Role and expectations for compliance are on the move

September 30, 2019

The role of compliance work in corporations is shifting. Both the knowledge required from a compliance officer in their tasks and the variety of businesses finding themselves responsible to comply to evermore complex sets of rules are expanding vastly. Legislative initiatives related to corporate ethics and compliance are numerous and do not today only touch financial sector.

The whistleblower directive the European Parliament has accepted earlier this year is an illustrative example of this: an EU-wide obligation for companies to enable safe reporting channels for revealing breaches in a wide range of areas including public procurement, financial services, money laundering, product and transport safety, nuclear safety, public health, consumer and data protection. The number of organizations affected is tremendous and includes actors as well with robust and refined compliance programs and trained personnel to effectuate it as industry or product-oriented businesses with less mature take on compliance and governance, or, actually, experiences in having needed them, either.

Fragmentation of compliance with new businesses and evermore specialized sub-genres of legal and technical requirements puts the compliance profession at a crossroads. The regulative ecosystem businesses operate in gets more complex and more specialized as new expert areas come up. Securities markets, trade compliance, market abuse and the above-mentioned protection of whistleblowers, to name but a few, are areas where the substantial legal requirements are multifaceted.  To add to their complexity, they often are interpreted and implemented satisfactorily only by a focused exercise of following market practice and understanding the dimensions of own business.

In order for answering to market needs in a world of ever-growing complexity, compliance functions would better offer solutions made easy, reliable and tangible, instead of absorbing in itself the complexity of all regulatory substance. In the face of demands to companies to put focus in their development of products and services and designing of work processes in the first line of defense, compliance function has the momentum to grow into the role of advisor and quality assurer. Taking on the task of making the complex straight-forward will bring compliance functions closer to thinking in terms of governance and standardizing compliance functions with help of packaged products, measurable controls for business compliance and other ways of providing the business with predictable guidance.

The pace for growth of the regulatory material is best met by compliance understanding that focuses on the solidity, predictability and safety of the method rather than the content. The content, the substance-matter of the multifaceted legal requirements and regulatory guidelines is baked into the first line of defense processes and controls whereas compliance as a second line function can bring value in ascertaining the safe and governed application. High hopes are put in machine learning and artificial intelligence in supporting the smooth running of daily tasks that often include large amounts of data. When applying new technologies in efficient design of compliance processes, the meaning of understanding and applying ethical guidance grows. This is likely to become a bigger part of a compliance function’s role and the field compliance professionals are expected to be able to advice in. Integrity-driven and focused way of doing compliance steps up in importance when the tools move from manual and based on individual consideration to technology-assisted and standardized.

Written by Anna Nousiainen and Holger Pauco-Dirscherl

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