Many recognise that technology offers a real opportunity to streamline these responsibilities and build resilience into their function. Yet, when it comes to taking that step – proposing investment in compliance technology to the board – it’s not unusual for even the most experienced compliance officers to hesitate.

Not because of doubt in the solution. But because proposing any operational change – especially one that may involve cost, change management, and executive approval – requires careful positioning, planning, and confidence.

This article is designed to support that step: helping compliance leaders translate their vision into a successful board proposal, without overpromising or risking their professional credibility.

Understandably cautious, not risk-averse

It’s important to start by acknowledging a simple truth: compliance professionals aren’t change-resistant – they are risk-aware.

If you’re asking these questions:

• How will the board will perceive the proposal?
• What will the implementation journey demand of you?
• Will the system will truly deliver on its promises?

Then you’re not alone, they are entirely valid concerns. But they should be explored, not avoided – because doing nothing has its own risks: inefficiency, human error, regulatory exposure, and missed opportunities to demonstrate leadership.

A familiar story: “we know it’s not ideal, but it works (for now)”

Many compliance teams operate processes like compliance monitoring, incident logging, or attestations through a patchwork of spreadsheets, emails, and manual follow-ups. It gets the job done, but at a cost:

• There’s no single source of truth.
• Key dates are missed.
• Management information (MI) is built reactively, not proactively.
• Oversight is diluted across disconnected tools.

You don’t need to tell the board everything is broken – but you can help them see that there is a better way.

Reframing the proposal: from ‘compliance tool’ to ‘strategic investment’

To win board support, it’s helpful to position the proposal not just as a “compliance upgrade” but as a “strategic improvement” that supports governance, operational efficiency, and resilience.

Here’s how to frame the core benefits:

You’re not asking the board to take a risk – you’re showing them a practical way to de-risk compliance itself.

Building the Case: A Practical Roadmap for Success

Here are steps you can take to move forward with confidence:

1. Clarify the case for change

Map out what isn’t working today – not with blame, but with clarity. Whether it’s lost opportunity of better risk management, wasted time spent compiling MI, fragmented registers, or missed policy attestations, show the impact on the business and your team.

2. Propose a measured, low-disruption start

Start with a core process where benefits are immediate and visible—such as Compliance Monitoring or a few high-priority Registers like Breaches or Financial Promotions.

3. Show the return on time and risk

Quantify what you’ll save – not just in hours, but in risk exposure and management confidence. For example:

“Today, our Compliance Monitoring results and MI are produced manually across five spreadsheets. My Compliance Centre would automate this, reduce the chance of error, and make live MI available to the board at any time.”

We have developed a return on investment tool that might help you. If you’d like a copy of this then please email Ben Mason.

4. Leverage My Compliance Centre’s implementation model

Highlight that My Compliance Centre is designed for minimal IT involvement and a phased rollout. This isn’t a high-risk tech transformation – it’s a manageable, supported operational upgrade and we use a proven roadmap for success that includes hands-on implementation and training support.

5. Offer to review after 3–6 months

Propose a clear review point. Demonstrating early wins builds credibility and allows the board to evaluate success without long-term lock-in.

You’re not alone – and you’re not the first

Many of My Compliance Centre’s clients have faced exactly these same questions. What helped them succeed is:

• Our proven roadmap for success – read about this.
• Starting with a clear but narrow scope.
• Getting a personalised demo for key decision-makers.
• Using My Compliance Centre’s evidence from similar-sized firms.
• Trusting their own professional judgment.

Your board respects you because you manage risk. That same mindset, applied to selecting the right system and framing the right proposal, is precisely why you’re the right person to lead this change.

Final word: steady steps, strong outcomes

It takes courage to propose change. But it also takes leadership. With the right message and the right technology partner, you can take that step confidently – knowing you’re doing it not just for efficiency or compliance, but for the long-term success and resilience of your compliance function and your firm.

My Compliance Centre exists to support exactly this kind of transformation – simply, securely, and with your reputation protected.

The post Leading change with confidence – creating a successful compliance technology proposal appeared first on My Compliance Centre.

Before we look at the roadmap and offer two examples where you may be able to secure a fast and effective result, it’s worth considering where most firms are in adopting compliance management technology solutions.

Manual processes – the number one challenge

Recently, we collaborated with a fintech association to survey their members, revealing that 82% of compliance teams regularly waste time managing important tasks because of inefficient tools and processes. Aside from financial crime, most compliance processes are still managed using manual systems, with compliance officers identifying manual processes as their number one challenge.

The emotional truth is that many compliance professionals feel overwhelmed. They are deeply committed to doing the right thing, protecting their firms, and meeting regulatory expectations, yet they are weighed down by inefficient processes that fail to reflect the strategic importance of their role. This not only limits their ability to excel but also prevents them from fully showcasing their value.

