For financial service industry leaders, compliance is one of the most important considerations. Compliance management systems bring immense value and benefit from an operations and cost-saving perspective. Leaders can reduce regulatory risk through reliable automation software. Let’s run through questions you may have and identify the value of compliance management systems for your business.
What is the role of a compliance management system?
Financial services institutions often rely on outdated and costly manual compliance management processes. Compliance is important in most industries, but the financial sector is under strict scrutiny from federal regulators to be compliant. Despite this, the processes may reflect something other than the modern world of financial compliance. The old systems leave room for errors that cost companies thousands, if not millions, of dollars. An added risk: the customer experience can suffer as a result.
Financial institutions lean on compliance and disclosure management systems to stay competitive and compliant. The right software and system will help professionals manage complicated consumer compliance risks and ever-changing consumer protection-related regulations. As laws may change and vary from one state to another, it’s vital to have a flexible and reliable compliance management system.
What are the biggest challenges in compliance?
Every financial institution has a program in place to manage compliance. However, staying up-to-date and maintaining ever-changing regulations can be challenging. A modern compliance management system should make these roadblocks easier to digest.
The financial industry must react promptly to changing government regulations to stay compliant and avoid expensive fees. The regulatory requirements are constantly changing, making it difficult for financial institutions to manage. For example, government bodies respond to economic struggles or a potential financial crisis by increasing strict laws and regulations, all to protect consumers.
The ever-changing regulatory environment is a major stressor for business leaders, per PwC. In fact, 2020 PwC survey data found that 40% of CEOs were worried that the changing regulations increased “the risk of their organization not complying with relevant laws and regulations.” A good compliance management system can make the process of managing regulatory change much more efficient.
Compliance management systems in financial institutions
Compliance management systems are nothing new to financial services businesses. Still, modern systems must keep up with global updates and integrate with all channels seamlessly.
One of the main benefits of this is the amount of money companies can save on regulatory fees. Calculating compliance costs can be difficult. Competitive Enterprise Institute (CEI) reports that the annual cost of financial compliance and intervention is about $1.9 trillion. Therefore, the right software can help reduce the resources and money needed to stay compliant.
Another example can be found in security and data management. Government regulatory bodies are constantly working to protect consumers and their personal information or sensitive data. As technology evolves, so do security threats, which encourage stricter regulations and customer protection laws. Financial institutions need to work to meet these requirements and keep their users safe. This is yet another area in which the right product can make a massive impact.
How a compliance management system manages risk
The first step in risk management is identifying potential compliance complications. As most financial institutions know, a certain amount of risk must be assumed to maximize profits. However, compliance risk can get in the way of achieving predetermined goals. When a reliable compliance management system is in place, these stress points can be identified and eliminated. Overcoming risk often requires the business to update its digital processes and management tools.
Financial institutions can use software to ensure that their internal policies and procedures align with regulatory requirements. Overall, this also provides a better customer experience.
Are you ready to transform your compliance management system and gain valuable insight into compliance and disclosures? A Naehas expert is ready to work with you to bring your marketing and compliance to the next level.