Financial Service Industry CEOs Want Greater Focus on Risk and Compliance

Nearly half (48%) of financial services chief executive officers (CEOs) believe that senior managers should be spending between 20% to 40% of their time on risk management and compliance, but nearly a third (31%) of this group admit that the standard is not being achieved, according to a research study released by professional services firm Kinetic Partners.

The percentage climbs even higher for chief risk officers (CROs), 43% of whom believe that senior management is not spending enough time in this area.

“Strong business performance is clearly important for CEOs and the board, but senior management needs to have a sound understanding of risk and compliance in order to be truly effective,” says Andrew Shrimpton, regulatory compliance member at Kinetic Partners and one of the authors of the firm’s Global Regulatory Outlook (GRO) research. “In particular, effective non-executive directors need to understand the key regulatory issues and questions they should be raising with their CEOs.

“The business leaders that participated in our GRO study say that they welcome regulation in this area, understand the need for it, and want to work with lawmakers to improve transparency and restore consumer confidence. However, many of these executives still have strong reservations around the challenges involved in building next-generation regulation into effective business processes.”

The study also highlights the vital role that risk management and compliance play within the business:

• More than three-quarters (77%) of the business leaders questioned felt that investment in their internal compliance arrangements would help to strengthen their reputation.

• More than two-thirds (65%) of these same respondents felt that investment in internal compliance arrangements would increase the company’s competitive performance over the long-term.

“These findings not only highlight the need for a tighter focus on risk management at board level, but also suggest that improvements in this area will offer benefits that go far beyond compliance alone,” said Shrimpton. “The fact that so many CEOs believe that senior management is failing to spend enough time in this area should act as a wake-up call for any firm that wants to achieve greater transparency, restore consumer confidence and improve its competitive performance overall.”

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