There is a constant flow of new financial regulation which is now becoming more complex and intrusive.
This regulation is moving further away from pure commission (where an individual or business is proactively committing a crime) to omission (where an individual or business is found to not prevent a crime through negligent or poor operational controls).
In other words, innocence is no excuse!!
Failure to comply with these regulations has serious consequences. For individuals, it could result in criminal prosecution, being fined and/or a loss of reputation. For the firms themselves, again there could be large fines, threats of closure, a loss of reputation and legal action from clients who are impacted by the record breach. Finally, clients themselves could lose money, they could have an indirect reputational loss and may end up wanting to take action against the firm that caused them the problems.
However, the main worry is that understanding the regulations is more terrifying and intimidating than actually trying to comply with them.
Firms need to understand what actual problems the regulations are trying to address and this is often impossible from having to read through and understand hundreds of pages of legal documentation. Even when this is done how far away is an organization from compliance? how many gaps are there? how worried should management be? what are the risks to the clients, the firm, and individuals? plus many other considerations.
Only once this is done will firms be able to think about what needs to be done to ensure there is compliance.
But firms have massive demands on their change budgets for product improvements, service improvements, revenue generation, cost reductions, etc
This means it is unlikely that firms will have vast amounts of money, resources and time to throw at these problems. Firms need to understand what is a reasonable amount of change to ensure compliance. I have heard it argued many times that there is no real competitive advantage for being ‘over compliant’ but significant issues of being ‘under compliant’.
It is a case of balancing the following the risk of non-compliance against the cost of change against lost opportunity costs.
What firms need is a trusted partner to help them who will give them impartial advice and guidance on what the regulations mean. What the impact of them will be? And how to efficiently and effectively comply with them.
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