Compliance Departments Becoming Integral to Firm Operations, Strategy, and Reputation

In 2016, Aite Group finds 68% of firms say that upholding the firm’s reputation is the most important function of a compliance department.

Boston, December 7, 2016 - In a post-global-financial-crisis world, lackadaisical attention to compliance standards is no longer acceptable. This change in internal and external attitudes toward the importance of the compliance function is readily evidenced both anecdotally and in the headlines, with more than a few prominent firms experiencing business-ending regulatory censures and seeing top executives face prison time. Across global market centers, the role of compliance within the firm has shifted from a mundane administrative function to an integral part of firm operations, strategy, and even identity.

“While regulatory fines are the most tangible and quantifiable result of a failure in the compliance process, firms overwhelmingly agree that protecting the firm’s reputation is the actual core function of the department,” says Aite Group senior analyst Danielle Tierney.

Aite Group finds that approximately two-thirds of firms agree that the task of protecting a firm’s reputation is the primary objective of the compliance function. Damage to a firm’s reputation can carry with it vast intangible costs—not only in lost business but also in increased susceptibility to further regulatory inquiries.

Echoing the increased importance of compliance for maintaining firms’ reputations, most heads of compliance report directly to firms’ highest levels—primarily the CEO or the board of directors. Aite Group finds that in 2016 versus 2015, twice as many respondents indicate that their department leaders report to the board of directors, suggesting that compliance departments are becoming more institutionalized and autonomous in their decision-making

Aite Group’s latest report, Trade Surveillance and Compliance Culture: Moving on Up, discusses the evolving role of the compliance department as a key function within the firm, with analysis based on information gleaned from qualified and experienced respondents during two years of in-depth studies. Subjects explored include drivers of compliance evolution, compliance departments’ role within firm hierarchies, interdepartmental collaboration trends, and relationships between compliance and the front office.

To request an interview with Danielle Tierney about this topic, please contact us at pr@aitegroup.com

About Aite Group:
Aite Group is a global research and advisory firm delivering comprehensive, actionable advice on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, insurance, wealth management, and the capital markets, we guide financial institutions, technology providers, and consulting firms worldwide. We partner with our clients, revealing their blind spots and delivering insights to make their businesses smarter and stronger. Visit us on the web and connect with us on Twitter and LinkedIn.

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