Risk, Compliance Challenges Remain High in Wolters Kluwer Survey
Wolters Kluwer, Minneapolis, released its annual Regulatory and Risk Management Indicator survey for the U.S., noting two-thirds of bank and credit union respondents continue to cite risk and compliance challenges as high, although there is “notable easing” compared to 2017 risk and regulatory anxiety levels.
The survey showed a Main Indicator Score of 85, down by 18 percent from 2017. Although the score suggests continued anxiety on certain risk and regulatory issues that demand close attention, it cited a notable easing in the anxiety levels of U.S. banks and credit unions in managing their risk and regulatory compliance obligations as compared to the 2017 survey results.
The survey said despite passage of regulatory relief legislation (S. 2155) by Congress, 62 percent of respondents indicated they “do not anticipate a likely reduction” in regulatory burden in the coming two years.
“While we see a reduction in the Main Indicator Score, more than 60 percent of respondents continue to rate their compliance concerns as a 7 or higher on a 10-point scale,” said Timothy R. Burniston, Senior Advisor for Regulatory Strategy with Wolters Kluwer. “It is notable that risk management concerns also remain fairly high, and there is palpable apprehension about several top issues, including cybersecurity, IT risk and credit risk that respondents indicated will receive escalated priority and investment in the coming 12 months.”
Over the next 12 months, surveyed institutions said they are most likely to make “moderate to high” investments in updating policies and procedures (78 percent), strengthening risk assessment and controls (77 percent), and training their staff, board of directors and senior management (75 percent) as priorities. The responses indicate a continuing concern about compliance risk management in general and point to the specific areas regulators are likely to scrutinize.
“The reductions in these environmental factors influenced the final score considerably,” Burniston said. “But persistently high levels of concern shown in six years of conducting this survey reinforces the recognition that compliance with rules and regulations is still very much part of an ever-evolving risk management landscape that continues to challenge institutions.”
The survey said staff and investment resourcing continued to be pressure points, with respondents citing inadequate staffing for compliance (44 percent), manual compliance processes (42 percent) and too many competing business priorities (42 percent) as top obstacles to implementing an effective compliance program.
This year saw a slight uptick in concerns around accurately capturing additional data fields for the Home Mortgage Disclosure Act rules (62 percent), upgrading systems (39 percent), and analyzing data fields (21 percent) when compared to 2017 levels. However, institutions’ total time and costs invested in HMDA implementations and staff training dropped from the prior year, from 41 to 33 percent, which was expected.
