In 2018, AFME published a paper in collaboration with EY on the ‘Scope and Evolution of the Compliance Function’. It identified that the availability of more complex data would allow Compliance to adopt different ways of managing risks, for example, anticipating or predicting risk events more proactively. This would be likely to result in broader demands from Compliance’s stakeholders, both within and outside the firm. Alongside these, it was anticipated that there would be further structural changes across the 3 Lines of Defence, driven in part by operational efficiency and cost effectiveness, as well as heightened regulatory expectations.
While this transformation has been taking place to varying degrees, the disruption to the capital markets industry caused by COVID-19 has resulted in immediate and fundamental changes to AFME’s Members, e.g. large-scale remote working and accelerated developments in the use of technology. The lessons learned during the 2020 pandemic period are likely to inform new ways of working, which will undoubtedly lead to a more fragmented workforce going forward and thus the need for greater supervision and surveillance techniques, including the use of a broader set of data points combined with enhanced analytical tools.
This paper focuses on four key areas with respect to the compliance control function and offers some considerations for firms thinking about how to ensure that the control environment continues to be robust, and can evolve to address new and developing risks in these conditions:
- Enhancing data and analytical tools
- Surveillance, testing and monitoring
- Conduct, culture and well-being
- Remote working and location strategy”