The level of regulatory scrutiny placed on financial institutions has increased dramatically in recent years, and compliance is a top-of-mind concern for management. Rightly so, as noncompliance can be incredibly costly in terms of potential financial and legal repercussions, brand and reputation damage, and loss of market share.
From improper segregation of duties for employees accessing financial systems to the tiniest leak of sensitive data, many things can come under scrutiny during a regulatory compliance audit for a financial institution. Senior executives and managers therefore need to ensure all staff members are up to speed on what can — but must not — go wrong.
Here are four suggestions to help your organization be at the ready for a regulatory compliance audit, and better able to stay on target with compliance requirements:
1. Provide the necessary staff training
The regulatory landscape for financial institutions is constantly evolving. Even the well-established Sarbanes-Oxley Act (SOX), which celebrated its 13th birthday this summer, is still changing due to shifts in how SOX compliance is governed and regulated.
Your team needs to understand how dynamic regulations can affect — and potentially disrupt — day-to-day business. More important, they must understand what they can do, in their specific roles, to help the organization ensure it stays in compliance and prepare for an audit.
Offer the training your professionals need to stay up to date on current requirements, and establish a communication framework for transmitting the newest information. Then, periodically quiz them for comprehension through one-to-one and broader staff meetings.
2. Conduct regular ‘internal audits’
Don’t expect the internal audit team to handle all aspects of making sure the organization is in compliance. Conduct your own “internal audit” in your department on a regular basis to help identify any potential noncompliance issues — before auditors do.
Companies that don’t perform these proactive spot checks often cite lack of resources as an obstacle. But the costs of failing a regulatory compliance audit are likely to be far greater than devoting time and staff to confirm the organization isn’t making any missteps. As the old saying goes, an ounce of prevention is worth a pound of cure.
If you go through a regulatory compliance audit, these assessments will ensure you are better prepared. You will have gained insights into the areas of the business in question and know how to address questions that arise.
3. Partner with your compliance team
In addition to having ongoing dialogue with internal auditors about compliance, build a good working relationship with your compliance manager or team. They will know where to look for potential pitfalls. They can also recommend ways to tighten controls and what best practices to implement. Their expertise also can go a long way toward reducing compliance costs for the business.
Many organizations, in an effort to keep those costs in check, are working to reduce the number of key controls for internal control over financial reporting (ICFR), for example. According to the Benchmarking the Accounting & Finance Function report for 2015, published by Robert Half and Financial Executives Research Foundation (FERF), 79 percent of U.S. firms report that they are now using no more than 100 key controls for ICFR.
4. Invite a different perspective
No matter how vigilant — and diligent — your team may be about helping the business to maintain regulatory compliance, blind spots are always a risk. Financial institutions are complex organizations. With so many moving parts, important details can be easily overlooked, and problems can multiply without anyone noticing — until it’s too late.
Consider bringing in outside compliance experts who can offer an objective evaluation of your operation. Regardless of the size of your organization, dedicated consultants can help you adhere to all relevant compliance mandates for the financial services industry. In addition, they can recommend ways to improve compliance processes and ensure that financial systems are up to date and sound.
What does your organization do to be prepared for a regulatory compliance audit? Share your strategies in the comments.