Typically, the manual processes these firms rely on are built around spreadsheets and email chains which are error-prone, time-consuming, and offer little in the way of meaningful oversight and insight. We explored the risks and benefits in more detail in recent articles Why Compliance Teams Are Switching To Automation and Six Risks Of Manual Compliance Processes.

There are undeniable cost benefits from implementing compliance automation technology solutions which are attractive to senior managers and Boards. Many firms that adopt these solutions find they can reduce additional recruitment with some even able to downsize their teams. It, also, gives firms the ability to scale their operations without proportionally increasing compliance headcount.

What’s holding firms back?

An increasing number of compliance officers like the idea of moving to a more automated world but some understandable concerns are holding them back.

How can firms find the time and resources to implement new technology and manage their ‘business as usual’ workload? What about the potential reputational damage if the technology fails to deliver the anticipated benefits?

Well, here’s the good news: automating compliance processes is much easier – and more rewarding – than many firms expect. Concerns that are preventing change can be mitigated by following a step-by-step roadmap and with implementation training and support.

Our Implementation Training and Support Programme is particularly effective in mitigating the impact of adopting new technology and often enables clients to start enjoying the benefits within a matter of a few weeks. For example, when firms purchase our Compliance Monitoring solution we take existing spreadsheet(s) and upload these into our system along with your current workflow processes, meaning that from day one My Compliance Centre feels and acts like an enhanced version of your existing Compliance Monitoring Programme.

Our roadmap to automation success

1. Document your processes

You may already have a clear idea of where technology could offer significant benefits. But, if you’re not sure a good approach is to document your compliance processes and for each one:

• What systems you use (e.g. spreadsheets and email)?
• Roughly what percentage of time does your team spend on this process?
• How much of that time relates to routine admin work that could be eliminated with automation (e.g. sending email reminders, capturing information onto central spreadsheets etc.)?
• Who is involved in the process (specific teams, business units etc.)?
• What percentage of time is spent analysing data to produce MI?
• Are there any MI gaps or analyses which is particularly difficult to carry out?

This will help you determine your priorities and the cost benefit of automation. In addition the information gathered will provide an excellent input for the process workflows that will be part of the implementation process.

2. Start small and scale

Don’t take on too much at once. Start with one area, learn from that implementation and scale up once you’ve built confidence in the system and your team’s ability to manage the change process.

Many firms will select a compliance process that delivers a strong benefit and which helps build the case for further investment. For example, Compliance Monitoring, a selection of Risk Registers or, perhaps, File Reviews which are essential to Consumer Duty in many sectors.

3. Define key objectives

Using the information you have from step 1 develop a clear system selection criteria. What features are important to you, for example is it user profiles to govern what people can see and do, is it a particular information to report, is it automation to eliminate a specific admin burden? etc.

4. Select the right system

Make sure the system you select has been specifically developed for regulated financial services firms, rather than something that has been adapted. We’d also strongly recommend you choose technology that’s easy to implement, intuitive, and doesn’t require internal IT support. This would normally involve a cloud-based software-as-a-service (SaaS) system that’s accessible from anywhere and which offers automatic updates and improvements.

5. Understand the implementation implications

Many systems will be labour intensive at the outset requiring you to spend hours entering your information. Others, like My Compliance Centre, will take that burden away from you.

6. Get the right training and ongoing support

Minimal training should be needed if the system is well designed. Yet you will still need ‘hands on’ support to help you avoid pitfalls, manage those first important steps and maximise the return from your investment.

Ready to get started?

At My Compliance Centre, we help firms at every step of the automation journey. Whether you’re just starting to explore automation or you’re ready to implement, contact us for a personalised consultation.

Compliance automation doesn’t just solve problems, it changes how firms think about compliance. It frees up time, reduces risk, improves outcomes, and empowers compliance professionals to play a more strategic role.

If you’re still working in spreadsheets and email, it’s time to ask: Isn’t there a better way?

The answer is yes—and it’s easier to get there than you think.

TWO EXAMPLES WHERE YOU MAY BE ABLE TO SECURE A FAST AND EFFECTIVE RESULT

The post Implementing compliance automation technology – a roadmap for success appeared first on My Compliance Centre.

Ben Mason is no stranger to the challenges. He founded one of the leading FCA/PRA regulatory compliance consultancies and for almost 20 years has been offering advice to financial services firms to help them manage their compliance obligations. He’s seen the risks and consequences of using manual processes and defunct systems. It’s why he’s so passionate about technology and the difference it can make, and what led him to launch My Compliance Centre.

1. Human error – the unavoidable truth

Let’s face it, people make mistakes (I know I do!) — it’s human nature. But when it comes to compliance, even small errors can lead to significant issues. Excel-based processes increase this risk dramatically, from simple typos to data duplication or loss. Each manual input is a potential mistake waiting to happen, and even when you think you have everything under control you get the dreaded ‘file corrupted’ message. It all leaves your firm vulnerable to compliance breaches, regulatory scrutiny, and reputational damage.

