Compliance spending priorities change with remote working

Many financial service firms are still struggling with how to react to longer-term shifts in working conditions although remote working is likely to be a more embedded part of an institution’s fabric in the future, according to Greenwich Associate’s 2020 Global Compliance Study.

This is even true for traders who have been the most reluctant to leave the office desk. Two thirds of the 210 compliance professionals polled across the industry believe this group will be allowed to work from home in some capacity in the post pandemic world, with only 4% disagreeing.

It is not surprising against this backdrop that compliance came into its own. Regulatory pressures have already given the function a boost, but Covid-19 took it to a new level as lockdowns ensured and remote working took hold almost overnight.

This is reflected in the study’s findings which showed 74% of organisations consider compliance standards highly important, up from 11% last year. This topped the level reached in 2018—during the MiFID II implementation era.

At the same time, the share of participants “strongly agreeing” that their compliance department is influential in firm-level strategic discussions climbed to the acme of 59%.

“The good news is that compliance professionals and technology platforms were up to the task by ensuring the market’s smooth functioning during the market’s biggest test,” said Danielle Tierney, senior advisor at Greenwich Associates Market Structure and Technology and author of the report.

She added, “Even for the few firms determined to fully return to a pre-pandemic office presence, maintaining a work-from-home capability will be essential since US and European regulators have clearly communicated the necessity of a flexible infrastructure conducive to working remotely.”

The challenge is predicting when the pandemic will end. “Speculation persists around how long pandemic conditions will last and whether shifts in best practices will be permanent,” said Tierney. “Thus, budget holders are wrestling with allocations—particularly amid the cash-crunched environment of economic recession.”

The study found that investment priorities shifted for compliance departments, as they did for nearly every business and individual. For example, it noted that “core platform investment unexpectedly dominated firms’ surveillance expenditures in 2020, with budget for vendor technology expected to remain strong in 2021.”

Moreover, as firms continue to scramble to address short-term needs, permanent investment in source coverage and alert integration is no longer up for debate. In other words, this will lead to greater spending in data quality improvement and data source integration as well as communications coverage.

The study also said that while budget priorities may have shifted away from emerging technologies this year to basic infrastructure, it is only a temporary move. Artificial intelligence and natural language processing are predicted to re-emerge as key priorities in 2021.

©BestExecution 2020

 

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