How regulatory challenges are affecting financial services industry


By Ken Tysiac

Regulatory compliance challenges are widely expected to create heavier workloads and spur hiring in the financial services industry, according to a new survey of executives in seven countries.

Governments, regulators and accounting standard setters have enacted and implemented numerous new rules in recent years in response to the recent financial crisis. The financial services industry has been a target of many of these new regulations, which executives report difficulty managing.

Almost nine in 10 respondents (88%) said they are challenged in managing regulatory change, according to a survey of 1,100 financial services executives conducted by staffing services firm Robert Half International. Executives from Canada, France, Germany, Hong Kong, Singapore, the UK, and the United States participated in the survey.

“The financial services industry is clearly undergoing great change,” Neil Owen, global practice director of Robert Half Financial Services, said in a news release . “Executives must balance compliance demands in equal measure with profitability goals.”

One of the biggest challenges posed by new regulations: rising workloads. Almost two-thirds (66%) of respondents expect workloads to increase as a result of regulatory changes.

The methods financial services firms are using to handle rising regulatory compliance duties include:

  • Hiring. About one in three (33%) of executives said they plan to increase their number of interim staff to handle the additional duties, and 23% said they plan to hire full-time workers.
  • Using an integrated approach. Firms are meeting regulatory challenges with a more holistic approach across the governance, risk and compliance functions, according to the report. More than two-thirds (68%) of respondents said integrated governance, risk and compliance programs have been effective for their businesses.
  • Leveraging technology. Big Data is helping alleviate risk across organisations by providing timely information that aids firm management in making decisions quickly and effectively, the report says.

The regulatory pressures depicted in the survey mirror those that emerged in the AICPA Business and Industry Economic Outlook Survey for the second quarter of 2013. In that survey, 60% of CPA executives across all industries said their current employees have been required to produce more or work more hours as a result of increased regulatory pressures.

Thirty-six per cent of CPA executives said their company has used technological advancements to increase efficiency in fulfilling regulatory requirements. One-third said they have outsourced work to outside contractors or vendors to handle the change, and one-fourth of respondents added staff to help manage the extra work.

“It’s not getting easier,” said  Don Kluthe, CPA, CGMA, president and chief operating officer of US-based home mortgage provider AmeriFirst Home Improvement Finance. “They continue to layer added regulatory kinds of burdens. It seems like every time there’s a change made, it’s not to make it easier. It’s to make it harder or to add another layer of regulatory oversight in some fashion.”

According to the Robert Half report, many of the recent regulatory changes in Asia have been made in reaction to changes made in the US and Europe. Talent shortages will result for financial services firms in Asia, the report said.

Meanwhile, respondents expected budgets in the UK to be largely unaffected by regulatory changes, the report said. This may be because firms already have made substantial progress adjusting to new rules and expect costs to fall, according to the report.

Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.

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