How to build a culture of compliance

Regulated financial institutions need to ensure that they are putting policies and procedures in place to effectively mitigate their exposure to risk.

With scrutiny around regulatory compliance increasing, regulated financial institutions need to ensure that they are putting policies and procedures in place to effectively respond to, and mitigate, their exposure to risk; with substantial monetary penalties awaiting those who fail to do so.

This requires an organization to have the focus, resources and time to ensure continuous vigilance; something that will only grow in urgency as regulatory demands increase. To achieve this, financial institutions must ensure they are working towards establishing a culture of compliance throughout their whole organization.

But what is involved in creating a culture of compliance?

Building a culture of compliance is a continuous process that requires a multi-faceted approach where compliance becomes embedded throughout every area of the organization.

To start, an organization needs to set out a defined framework of how they want their ‘culture’ around compliance to be shaped; thus providing a clear sense of purpose in which every employee is clear on the process, and is certain of what is required from them to achieve the end goal. Part of this culture-building will involve having compliance become a consideration at every stage of the business process, with compliance officers helping colleagues to understand how they can meet the organization’s compliance needs.

This means that compliance has to be considered in the end-to-end lifecycle of a project; from initial planning and strategy creation, through all phases of product or service development, to delivery and reporting. For an organization to instill this directive within operations, it needs to ensure its compliance-focused culture has the backing from the top – as a lack of visible and demonstrable support from senior management will only lead to a limited take-up and effect.

Most importantly, a culture of compliance can only be truly effective when a financial institution fully-understands the regulators’ expectations, in a regulatory environment that is constantly evolving. This is key for multi-jurisdictional financial institutions that need to ensure they remain up-to-date with changing and emerging regulations, as well as being able to understand how they apply to their own policies and controls.

To do this in an efficient and timely manner, that supports informed decision-making, they must ensure their culture of compliance is set up to adopt and fully embrace technological frameworks that can map compliance practices onto their everyday workflows. And as the regulatory landscape becomes more complicated and multi-layered, the requirements of their RegTech solution need to be able to quickly expand to meet it head-on.

In summary, a compliance culture is built on a clear sense of purpose, that is directed from the top down, where compliance has been built into every stage of a project’s lifecycle, and that enables employees with up-to-date regulatory information and insight.