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Regulatory productivity

Is there an answer to the rising cost of compliance?

Regulatory expectations have increased for all financial services institutions (FSIs). Even as penalties are levied for non-compliance with existing rules, new rules continue to be released. And one thing is clear: The cost of compliance is a heavy burden.

The cost of compliance

The cost of compliance and risk mitigation over the last eight years has jettisoned almost all discretionary funding available to firms. Compared to pre-financial crisis spending levels, operating costs spent on compliance have increased by over 60 percent for retail and corporate banks.

Policy makers, regulators, and shareholders are looking for firms to not only meet new regulatory requirements, but to ensure the effectiveness of all that has already been built. These increasing compliance-related cost pressures, coupled with low interest rates, a slow economy, and stagnant revenue growth, have not resulted in significant downward pressure on returns.

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A team effort

Complying with regulations is becoming an increasingly complex, cross-functional effort. It’s no longer a domain of just the chief compliance officer or chief risk officer. Other chief experience officer (CXO) roles have critical parts to play in the planning and implementation for regulatory compliance.

Many CXOs across institutions are looking for opportunities to dramatically improve regulatory productivity (i.e., meet compliance requirements at lower costs). The focus on traditional cost reduction operations have yielded some relief, but now many CXOs are looking at emerging technologies for transformation.

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Challenges and opportunities ahead

Emerging technologies, such as blockchain, robotic process automation, and cognitive computing, seem to offer significant transformative potential in operations and regulatory productivity. Regulators are also fostering environments that encourage the use of these technologies by firms. However, many organizations are struggling to leverage them in the most efficient manner.

The challenges and choices can seem overwhelming. Where should you start? Who should lead? What technologies offer the most promise? Will the transformed compliance efforts meet with regulatory approval?

Navigating these is akin to piecing together a complex puzzle without the picture that shows the final result. Organizations will have to involve multiple functions, processes, and technologies, and ensure that the technologies involved are well controlled and don’t introduce unintended or new risks into the environment.

To learn how Deloitte’s framework can help you assess your options and put the puzzle pieces together, download our full report on the future of regulatory productivity.

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