2. Lack of real-time visibility

Manual processes and systems like Excel can’t provide real-time visibility. With multiple versions flying around, it’s easy for critical information to become outdated or lost entirely. Compliance teams are left blind to emerging risks, unable to proactively respond, and constantly playing catch-up. This lack of timely visibility makes managing compliance stressful, reactive, and ineffective. It is also far more difficult to be strategic and access timely management information, for use both within compliance and the wider company.

3. Poor audit trails – the auditor’s nightmare

Imagine an FCA supervisor arriving and asking for clear evidence of your compliance. With Excel and email, providing a coherent audit trail is a daunting task. Retrieving historical data from scattered spreadsheets or fragmented email chains is difficult and time-consuming, causing anxiety during audits. It’s easy for key details to get overlooked, raising red flags during regulatory inspections.

Conversely, with fit for purpose risk and compliance technology solutions by definition they should provide a full audit trail, it makes it very easy to demonstrate your compliance, show you are in control – and encourage the FCA to go and spend their valuable time investigating someone else!

4. Limited reporting – leaving stakeholders in the dark

Manual compliance processes often fail to deliver comprehensive, actionable management information (MI). And, if they do, it often needs significant amounts of reworking. Producing meaningful reports from scattered spreadsheets is laborious and prone to inaccuracies. Board members, compliance heads, and operational staff are left without the clear insights they need to make informed decisions or demonstrate strong governance. Stakeholders across the organisation are frustrated by the lack of clear, timely data, making effective oversight and decision-making extremely difficult.

5. Inefficiency and wasted resources

Compliance professionals are highly skilled individuals whose expertise should be focused on managing and mitigating risk — not endlessly updating spreadsheets or chasing down tasks and information. The inefficiencies inherent in manual compliance processes drain resources, limit productivity, and distract talented teams from strategic initiatives. Firms lose valuable time and money simply because their processes are outdated and talented team members can become disillusioned with an employer using outdated techniques.

6. Manual reminders and approvals

A further high-risk waste of time for compliance teams is spending time tracking when tasks need completing by colleagues, or when scheduled reviews, such as annual policy reviews, are outstanding. When done manually it is easy to miss actions not carried out or to fail to remind colleagues of their obligations. An automated system will execute the necessary reminders and compliance teams can simply report by exception to see which tasks have not been carried out.

Technology – A Clear Path Forward

Recognising these risks, many regulated firms are embracing regtech compliance solutions that are designed for FCA regulated firms (and therefore fit for purpose) – like My Compliance Centre. Inbuilt automation dramatically reduces human error; extensive MI dashboards provide instant visibility and offer powerful reporting capabilities; and robust audit trails make evidencing compliance a simple touch of a button task.

Risk and Compliance teams can shift from administrative tasks to strategic management, enhancing regulatory readiness and stakeholder confidence. People often talk about efficiency when mentioning regtech but that’s a small part – it’s really about protecting you and your firm from costly mistakes and regulatory scrutiny.

My Compliance Centre offers a comprehensive range of modules that support modern risk and compliance functions. We help our clients to power their risk and compliance productivity by eliminating routine administration and using extensive MI dashboards to improve the identification and management of regulatory risk. It supports more than 200 legal entities and over 10,000 people use our system.

The post Manual Compliance Processes – Six Risks You Can’t Afford to Ignore appeared first on My Compliance Centre.

Life with Excel – the hidden cost

For firms still using Excel-based compliance processes daily tasks can be both repetitive and frustrating. Compliance teams spend valuable time manually inputting data, updating spreadsheets, and managing tasks through endless email exchanges. Issues like version control and data inaccuracies are common, creating confusion and increasing the risk of costly errors.

Beyond just inefficiencies, these manual methods exact an emotional price. Professionals frequently feel overwhelmed by the monotony and constant worry about potential errors or regulatory scrutiny. The stress of navigating audits without robust processes and clear records can diminish morale, leaving teams drained and anxious.

Manual compliance – why it’s risky

Manual compliance processes introduce numerous risks, primarily driven by human error. Spreadsheets lack real-time oversight, making proactive compliance management challenging. Reporting becomes cumbersome, and providing clear evidence during FCA audits can be difficult. Furthermore, Excel-based processes often fall short in addressing critical regulatory requirements like Consumer Duty, leaving firms vulnerable to scrutiny and potential regulatory action.

Stakeholder management – understanding different needs

Effective compliance impacts multiple stakeholders across a regulated firm, each with distinct needs. Operational staff require intuitive, streamlined processes that simplify daily compliance activities without overwhelming their daily responsibilities. Compliance officers seek clear visibility and accurate, timely information to manage risks effectively. Meanwhile, board members and senior management rely on high-quality, insightful management information that supports decision-making and demonstrates robust governance. Auditors and regulators, on the other hand, need clear audit trails and easy access to evidence compliance.

