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Survey: Compliance Officers Expect Personal Liability to Increase in 2014

Jaclyn Jaeger | March 13, 2014

The growing numbers of senior managers facing enforcement actions by regulatory bodies all around the world are leaving compliance officers themselves feeling quite vulnerable these days.

That's according to the findings of a recent study by Thomson Reuters, which surveyed more than 600 compliance professionals at financial services companies across 71 countries. Respondents represented firms from across all sectors of financial services, including banks, brokers, insurers, and asset managers.

According to the study, 53 percent of respondents said they expect their personal liability to increase in 2014, with 17 percent expecting a significant increase. Another 43 percent said they expect no change.

“Compliance leaders are being held to increased accountability amid an ever-increasing volume of regulation,” says Chris Perry, managing director of risk for Thomson Reuters. “In this time of heightened scrutiny, it has never been more important that boards support the compliance function and its senior leadership with the budget, resources, and tools to help ensure transparency, trust, and a lasting change in behaviors throughout firms.”

The perceived increase in personal liability may explain, in part, why 66 percent of respondents said they anticipate the cost of their compliance staff to increase in 2014. According to the findings, 21 percent said they expect costs to be “significantly more” in the coming year, while 41 percent said “slightly more.”  

“The competition for senior, experienced compliance officers is likely to be heightened in the coming year as firms as well as regulators seek to increase their in-house skills,” the report stated. Greater competition for skilled compliance professionals will push salaries up, “and give highly-qualified compliance officers an incentive to move on if they feel they are not being appropriately rewarded at their current firm.”

As a result, compliance budgets are expected to rise accordingly. “The results year-on-year suggest that not only are compliance salaries rising across the board, but also that the size of compliance teams may well also be growing,” the report stated.

Sixty-four percent of respondents believed their total compliance budget would increase in 2014, with 20 percent expecting their budgets to be “significantly more.” In addition to greater competition for compliance professionals, another driving force behind the increased compliance budgets includes the “sheer volume of anticipated rule changes,” including those coming out of the Dodd-Frank Act, the report stated.

Accordingly, the number of compliance teams in U.S. companies spending more than 10 hours a week tracking and analyzing regulatory developments has nearly doubled in the last year, from 13 percent in 2013 to 25 percent this year.

All signs point to 2014 being another challenging year for compliance officers and their companies. For compliance functions to effectively tackle these challenges, they'll need adequate budgets and resources that reflect the cost of hiring today's highly-skilled compliance professionals in order to thrive in the highly regulated world of financial services.