BSG (UK) Thinking strategically about compliance version 1

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BSG (UK) Thinking strategically about compliance version 1

  1. 1. INSIGHTSAre you thinking about your Compliance initiatives strategically ? From surviving to thriving Compliance related fines totalled more than $3.5bn in 2012. Financial sector compliance has moved from the business pages to the front page. LIBOR, regulations, capital adequacy, anti- money laundering and other industry terms are becoming discussed as regularly as last week’s football results. We’ve observed in many clients that when people speak about compliance it tends to be reactive – a problem has been identified and it needs to be fixed. Businesses tend not to see compliance in a strategic fashion as it has traditionally been a cost centre that has not contributed to the bottom line. A seismic perception shift needs to occur – compliance needs to be seen as a strategic opportunity. Surviving, th riving and playing the long game The FSA has published a short guide that assists organisations with selecting compliance consultants1. The first aspect addressed is how one should go about establishing one’s needs. The questions asked can be summarised as follows:  Do you have an area of concern or weakness and require a compliance audit?  What level of support do you require or are there specialist areas with which you require help?It is essential to consider We believe that there is more that should be considered. Not only is it essential to understand whether a compliance why the organisation has any need for a compliance engagement, it is also essential to consider whether there are broader strategic opportunities that can be created. initiative presents a broader strategic Why am I in this position? opportunity  One of the reasons may well be because you have an area of concern or weakness, a reactive need (Surviving) …  … but it may be because new legislation is on the horizon, or you have a desire to introduce rigour into your processes. These two aspects (and many others) move organisations from the reactive to the strategic space, and the compliance initiative becomes an opportunity rather than simply reducing risk (Thriving). Where do I want to be after this compliance initiative?  Reactive compliance initiatives aim to make sure that an organisation is compliant with the relevant regulatory body. The main aim is to keep your trading license (Surviving).  Strategic compliance initiatives allow for the creation of competitive advantages that enhance both market and customer reputations. It’s about creating new opportunities to allow your business to take the initiative rather than to wait and defend (Thriving). Well known leadership author Stephen Covey talks about different quadrant behaviours 2. An analogy for quadrant behaviours is the difference between putting out fires (quadrant 1, Q1) and mitigating the spread of fire by cutting firebreaks (quadrant 2, Q2). Q2 activities feel less urgent but, more often than not, reduce the need for Q1 activities. The same analogy can be applied to how budget and effort is allocated across compliance projects. 1 - http://www.fsa.gov.uk/smallfirms/resources/factsheets/pdfs/factsheet_consultant.pdf 2 - Covey introduces this idea in The Seven Habits of Highly Effective People & details them further in First Things First Business Systems Group (UK), Registered in England No. 6150570, 230 City Road, London, EC1V2TT www.bsgdelivers.com // @bsguk This document can only be reproduced in its entirety. This document does not constitute any form of advice from BSG (UK).
  2. 2. INSIGHTS Are you thinking about your Compliance initiatives strategically? Firefighting is merely Our observation is that currently a lot of compliance initiatives are Q1 activities – projects to about surviving, there’s “fix up” process gaps, gather new pieces of data, etc. This short-term approach ticks the current box, but doesn’t structurally improve the organisation’s ability to meet changing no long-term structural compliance regulations. A “thriving mindset” demands that we spend more time on Q2 benefit activities to introduce flexibility into the overall business system, allowing the organisation to be better prepared to meet changing compliance regulations. Get ahead of the game – start taking those strategic opportunities Thriving demands It is an unfortunate reality that budget for compliance initiatives is typically allocated to Q1 thinking about the type projects, taking a surviving mindset. If this budget were to be, at least in part, dedicated towards more Q2 initiatives, then problems will be spotted early enough for their impact to be future and preparing mitigated and similarly, opportunities will be identified soon enough for them to be exploited. accordingly It is a significant challenge to ensure that a Q1 thinking culture doesn’t become pervasive in responding to the ever-changing compliance landscape. Convincing board colleagues that a compliance initiative represents an opportunity may be difficult, but will ultimately prove rewarding. Building a case for a broader perspective can be done by adopting a typical business analyst’s process worldview. Take a step back and look at the whole situation, at both the upstream and downstream implications of the problem. Conduct root cause analysis to get to grips with what is manifesting itself in the shape of the problem. Make this insight part of the information pack provided to decision makers. Inform them that in fixing the current problem, if we also analyse certain other areas we will be able to identify inefficiencies and thus improve overall profitability in a number of ways. Driving forward into Q2 Q1 activities will never go away, but we feel that spending 100% of your time on these activities is not sustainable. Q2 behaviour generates understanding, perspective and clarity, likely resulting in fewer crises. In short, fortune favours the prepared. Organisations that move their compliance activities towards this quadrant will generate more benefit from compliance spend making it easier to both take advantage of business opportunity and respond to new compliance requirements. Make no mistake that moving from surviving to thriving will require a cultural shift within your organisation. For years organisations have been reacting to compliance changes. By driving this cultural shift you will notice that your organisation will become more visionary and less reactive, and in today’s ever-changing compliance landscape being on the front foot can only be a good thing. A long term culture of proactively analysing the regulatory landscape will allow companies to continually innovate in this space and not only be first to implement regulatory compliant processes but also the first to market with the most rigorous, efficient and effective processesAt BSG we are passionateabout design and delivery BSG (UK) of change that makes a We’ve observed that compliance projects are often maligned as mere tickbox exercises. By difference for our contextualising the projects and understanding the opportunities they offer, we believe that customers and their compliance is both interesting and important. We talk about this in more detail at customers. http://bit.ly/cancompliancebeinteresting A collection of BSG (UK) BA practitioner www.bsgdelivers.com // @bsguk insight can be found at +44 20 3416 6400 http://bit.ly/bsgukinsight info@bsguk.co.uk Business Systems Group (UK), Registered in England No. 6150570, 230 City Road, London, EC1V2TT

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