Excel and email-based processes simply cannot satisfy all these stakeholder demands, often leading to dissatisfaction, friction, and increased compliance risks.

Technology and automation – how does it work?

Fit for purpose risk and compliance technology solutions, such as My Compliance Centre, automates processes and this is changing the game for regulated firms. Instead of struggling with spreadsheets, compliance teams benefit from intuitive, centralised dashboards that provide instant visibility. Task management becomes automated, eliminating the chaos of email-based assignments. Real-time analytics, clear audit trails and evidencing of compliance, and insightful reporting simplify regulatory readiness.

From chaos to control – immediate benefits

Firms that transition from Excel to automation experience immediate improvements. Compliance professionals gain significant time savings previously lost to repetitive manual tasks. This allows teams to shift from reactive firefighting to proactive, strategic compliance management.

Accuracy dramatically improves, reducing compliance risks and audit anxiety. Morale within compliance teams also rises as workloads become manageable, stress decreases, and job satisfaction improves. Automated reporting significantly enhances transparency and efficiency, delivering better outcomes for stakeholders at every level.

A real-world success

One of our clients, a mid-sized investment firm, had a small compliance team of four but was under pressure to reduce that number. However, they were overwhelmed by Excel-driven compliance processes. After implementing My Compliance Centre, the firm saw dramatic improvements – it was able to half its compliance team while improving outcomes for all stakeholders and enhancing the job satisfaction of the team. Additionally, when the FCA came to call they had all the information they needed to hand.

Overcoming automation myths

Despite concerns about complexity, cost, and loss of control, automated solutions like My Compliance Centre are designed to be intuitive, cost-effective, and easy to implement. Technology does not add complexity, quite the opposite, it simplifies processes. Automation does not mean losing control; instead, it enhances visibility, transparency, and oversight, allowing firms to maintain full control while improving compliance outcomes.

Conclusion: your next step towards compliance excellence

Moving from Excel to automated compliance isn’t merely a shift in process; it represents a strategic upgrade that positions firms for sustainable compliance excellence and growth. Automation through My Compliance Centre reduces inefficiency, alleviates frustration, and delivers meaningful insights that stakeholders—from compliance teams to board-level management—truly value.

It’s time to embrace automation, leaving Excel behind and stepping confidently towards a future of compliance excellence.

The author of this article is Ben Mason.

Ben is the founder of My Compliance Centre, a regtech solution which offers a comprehensive range of modules to support modern risk and compliance functions. Prior to setting up My Compliance Centre, Ben established one of the leading FCA/PRA regulatory compliance consultancies and for almost 20 years has been offering advice to financial services firms to help them manage their compliance obligations.

The post Excel to Excellence: Why Compliance Teams Are Switching to Automation appeared first on My Compliance Centre.

Jenny Kenlin, Head of Customer Engagement at My Compliance Centre, explains “client feedback has been at the heart of our Spring ’25 Release. We’ve included new features clients asked for, and used practical system use case examples to inform product design and automation process improvements.”

The Spring ’25 release is the next phase of a major upgrade to My Compliance Centre that started in December 2024 with the launch of an improved FileChecker Module.

According to Eric Addy, Technical Product Owner at My Compliance Centre “We are delighted to launch the Spring ’25 Release on time and with such excellent new functionality. It lays the foundations for a really exciting 2025 product development schedule that’s going to see us incorporate the latest technologies to continue to improve the customer value proposition.”

Key highlights of the Spring ’25 Release:

New and upgraded Compliance Monitoring Module:

• Adopts a risk-based approach to compliance monitoring.
• Allows teams to define their key risk areas and implement a company-wide monitoring programme.
• Makes it clear what needs to be done and by whom.
• Controlled from a central dashboard that offers ‘real time’ management information and makes it easy to track progress and make informed decisions when revising or enhancing monitoring.
• Task assignment automation processes ensure that no task is missed and information is clearly recorded.

Upgraded Registers Module:

• Users can customise their own Registers or choose from a library of over 60 Governance, Risk and Compliance registers.
• Covers compliance, risk and controls, including Consumer Duty and DORA statutory registers.
• Supports the management of complex workflows in relation to risk and compliance processes, for example assignment of responsibilities and approval processes.
• An ‘auto-renewal’ feature allows key records to be reviewed and updated when due without any additional input from the compliance team. Management information dashboard show the status and compliance teams can set their own notification triggers to keep them informed.

Other improvements:

• Updated interface that is more user-friendly and intuitive.
• Expanded and improved Management Information Dashboards.

CEO, Ben Mason commented “too many compliance teams are controlled by their legacy technology. They spend too much time on record keeping, administration and report writing and not enough time interpreting information and decision making. MCC’s upgraded Apps help to address this problem, delivering significant benefits to our clients.”

