Tame the Compliance Monster
The compliance burden affects all financial organizations, often requiring them to extend compliance-related operational functions into new areas.
To meet increasing regulatory obligations, financial institutions may be tempted to add staff and re-channel resources away from serving customers. But layering on processes and costs hits hard at return on investment (ROI), according to Lee Kuntz, president of Innovation Process Design, in Northwestern Financial Review.
Instead, Kuntz suggests the following proven approaches for improving compliance processes.
Do it right the first time. Errors increase the cost to fix compliance issues and the cost to monitor compliance. Even a single bookkeeping mistake or typo in a loan file can be costly, and it’s not just the cost of redoing the work. Quality studies usually find the cost of errors to be between 10% and 30% of revenue.
When work processes are done right the first time, errors decrease. Creating error-proof processes also speeds customer service by avoiding corrections. And when processes are done right, there’s a triple boost to ROI in customer satisfaction, lower operating cost, and reduced cost to comply.
Simplify, don’t add. Compliance requirements can be complex, so institutions frequently add more handoffs between people. Excessive handoffs aren’t efficient and take time to communicate at every step. Each handoff leaves the process vulnerable to error.
Reporting mechanisms and complex tools such as measurement and tracking software can help to ensure compliance. But these tools tend to require deep knowledge to operate properly and interpret results. Further, without adequate training, errors rise.