Compliance spending shifting to new technologies as threat landscape expands

Faced with growing threats such as cyber fraud, cryptocurrency, quantum computing and open banking, financial institutions expect to increase their compliance investments over the next two years as they seek new approaches to strengthening compliance functionalities.

Based on a survey of 150 compliance executives at financial services institutions, Accenture’s fifth annual compliance risk report, Comply and Demand, found that 89% of respondents said they expect to increase their compliance investments over the next two years. The study revealed that the top spending priority for compliance officers over the next 12 months is technology transformation, cited by 24% of respondents. Investments will be led with the implementation of new surveillance tools, with half (49%) of respondents planning to deploy these technologies this year.

The report notes that to ensure returns on technology investments, companies will need to evolve the skillsets of their compliance employees, as 76% of respondents acknowledged a skills gap between their group’s current compliance skills and those required to apply insights through data and analytics and to drive technology innovation. Having access to the right data to identify risks will be another key component, as one-third of respondents (31%) cited data quality issues as a significant barrier for transforming the compliance function over the next three years.

When asked to rank the top three compliance risks that will be the most challenging to manage within the next year, respondents most often cited cyber risk (21%  of respondents). Cyber risk was also the most challenging to manage three years out. Interestingly, data and information risk and privacy risk were among the top three most challenging risks to manage within the next year and three years. This suggests that the General Data Protection Regulation could be putting a much-needed focus on the importance of customers’ data privacy and security.

The percentage of respondents who cited conduct and culture risk as a top-three concern dropped noticeably, from 27% in last year’s survey to only 7% this year, while only 14% cited product risk as a top-three concern this year. Given the ongoing incidence of corporate misconduct, mostly related to mis-selling and unethical behavior, and the proliferation of virtual currencies, these findings could indicate that the compliance function is losing sight of key risks and less prepared to respond proactively.

For the report, Accenture surveyed 150 compliance officers at banking, insurance and capital markets Institutions across 13 countries in North America, Europe, Asia-Pacific and South America: Australia, Brazil, Canada, China (Hong Kong), France, Germany, Italy, Japan, Singapore, Spain, Switzerland, the US and the US. The online survey was conducted between December 2017 and January 2018.