About My Compliance Centre

My Compliance Centre offers a comprehensive range of modules that support modern risk and compliance functions. We help our clients to power their risk and compliance productivity by eliminating routine administration and using extensive MI dashboards to improve the identification and management of regulatory risk.

My Compliance Centre supports more than 200 legal entities and over 10,000 people use our system.

The post My Compliance Centre Spring ’25 Release appeared first on My Compliance Centre.

As we approach the end of the FCA’s strategic cycle (2022-2025), I thought it would be a good time to reflect on how well they’ve executed their strategy, what regulatory themes have and have not stayed consistent, and where they might be heading next. It’s also interesting to reflect on what is happening at the FCA itself.  

Summary  

Overall, the FCA needs credit. It developed a strategy, and it’s been true to it. Obviously, things can change and it has to adapt accordingly – and recent years have seen some very significant changes, particularly to the lifestyles of the consumers it’s here to protect – but generally it’s been suitably consistent over this strategic cycle. 

The FCA has made substantial progress over the past three years, adapting to new challenges and improving its regulatory framework.  It consistently focuses on its key priorities of consumer protection, market integrity, and technological advancements while its competition objective continues to receive an increasing focus, albeit it with a level of political interference.  

As it moves into the next strategic cycle, expect the FCA to build on these foundations, addressing emerging challenges and opportunities with a proactive and dynamic approach. 

Execution of Key Focus Areas  

First off, the FCA has some clear goals: reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change.  

Consumer protection (now via the Consumer Duty) is always a big focus. They’ve made strides here, with quicker interventions and better consumer trust. The FCA’s own metrics show that awareness of FCA interventions has jumped, which I can accept is a solid indicator that they have made progress. 

Market abuse prevention has also seen real progress. Enhanced data analytics have played a big role here, helping detect abuse more efficiently and improving market transparency.

Do the Annual Business Plans Align with the Original Strategy? 

In short “yes”.  The three business plans (2022-23, 2023-24, and 2024-25 respectively) all align well with the original strategy. 

Moving beyond consumer protection and market integrity, there’s been consistent focus on resilience – both operational and financial. Financial crime will always feature strongly, and the FCA’s approach to preventing it continues to evolve.  The FCA also, quite rightly, continues to enhance and develop its own regulatory frameworks, so that it operates more effectively and more efficiently.  ESG has also grown in significance over the strategic cycle, and this needs to achieve a business as usual status at some stage over the next year or two. 

The FCA, Regulation and Technology 

Of most significance for me, what I think is really interesting is the rapidly advancing role of technology within regulation. It touches everything.  (And, I realise that this is kind of self-fulfilling for somebody that runs a RegTech company called My Compliance Centre to say!) 

Technology touches firms the FCA regulates: through the FCA’s very strong emphasis on operational resilience and because no firm of any real substance can execute on its regulatory obligations without a robust investment in RegTech.   

However, technology is clearly impacting the FCA itself. The FCA has invested heavily in data centres, technology, staff and improvements in its own processes.  The mood music is that their investment in technology is paying off, with better detection both of financial crime and firms in breach of their obligations; the FCA’s own metrics reinforce this. 

Additionally, the FCA has to regulate firms which are using new technologies and apply (very often) quite old regulations to very modern technology, such as AI, machine learning and digital ledgers.  I’ve written many times about how I am amazed that a UK regulatory framework for crypto has not appeared already, but, away from that, it does appear that the FCA is doing everything it can to keep up.  

How Has The FCA Itself Evolved Over The Strategic Cycle? 

Quite a lot. Again, I think the FCA deserves credit. It’s dealing with a dramatically changing environment, politicians who change what they think and their own risk appetites, and a range of other headwinds. We’ve already mentioned technology and how the FCA continues to evolve its own regulatory frameworks.  However, I think the other point that we have to mention is its growth in staffing.  

I kind of think of the FCA as being a 3-3500 per person organisation.  I am out of date. The FCA is now about 5000 people, which (to me at least) just sounds like an incredible number to control within one regulatory body.  I’ve written previously here about the FCA’s budget, and how it compares to other regulators. It’s very difficult to compare apples with apples when talking about this subject but unsurprisingly the FCA’s budget is massive compared to nearly any other regulator, except a behemoth such as the SEC.   

I also think that the FCA has become better at communication.  The most recent business plan is substantially easier to understand than the previous two versions.   

Going Forward, What Can We Expect? 

The regulatory focus for the FCA over the forthcoming period is unlikely to change and surprise any reader.  You know its priorities and it will continue to focus on those.  

However, the way in which the FCA regulates is evolving and that is what you should track. (In addition to the obvious) expect an ongoing focus on operational resilience and cyber security, and the evolution of the FCA’s own risk appetite in regard to all aspects of digital finance and digital markets.  Expect ESG to continue to receive attention while market standards and the FCA’s own opinion stabilise. 

