Over the past few years, compliance has become an increasingly expensive and time consuming practice for financial services firms. Unfortunately, this burden is expected to intensify.
According to Reuters, the rise in compliance spend has been consistently rising over the past few years (63% in 2019, 61% in 2018...) and many expect this theme to continue. However, this is no longer just about meeting the regulations.
The yin-yang of reputation management: conduct and compliance
Stronger regulations and greater transparency have helped remove some of the cowboy practices from financial services but regulations have increasingly come to focus on conduct. Effectively, instead of focusing on what they can’t do, business leaders are being encouraged to explore what they can do.
A huge part of this is the rise of ESG and such organisations are increasingly being held accountable for the standard of their corporate governance. Yes, a firm may have met all the regulatory standards it needs to meet but how has it gone above and beyond?
For instance, the Financial Reporting Council recently introduced the new UK Stewardship Code 2020. Aimed at asset managers and asset owners, this revision of the 2012 code is aimed around 12 principles to encourage such organisations to encourage greater standards of corporate governance and effective stewardship.
Meanwhile, regulators are increasingly putting frameworks in place to foster an environment where higher corporate governance standards are created.
"You can't guarantee a change of culture. It's not up to the regulators to change the aspect of governance, it's up to shareholders to decide if they are happy with the governance or nor." Philippe Houchois, analyst at Jefferies Financial Group, discussing the reformed compliance culture at Volkswagen
Strategies to avoid reputation damage
From emission scandals to poor diversity standards, businesses are being increasingly held to a higher standard. And while compliance teams may be working non-stop just to meet the regulations their organisation is set, the role this plays in corporate governance and external reputation management is unavoidable.
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Regulatory breaches can of course mean poor corporate governance and severe reputational damage (as see whenever a large bank or financial services organisation is penalised for misleading or mistreating customers). This has made more organisations throughout financial services invest heavily in reputation management, proving to shareholders (both existing and prospective) that they run a tighter ship.
A big part of this is to review your conduct and consider what initiatives you want to put in place to improve practice and minimise any future potential risk to your reputation. Going above and beyond when it comes to accountability over your brand can play a vital role here.
"We expect to see an increasing focus on ethics, culture and principles, and progress towards functions which are enabling change, acting in an advisory capacity to the business and providing a source of competitive advantage." 'New horizons: Compliance 2020 and beyond', by Deloitte
So how can firms take that vital extra step?
How the MirrorWeb Platform can help
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With the MirrorWeb Platform, financial services firms are going beyond compliance and demonstrating how seriously they take accountability.
MirrorWeb's customers now have accurate and immutable records of their websites and social media which are searchable, can be replayed and have the potential to be fully-automated.
Having a fit-for-purpose archiving solution, could be the difference between rescuing a firms reputation through good conduct and compliance, or instead, severely damaging brand reputation with huge fines inbound from the regulator.
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