Posted by Tim Hird on Monday, October 6, 2014 - 00:00
In today's regulatory environment, the compliance burden in the United States isn't expected to let up anytime soon. National regulatory standards were stringent before the financial crisis, and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act created a whole new set of rules for the business sector. The Patient Protection and Affordable Care Act is also generating a list of complex and sometimes shifting mandates and requirements.
This environment appears to be the new normal. Almost all (98 percent) of the U.S. financial executives surveyed for Financial Executives Research Foundation (FERF) and Robert Half’s Benchmarking the Accounting and Finance Function: 2014 believe their regulatory compliance burden will either increase or, at the very least, stay the same in the near future.
So, what can businesses do to get a handle on rising compliance costs and regulatory challenges? The answers vary depending on company size and location: A global company must comply with multiple regulatory bodies compared to what a smaller, regional business faces. However, there are several steps all businesses can take.
Be in the know
To stay up to date on quickly changing industry-specific shifts, make sure your staff is adequately — and frequently — trained. Here are just a few ways to stay informed:
Benchmarking your firm against others of similar size allows you to establish best practices and provide a starting point for better performance.
The American Institute of Certified Professional Accountants (AICPA) has a number of articles, reports and webcasts on a host of industries across a wide range of compliance topics, including tax compliance, attestation requirements, Medicare surtax and audits.
The American Bankers Association offers free online compliance courses for its members’ employees. It also oversees the Certified Regulatory Compliance Manager (CRCM) designation for professionals working in the finance industry.
University of Pennsylvania’s Wharton School and the Financial Industry Regulatory Authority (FINRA) have created the Certified Regulatory and Compliance Professional (CRCP) program for those who deal with securities laws.
BAI, a financial services association, offers up-to-date training courses led by CRCMs, former regulatory examiners and certified risk professionals.
Invest in technology
If you are still manually reconciling accounts, now may be the time to upgrade. Let account reconciliation tools, whether third-party software or those developed internally, automate and streamline the process.
One way for companies to enhance their efforts to meet regulatory demands and curb compliance costs is to use an enterprise content management (ECM) system. Since retaining documents is a key factor in compliance, having a solid document management strategy is crucial. An ECM system can:
Keep track of altered document versions
Establish a history of when documents are accessed, and by whom, to help with audits and evaluations
Streamline business practices by automating processes and activities
Smooth the progression of changing compliance requirements
Permit internal information technology staff to set standards for managing, retaining and disposing of data under preset rules and schedules
Use of technology alone cannot ensure regulatory compliance, of course, but it can go a long way toward reducing the time and energy spent on closing, producing financials and reporting.
Hire expert staff
More companies are seeking to hire skilled workers in fund accounting, regulatory reporting, financial control, anti-money laundering, risk and compliance. But hiring compliance professionals may not be easy. This is one of the in-demand areas experiencing a talent shortage. As a result, salaries are rising — with projected increases around 4 percent for next year, according to the 2015 Salary Guide from Robert Half — and many companies find they must also offer sign-on bonuses and other incentives.
To address the increasing difficulty of maintaining compliance, 59 percent of chief financial officers in a Robert Half Management Resources survey said they’re providing additional training to staff; 57 percent are increasing employees’ workloads. At some point, though, there will simply be too much work for existing staff to shoulder, and hiring more full-time staff or bringing in consultants with subject-matter expertise is likely to be necessary.
Yes, compliance costs are rising, but there are several ways to manage those expenses. Adding personnel and investing in technology may require financial resources but will likely be money well spent.
This blog post first appeared in the Corporate Finance Insider newsletter from the American Institute of CPAs (AICPA).
NOTE: This blog post was updated Oct. 14.