We’ve had some wild weather here in the U.S. in the past several months. Hurricanes, flooding, and fires have hit multiple parts of the country. This has probably made you think at least a few times of disaster preparedness and what you can do to weather potential storms. Hopefully you’ve got a solid disaster preparedness plan in place, but today we’re going to talk about another type of storm: the compliance storm. You may be thinking, what compliance storm? Hasn’t there been a shift in the regulatory environment from tough to a little more relaxed? Yes, there has been a shift, but if you think that means you can sit back and take it easy, you’ll be kicking yourself when the regulatory pendulum swings back the other way. Not only that, but it’s the regulatory shift that causes the compliance storm. Even though the pendulum may be swinging away from a tough regulatory environment, it still means change. And any regulatory change, even one from tough to relaxed, means a storm of compliance headache. This storm affects even the big financial institutions, and it hits smaller ones even harder.
Over the last several years, compliance costs have increased for more than 90% of small institutions. How smaller financial institutions react to a changing regulatory environment is not as clear cut. Many financial institutions operate with a compliance officer who also wears other hats, or they may divide the compliance responsibilities among several officers, who also wear other hats.
For such institutions, the options for keeping up with escalating compliance expectations tend to be:

  1. Dedicated. Make one or more of those officers with existing compliance responsibilities dedicated compliance personnel, or increasing the number of dedicated compliance personnel. If you’re considering this approach, you’re not alone. The George Mason University study found that the median number of compliance staff at community banks grew from 1 to 2 in response to Dodd-Frank. In addition, more than a quarter of the banks surveyed plan to add another compliance person.
  2. Shared. Sharing compliance resources with other financial institutions.
  3. Outsourced. Outsourcing the compliance duties to a third-party provider.
  4. Other. AffirmX adds a new alternative into the mix for many smaller financial institutions. We provide a solution that gives compliance personnel a tool that fits with their existing compliance program and connects it with offsite subject matter experts in a way that both reduces workloads and costs, while distributing the demands of compliance in an orderly, even flow throughout the year to reduce stress.

Whichever approach you’re considering, here are some questions you may wish to consider when it comes to evaluating possible compliance solutions.

  • How does the compliance solution fit with my organization structure? What happens if my structure or personnel change?
  • How does the compliance solution work with and through my financial institution to assess and address compliance risk factors?
  • How does the compliance solution act as a partner with my existing program in promoting effective compliance?
  • What reports and/or scoring factors does the compliance solution deliver to enable meaningful awareness of compliance risk?
  • How well can the compliance solution be tailored to fit my compliance risk factors as well as my financial capacity and constraints?
  • Does the compliance solution adjust to my dynamic needs and how does it accomplish this?

When these types of questions are considered, the solution should give more than just a pat answer, but should provide the financial institution with sufficient insights to the compliance solution that will lead to safely, cost-effectively navigating its way to compliance.