In terms of supervision, expect more early interventions in an attempt to prevent harm, often driven by data and the FCA’s own analytics.  Will this enhanced approach to supervision change outcomes, for example in a reduction in the number and the amount of fines levied? At the time of writing, only five fines have been levied by the FCA in 2024 and from a high of 26 fines in 2022, there were only 12 fines levied in 2023.  Bearing in mind the lead time from misdemeanour through to the completion of enforcement action, I think it’s too early to draw any conclusions, but maybe one positive benefit for firms is that the FCA’s early intervention might reduce the fines that are finally levied. We can only hope. 

The elephant in the room is the political environment. Personally, I’ve had enough of politicians flip flopping their risk appetites, wanting greater regulatory scrutiny one week and then telling the FCA to relax its risk appetite the next week. This challenge is particularly evident in relation to the competition objective.  Executing the competition objective seems challenging for the FCA, particularly given the international dimension which it now has to deal with on top of vacillating politicians. 

And, finally, don’t expect your regulatory fees to go down anytime… that budget just keeps going up!

Author: Ben Mason

Date: 11th June 2024 

The post Evaluating the FCA’s Strategic Execution and Anticipating Future Directions  appeared first on My Compliance Centre.

In this article, My Compliance Centre Founder, Ben Mason, revisits a favourite old subject:  The cost of compliance.  Ben attempts to calculate the cost of compliance with financial services regulations to the UK and asks, ‘is it value for money?’ 

The cost of Financial Services compliance has interested me for a long time.  We know it is a big number – but what is that number?  It is difficult to find a reliable source of information on the subject, so, I have tried to take on working it out. 

My interest in this topic was rekindled by a couple of years ago when the FCA’s announced that for each £1 spent running the FCA £11 of benefit is derived for consumers.  (See P3 here). 

I do think it appropriate that the FCA consider the cost impact of their work – I am just not sure that they do it very well, however.  What I found interesting about the specific calculation mentioned above, is the FCA counted the cost of running the FCA only, not the additional cost to firms of complying with the FCA’s rules.  It feels like they have missed the point. My own experience of dealing with regulators, including highly professional and effective ones, was that they really gave little consideration to the cost of compliance on regulated firms.  In actual fact, under the Regulators’ Code the FCA (and PRA) have an obligation to minimise the cost of compliance to the firms they regulate, and the increasing cost of compliance is a concern for all regulated firms and their service providers.  Funding of the regulators themselves is a cost born by firms, but only one of the costs they experience.   

There are some challenges to working out the cost of financial services compliance to UK Plc. Much of the challenge is the significant differences across financial services sectors: from Capital Markets to Insurance; from Asset Management to Banking and so on.  The dynamics vary by sector very significantly and so assessing the total aggregated cost is a challenge. 

I should emphasise now that this is not the last word on the subject; much more of a ‘starter for ten’ in a debate in which I am interested.  I have made a set of assumptions, a number of which I know are approximations or guestimates, and I am interested in honing these over time.    

Before we get started, what am I expecting? 

According to the government, the UK financial services industry employed 1.1m people and produced £278bn of output in 2022, which seems as good a start as any.   

One very broad rule of thumb is that compliance costs 5% of output.  5% of £278bn is £13.9bn p.a.  

The cost of Financial Services compliance to UK Plc:  Where do you start? 

I am sure that there are many ways of costing compliance and others might adopt a very different methodology.  My approach is to work from first principles and look at it from firms’ perspectives, by aggregating costs across the whole industry.  

On that basis, it seems that the compliance costs might be categorised as the following: 

1. Direct regulator funding. 

2. Compliance staff. 

3. Non-compliance staff spending time on compliance activities. 

4. RegTech (i.e. compliance related systems for AML, compliance management etc.) 

5. Professional services. 

6. Network costs for Appointed Representatives (arguably a branch of professional services.) 

I have kept the scope of my calculation to financial services regulation and not leaked into the cost of financial crime compliance, for example, or Data Protection or IT compliance costs, which are not specific to financial services.   

What assumptions did I make? 

• Financial Crime Compliance I have not considered specifically.  This is laws and rules which sit outside of financial services specific regulation and applies to all industries.  However, if this was included, the answer might be much higher 
• The cost of regulators, in which for convenience I include the ombudsman (FOS) and compensation scheme (FSCS), we know from their published business plans   
• Starting from a population of 1.1m workers in financial services, I have assumed that just over 4% are compliance staff (from LinkedIn and personal experience of dealing with regulated firms) and non-compliance staff spend 2.5% of their time on compliance activities.  These two assumptions, along with the cost of employment, are the primary drivers of UK compliance costs.  (I asked a stockbroker friend how much of his time he spent on compliance, and he said ‘60%!’  He does complain about it a lot and I don’t really believe him!  There are many others whose direct compliance activities will be an hour a week or less) 
• I assumed that the average financial services salary is as stated on reed.co.uk  
• I have relied on the ‘good calculators’ website to advise that doubling a base salary cost is broadly an accurate way of reflecting employees’ true employment cost 
• Ironically, given my current and previous roles, estimating the cost of RegTech and professional services in relation to compliance specifically, I have found the most difficult.  I made a set of assumptions by market sector and ended up with professional services coming in at roughly 20% of the total compliance cost and made a very broad RegTech assumption 
• I’ve not tried to be too clever and include, for example, the costs to firms of specific FCA processes such as burning capital while waiting to get authorised, and so on.  Some costs are too complex to work out 
• I have made an assumption about the cost of being an Appointed Representative, at different levels for different sectors (i.e. Asset Management is much higher than Consumer Credit) and estimate a weighted average annual cost just inside £10k p.a.  (there are circa 24,000 Appointed Representatives in the UK on top of the circa 50,000 directly authorised firms) 

