We are all aware of the tragedy of Sisyphus, cursed to roll a boulder uphill, only for the boulder to roll back down the moment he neared the top of the hill, resulting in him repeating the process ad nauseam. Banks and financial institutions face a similar situation when it comes to managing compliance manually. They keep investing resources into the process but never seem to get the result that they need.
What Makes Manual Compliance Management Such an Impossible Task?
Managing compliance is something that banks have been doing for almost a century at this point, so what makes it so difficult? The problem isn’t increasing compliance levels – the problem is increasing compliance levels while staying within budgets. Compliance is costly and the costliest part of compliance is the personnel. Personnel costs account for more than 70% of total compliance costs, larger than every other compliance cost combined, aside from when a bank faces a heavy penalty for non-compliance.
We can tell you Why Your Business Needs Regulatory Compliance Software.
Why are compliance personnel costs so high? We go into this in a bit more detail in our Costs of Compliance white paper, but to summarize it the costs of compliance are so high because compliance requires highly qualified people. Compliance professionals need to have in-depth knowledge of regulations and laws, real-world experience in banks to ensure that they can enforce compliance practicality, along with specialized education related to banking and compliance. Compliance professionals are highly sought after and their importance is only increasing, which further increasing the costs of increasing compliance professional.
Why Increasing Compliance Employees Does Not Provide the Desired Results?
A seemingly simple solution to compliance issues is to increase the number of compliance employees within the organization. Doing is a recognized way of improving compliance in both speed and efficiency. The problem is on the financial side of things. Does it make sense to improve compliance by making it so expensive that the business now loses more money than it did before? Imagine that a bank faced fines of $500,000 dollars for non-compliance in a year. They want to bring this number down and eliminate non-compliance fines completely if possible.
Now let’s look at the cost of hiring a compliance officer. According to PayScale.com the average pay of a compliance officer is $66,974 per year, with salaries in bigger banks being around $80k. This is just the pay – the actual cost of an employee is much more than just their salary. The company must also provide insurance, create space for them to sit within the office, and must also buy among other things furniture, computers, and supplies. The $66k figure easily reaches $100,000 once all costs are factored in.
This means that if the business adds just 5 more employees to their compliance department, they will now be spending more money on enforcing compliance than they would have to spend for non-compliance.
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This is what makes compliance a Sisyphean task for banks. To eliminate the fines that decrease their profits they need to hire more compliance employees, but then the pay for those added employees starts decreasing profits too. This leaves banks right where they started. Then, to bring the profits back up they can decrease those expensive employees they hired, which again decreases compliance levels.
Sustainable Compliance Solutions Require Modern Technology
We can see that adding more compliance personnel is not a sustainable solution, so what is? The simple answer is technology. GRC technology allows businesses to increase compliance performance without needing to add more compliance employees, which is exactly the solution banks are looking for. While yes, implementing compliance technology does also have a cost attached to it, the cost is much lower than the cost of adding more employees.
Go in more depth with our recent blog post The Future of Compliance Solutions.
The low costs are a direct result of cloud based solution. Solutions that need to be installed on your own systems are expensive because they require dedicated hardware resources and regular maintenance. Cloud based solutions like Predict360 are maintained by the providers and can be accessed through all compatible web browsers.
If you want to improve the compliance levels of your organization while at the same time reducing the costs of compliance, then you’ve come to the right place. Get in touch with our team to get a demo of Predict360, the American Bankers Association endorsed compliance solution, and also arrange free trial access so you can test the compliance management system yourself.
About the Company
360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.