Compliance & Customer Experience: Top Compliance Challenges for APAC Financial Institutions

This is the second in a four-part blog series exploring opportunities and challenges faced by Asia-Pacific financial institutions in relation to two, often conflicting, organizational imperatives: regulatory compliance, and customer experience. Part one, Compliance & Customer Experience: Exploring APAC’s Regulatory Compliance Context, explored the current Asia-Pacific financial institutional regulatory environment and the factors which have contributed to the current state.

Organizational Compliance Challenges: Current-state

PwC has produced an excellent resource titled Financial Services Viewpoint: Managing Compliance and Operational Risk in the New Environment, which explores the organizational challenges financial institutions face internally to manage the regulatory convergence in the Asia-Pacific region.

The key challenges outlined are:

• Compliance functions are fragmented due to piecemeal development over time. This means that across the organization there are often varying processes for risk assessment, testing and reporting—adding to the complexity and potentially leaving holes in the system.
• Roles and responsibilities are not defined well. The scope of the compliance function is not defined in relation to Line of Business’ (LoB) role. This means that the responsibility for managing emerging sources of risk is not clear,  leading to duplication of resources and effort, as well as inefficiencies and increased risk if new risks are missed or unassigned.
• Region-wide shortage of appropriately skilled compliance professionals.
• Customer experience programs are disconnected from compliance risk programs, so the impact of compliance activities on the customer is not treated as a priority, or possibly, is not even known.
• The Line of Business reporting not standardized, meaning cross-LoB insights cannot be drawn.
• Organizational structures supporting the compliance and operational risk programs are siloed and inconsistent across the LoBs.

The key themes emerging from these challenges are a lack of coherence and standardization across LoBs in terms of how existing and new regulations are integrated into operations.

The impacts of this on Asia Pacific financial institutions include the usual suspects—gaps in compliance activities and slow responses to new regulatory requirements. This is most likely due to the complexity of navigating an already tangled web of regulatory interactions combined with Asia Pacific’s shortage of appropriately skilled compliance professionals. The risk of hefty penalties, litigation, and reputational costs when in breach are also at the top of the list.

These are the fundamental reasons why internal compliance systems are implemented in the first place. However financial penalties are no longer the only (or most crucial) outcome of a compliance system that needs to be taken into account. As regional competition heats up, and financial institutions seek to enter new markets and serve new segments, the impacts of compliance activities on customer experience (CX) become integral to market success.

In blog three we’ll introduce customer experience, bringing the impact of the regulatory context and management systems together to explore how the intersection of compliance and customer experience impacts financial institution market share and sustainability

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