Thursday, 24 October 2024
By Alessandro Bizzozero, Founding Partner of BRP Bizzozero & Partners SA and Achille Deodato, CEO of Indigita SA
Before being a cost, which is becoming more and more affordable for managers, the Compliance function should first be viewed as a lever in a growth strategy. For our experts, Alessandro Bizzozero and Achille Deodato, it establishes the foundation for the development of the business.
Is there a way to measure the impact of compliance in terms of time or money spent on its management?
Alessandro Bizzozero. "Compliance" is a broad term that encompasses legal regulations, industry standards, and internal policies, including legal matters and regulatory oversight. Rather than viewing it as a burden, it should be seen as a guarantee that a business operates within the legal framework. It thus enhances trust in the market as well as its competitiveness. Violating regulations can carry significant costs both in Switzerland and abroad. In this respect, achieving compliance effectively saves money.
Achille Deodato. The operational costs of compliance can be classified into direct expenses—salaries, systems, and time allocated—and indirect expenses—training, consultant fees, and operational delays. To quantify these costs, there are key performance indicators such as the cost of compliance as a percentage of revenue, the time spent on compliance activities, and the number of compliance-related incidents. These help manage the financial and time burdens of compliance.
To what extent do digital solutions like yours help managers save time and money?
Alessandro Bizzozero. Digital solutions are now part of the daily routine for managers. They are essential for accessing updated databases and processing large volumes of data. I would go further: they are necessary for the smooth operation of the business and contribute to improving the services provided to clients.
Achille Deodato. They also facilitate business development. By integrating the right tools, managers can significantly reduce operational costs and improve the overall performance of the company. We see that an increasing number of ready-to-use digital solutions are available on the market at very competitive prices. For a mid-sized manager, having the right digital solutions equates to saving the equivalent of 1 to 2 full-time positions!
Over the past ten years, how has the volume of data you manage to meet regulatory requirements changed?
Alessandro Bizzozero. The volume has increased exponentially! In addition to historical data related to anti-money laundering, managers have had to add cross-border data, tax data, ESG, FinSA, and more.
In our case, at BRP, we cover more than 190 jurisdictions with our country manuals. To give you an example, producing a manual on cross-border services typically requires consulting 4 to 6 local regulations per jurisdiction. Given that cross-border compliance is just one part of the data needed to conduct business, it's clear that the landscape has become very complex for financial institutions.
Until recently, in Switzerland, independent managers had lighter regulatory obligations than banks. These were mainly limited to anti-money laundering. However, with the new regulations, financial intermediaries must now face the same obligations as banks in many areas, hence the need to handle large volumes of data.
Achille Deodato. Fortunately, digital solutions and service pooling today offer managers viable options to organize this data well, manage it effectively, and ensure compliance while maintaining operational control.
How should managers approach these compliance issues?
Alessandro Bizzozero. Costs have risen significantly for managers, and compliance is largely responsible for this increase. However, while the context may seem challenging, we still see opportunities. There are several ways to leverage them, provided one is willing to invest a bit. For example, managers can come together and share costs by joining platforms that facilitate cost-sharing for compliance issues. They can also collaborate with specialized providers or purchase dedicated solutions. In this scenario, they can manage compliance in-house with a streamlined setup.
Achille Deodato. It is clear that there are strategic investments to consider. It is essential to emphasize the quality of the employees in charge of compliance rather than their quantity. They must be able to effectively handle a wide range of regulatory issues. Specialists from small banks, therefore, have the ideal profile due to their versatility. Additionally, managers should invest in ready-to-use digital solutions that are easy to use and integrate seamlessly to avoid overly burdensome IT integrations.
How should priorities be set?
Alessandro Bizzozero. By focusing on training and staff development, especially in areas such as anti-money laundering, FinSA, and cross-border issues.
Achille Deodato. In the priorities, I would add data management systems that streamline the collection and maintenance of KYC documentation as well as risk profiles. These systems must comply with regulations in the countries where the manager operates. Automated monitoring tools can also help track client transactions and quickly identify or investigate suspicious activities. Finally, adopting digital platforms for regulatory updates ensures that the Compliance team stays informed of the latest regulatory changes, so they can quickly integrate them.
Regarding requirements, the FinSA imposes numerous hours of regulatory training on managers each year. How can they make the most of it?
Alessandro Bizzozero. The best approach for managers is to focus on practical application and continuous learning. For example, by organizing training sessions that integrate real-life situations and case studies related to the business activities. Employees can then apply what they know about regulations in a practical context.
Achille Deodato. Using online training platforms can provide flexible, on-demand access to training materials, allowing employees to learn at their own pace and on their own schedules. Incorporating interactive online learning modules and virtual simulations can enhance engagement and retention of complex regulatory information.
What key themes should managers focus on?
Alessandro Bizzozero. The FinSA imposes several key requirements on independent managers. For example, a minimum of two qualified directors with appropriate training and professional experience in asset management. Secondly, the FinSA requires the establishment of a compliance function, risk management, and an internal control system to professionalize the second line of defense. Thirdly, EAMs must have a minimum capital of 100,000 Swiss francs and adequate guarantees, which can be supplemented by professional liability insurance. Finally, obtaining FINMA approval represents a significant cultural shift that forces managers to rapidly transform their governance frameworks.
Following the Credit Suisse crisis, what kind of regulatory overload do you anticipate today?
Achille Deodato. It is possible that FINMA will introduce a senior management regime for managers similar to that of banks. Such a change would imply personal responsibility for board members and senior executives. It will likely become more challenging for managers to find independent members for their boards.
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