UK Financial Services Industry CFOs Find Managing Regulatory Regime Challenging

Ninety-four per cent of chief financial officers (CFOs) and chief operating officers (COOs) within UK financial services businesses find the regulatory regime either ‘somewhat’ or ‘very’ challenging to manage, reports recruitment specialist Robert Half Financial Services. Compared to 88% of firms globally, only Hong Kong executives (96%) find regulatory change more taxing than the UK financial services sector.

The firm’s research report is based on responses from 1,100 CFOs and COOs from the major global financial centres including the US, Canada, the UK, France, Germany, Singapore and Hong Kong.

Fifty-four per cent of UK respondents report that their budget for managing regulatory change will remain the same in the next 12 months, underlining the challenge that firms face in balancing expenditure and profitability. Only 26% of companies predict that their budget will rise, compared to 49% of industry leaders in Singapore and 46% in Hong Kong – suggesting that investment over the past two years has already addressed many of the structural changes that needed to be made in the UK. 

Despite that, regulation has increased the day-to-day financial workload for UK financial services companies. Sixty-one per cent report that financial workload has ‘somewhat’ or ‘significantly’ increased.  To manage, one in three global firms will hire contract or interim staff and 23% will increase their permanent headcount to accommodate the additional regulatory workload.

When asked which department is leading their response to regulatory change, 24% of UK firms said finance, 19% said risk and 17% said compliance.  A further 11% respectively said their in-house legal team or technology department was leading the charge while audit was named by 10% of organisations.  The majority (91%) of UK financial services organisations say they have now adopted an integrated governance, risk and compliance (GRC) programme with the primary benefits including reduced compliance costs (46%), improved business performance (29%), optimised risk-return outcomes (25%) and increased shareholder value (25%).

The extra work created by regulation is having an additional effect on the availability of relevant skills for financial services companies.  More than nine in 10 UK CFOs/COOs report that they find it ‘somewhat’ or ‘very’ challenging to find the right skilled professionals.’ The same percentage of companies (91%) in Germany finds it difficult to source skilled professionals, but the figure rises to 95% in Hong Kong and 93% in Singapore.  Companies in the US find it slightly easier to source the right people (84%).

“The global financial crisis of 2007-2009 marked the beginning of an era of significant change for the financial services industry,” said Neil Owen, global practice director, Robert Half Financial Services. “The crisis forced organisations to focus on corporate restructuring, cost-cutting and managing institutional risk, all under the watchful eye of regulatory bodies and general public scrutiny. 

“Our research shows that even though UK financial services have done much of the ‘heavy lifting’ when implementing new processes and cost-cutting, the regulatory environment continues to create day-to-day challenges, including finding and retaining professionals with the right skills to cope with the extra workload.”

UK financial services companies are broadly positive about their own outlook for the future with three in four confident in their firm’s business outlook compared to 80% globally. Top internal concerns include business costs (36%), profitability (34%) and increasing regulatory issues (22%). Top external concerns include the national economy (54%), the global economy (50%) and the competitive environment (22%).

The areas of regulation that have had the most impact on UK financial services companies include anti-money laundering, identified by a third of companies (33%), disclosure or reporting requirements (31%) and privacy requirements (23%).

Owen added: “Today’s financial services executives are facing unprecedented challenges including emerging regulatory issues, business threats and talent shortages. Firms that proactively address these issues and develop a long-term strategy are best positioned to succeed in the future.”

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