So, what is the answer? 

My calculation is below, and the answer it throws out is that the UK’s financial services compliance cost is approximately £11.5bn p.a. or 4.1% or the UK’s financial services output.  This feels a bit too low, but, by way of reminder, I have not split out financial crime compliance specifically, which some estimates put as much higher than this.  As a cost of general compliance with FCA/PRA rules, this seems about right. 

Is it worth it?  Does this represent good value for money? 

That is a debate that could rage, but my belief is ‘yes’.   

It you tried to add up the cost of the damage that hypothetically would be done if there were no regulations, both to the financial markets and consumers, it seems a no brainer.   

Think of it like this:  When regulation goes horribly wrong (think the credit crunch), or even just has the odd blip (think London Capital and Finance), then the costs are very high.  Direct costs of such failures are in the £bns or hundreds of £mns, very easily.   

If there was no regulations this damage would be ongoing.  Consumers would not be able to buy financial products with confidence.  The capital markets would suffer from ongoing manipulation.  Investment firms, insurers and banks would go out of business much more regularly. Overseas investors would put their money in another jurisdiction.  And just look at the resilience of our systemically important financial institutions (SIFIs) in dealing with the shocks of the last few years.  It seems the lessons of the credit crunch have been well learned, if judged by SIFI’s apparent recent resilience.  (My fingers are firmly crossed as I write that!) 

So, expensive though it is, I believe the cost of regulation is worth paying in return for a more stable country and financially resilient population. 

Can the cost of regulation come down? 

I know many people running regulated financial institutions would feel that compliance should be less costly.   

So, let me finish with a little regulator anecdote.   

I once shared a conference platform with an FCA manager who proudly told the audience that her business was to disrupt my business (which at the time was compliance consultancy).   

This literally made me laugh out loud: firstly, I am sure her business was really to protect consumers and financial markets.  But secondly, the only reason that I had a flourishing consultancy business was the complexity introduced into regulation by legislators and regulators.  It is that complexity that leads regulated firms to seek and pay for professional support. 

And I think that is the answer:  to make any significant reduction to the cost of regulation the authorities would need to significantly reduce its complexity. 

So, where does that complexity come from? 

Various places: 

1. The size of the rule book.  Quite simply: there are lots of rules! 

2. Different rules across jurisdictions multiplies that complexity. 

3. The complexity of regulation reflects the complexity of financial services being provided. 

4. The increased sophistication of ‘the bad guys’ and changes in markets and technology means that last years’ laws and rules are no longer adequate – they have to keep moving on. 

5. The political angle: every time something goes wrong, something new must be done.  The net effect, ultimately, is to load complexity and pressure on firms.  Recent examples being the advent of crypto or the London Capital and Finance scandal which, via the Dame Gloster report has led to an increase in scrutiny from the FCA and more pressure on and cost to regulated firms. 

6. The tension between principles-based regulation and detailed rules.  The market tends to prefer rules based, because compliance can be automated rather than having to take and justify decisions on what the firm is doing.  We generally use the more expensive principles-based approach in the UK. 

When I look at this list, I don’t see anything changing.  Complexity will not reduce; compliance and the associated cost is here to stay. 

And Finally 

And finally: in practice what can you do to reduce compliance costs?   

We agree you cannot do much about the cost of compliance to UK Plc.   

However, what you can do is manage the cost of compliance within your own company.  As for all other commercial functions, a significant part of the answer is to utilise a suitable management system, such as My Compliance Centre, to increase control, reduce administration and ensure costs don’t rise as your company grows. 

Ben’s Calculation of the UK’s Cost of Compliance

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1. For system administrators there are amendments to the way that you set up new users along with some new features and functionality to streamline adding / updating user profiles. 

2. Dashboard Editor allows users to amend the My Compliance Centre homepage to act as an intranet site, linking to external websites or other third-party systems. 

Since the last newsletter we have also made changes to the following modules: 

PA Dealing Register 

We have updated the PAD reports to include broker account and holding reports, managers can send reports for time periods as required and ask staff to confirm: 

• Transactions 
• Broker Accounts Held or Opened 
• Holdings 

Which can be updated / created in the system within the time periods selected. 

