
If you are interested in participating in 2018’s survey or wish to discuss any points further, then please get in touch with us info@riskadvisory.com
About The Compliance Horizon 2017
The Compliance Horizon 2017 report is based on an online survey of 123 senior compliance professionals conducted by The Risk Advisory Group in September 2017. Respondents are from a broad cross-section of businesses in terms of size and sector and from all continents. The report is available to download here: https://www.riskadvisory.com/news/compliance-horizon-report-2017