Compliance Advice 

Addition of Related Individuals – when submitting a compliance advice request users can link related individuals, meaning that they are advised on requests raised by team members and colleagues and can view the progress of requests. 

When Compliance Advice records are closed, users can now reopen or export the data as required. 

Boards and Committees 

Small UX amends in line with client feedback. 

Emails at Committee Level – Administrators can enable / disable emails per committee, controlling which committees sends out emails when updates are made, or actions are added. 

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Traditional Manual Approaches to Internal Policy Attestations 

Historically, the process of internal policy attestations in financial firms has been manually driven. This approach typically involves a series of steps, including the distribution of policy documents, physical or electronic acknowledgment by employees, and subsequent record-keeping. The primary advantage of this approach lies in its simplicity and directness. Employees receive the policies, understand them, and attest their compliance by signing off. 

However, manual approaches present significant challenges, particularly in scalability and traceability. As firms grow and regulations become more complex, managing attestations manually becomes increasingly burdensome. The process is time-consuming, prone to human error, and lacks efficient oversight mechanisms. Monitoring compliance and ensuring that all employees have read and understood the policies are ongoing challenges. Moreover, manual methods struggle to provide real-time insights into compliance levels across the organisation. 

The Rise of Technological Solutions 

In contrast to manual approaches, technological solutions such as My Compliance Centre offer a more streamlined, efficient, and transparent way to manage internal policy attestations. These solutions typically involve the use of specialised software platforms that automate the distribution, acknowledgment, and tracking of policy compliance. 

Technology-driven approaches boast several advantages. Firstly, they offer scalability, accommodating the needs of growing firms with ease. Automation reduces the administrative burden, allowing compliance teams to focus on more strategic tasks. Secondly, these platforms offer real-time tracking and reporting capabilities, providing a clear overview of compliance levels and enabling quick identification of areas needing attention. Additionally, digital solutions often come with features like electronic signatures, reminders, and interactive learning tools, enhancing employee engagement and understanding of the policies. 

Comparing Manual and Technological Approaches 

When comparing manual and technological approaches, several key differences emerge. The manual approach, while straightforward, falls short in terms of efficiency, accuracy, and scalability. In contrast, technological solutions offer a more robust, reliable, and scalable approach to managing attestations. 

A significant benefit of technology-driven solutions is their ability to integrate with other systems and processes within the firm. For instance, attestation platforms can be linked with training modules, ensuring that employees not only attest to policies but also receive necessary education on them. This integration fosters a more comprehensive understanding of compliance requirements, which is often lacking in manual processes. 

Another advantage of technology in this domain is the ability to customise and update policies swiftly in response to changing regulations. Manual processes, on the other hand, are slower to adapt, posing a risk in the fast-evolving regulatory environment. 

Implementation Considerations 

Implementing a technology-based attestation program requires careful planning. Firms must select a platform that aligns with their size, complexity, and specific regulatory needs. Training and engaging employees in the new system is crucial to ensure its effective adoption. Additionally, the chosen solution should offer robust data security and privacy features, considering the sensitive nature of compliance data. 

Conclusion 

In conclusion, while traditional manual approaches to internal policy attestations have their place, the evolving nature of the financial services industry calls for more sophisticated, technology-driven solutions such as My Compliance Centre. These technological approaches offer improved efficiency, accuracy, and scalability, thereby better equipping firms to meet the rigorous compliance demands set by the FCA. As the industry continues to evolve, embracing technology in compliance processes will be key to maintaining robust internal controls and fostering a culture of compliance. 

The post How to configure your internal policy Attestations programmes  appeared first on My Compliance Centre.

SMCR 

Release of v2 of SMCR to bring further configurability – refer to the spotlight on SMCR for more details. 

Compliance Advice 

Enhanced Export from CAR Register 

• Amendments to the tags and topics section, allowing custom fields to be linked to a particular topic 
• When a user selects a topic for a compliance advice request they are then presented with additional custom questions to ensure the compliance team get the right information 

FileChecker 

We have added hyperlinks to tasks to make it easier for users to complete follow up tasks when looking at the completed file. 

From the completed file, all tasks can now be viewed/completed by clicking on the link as demonstrated below: 

Details regarding autofailed reviews have now been added to: 

• The report – When clicking Show Report, details of autofailed questions are now shown. 

• The Review Page – when a file has been sent for QA, allowing a QA reviewer to easily see where a file has autofailed. 

• In the result column on the FileCheck Register 

Document Manager 

Adding Files / Documents 

• When using folder structures, a document will now be added into the folder you select. 

• For bulk upload, users can select the appropriate folder for upload. 

• Moving Files / Documents 

• Files can now be moved into sub-folders where required. 

PA Dealing Register 

• Small amends to the confirmation reports to include the time stamp within reports / exports 

• Display PDF reports to managers within the system 

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