The Rise of Compliance Consulting: A Smarter Alternative to Hiring In-House Compliance Experts


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The financial services industry faces several regulatory challenges. They include enterprise risk governance and culture, cross-border regulatory standards, consumer financial protection, cybersecurity, customer data protection, financial crimes, regulatory reporting, and compliance surveillance.

Additionally, the regulatory landscape keeps changing at a fast rate. As a result, financial institutions are struggling to keep up. Many organizations are turning to compliance consulting firms in response to these challenges. They could hire an in-house team, but compliance consulting offers several advantages over hiring in-house compliance professionals.

Advantages of Contracting Compliance Consultants

There are many advantages of contracting compliance consultants. Let's discuss nine of them below:

They Are Cheaper

Hiring new employees can be expensive. The Society for Human Resource Management (SHRM) reports that hiring new personnel costs about $4700. On the other hand, employers state that a new hire costs up to three times the position's salary. So, it costs $213,000 to hire an in-house compliance officer who earns an average of $71,000 annually in the USA.

Clearly, hiring, training, and retaining qualified compliance professionals can be expensive, especially for small and mid-sized enterprises (SMEs) with limited budgets. So, outsourced compliance officers are the best alternative, as they are cheaper and have flexible pricing models.

Firstly, there are no training costs. These professionals invest in continuous professional development to make sure that they are up-to-date with the latest regulations and requirements, offering maximum value to their customers. They work on a contract basis, mostly pricing their craft based on an hourly rate (starting at $33 an hour) or project-specific rate. So, you only pay for their time and skills for a particular project. You also don't incur retaining costs such as benefits.

Lastly, ending this professional relationship is cheaper than losing an employee, especially when the United States is undergoing the Great Resignation. Employees are voluntarily leaving their jobs in high numbers, causing a negative ripple effect. Employees left in the organizations lose morale, and the business experiences reduce productivity and incur high hiring costs. Conversely, a compliance consultant exits at the end of the contract with no financial implications as long as involved parties follow the contract to the letter. 

Their Workload Is Scalable

Hiring an in-house compliance team is expensive. Therefore, you'd need a great Return on Investment (ROI) based on the workload. Unfortunately, the workload of compliance experts can vary significantly, making it challenging to maintain a consistent team size. Organizations may face overstaffing or understaffing issues.

However, outsourcing compliance consultants allow you to spend based on the need and workload, only paying for work done. Therefore, your organization can scale its compliance efforts up or down as needed, avoiding the challenges of maintaining a fixed in-house team.

They Have Specialized Knowledge

Compliance can be complex, requiring personnel from several departments in the institution. These professionals' day-to-day activities involve so much more than compliance. Therefore, it may be challenging to work with an in-house team efficiently. 

Moreover, some compliance issues are industry-specific or involve niche areas of expertise. Finding the right professionals with specialized knowledge can be a challenge. There's also an issue of high employee turnover that may affect how robustly a department or institution handles compliance issues.

Compliance consultants help fill this gap as they are usually a consortium of specialized professionals working as a team to ensure their clients fully comply with all relevant laws. For example, a compliance firm like Captain Compliance entails experts in data privacy, cybersecurity, cross-border regulations, regulatory reporting, regulatory standards and certifications, and financial crimes. 

Compliance specialists with niche specialization in various compliance areas make it easier to address specific regulatory concerns. So, all you need is to present your case. You'll fine-tune your needs within the consultation period before agreeing on the experts you need to handle your case.

They Have More Expertise

These specialized professionals work to hone their skills at their own cost. Because regulations constantly evolve, compliance professionals must stay updated with the latest local, national, and international changes, ensuring clients access the latest industry knowledge and expertise. This may be time-consuming and costly for an in-house team because you incur costs training them.

Compliance consultants invest in being up-to-date and being the best. After all, it's their selling point. So, you save money but get to work with the best professionals in the industry. Also, they stay updated on the local and international regulatory market and improve on other areas that benefit your business. 

They improve their skills in auditing, regulatory compliance, project management, regulatory affairs, finance, communications, software, operations, management, and attention to detail. As a result, you get world-class assessors, advisers, and mitigators of your company's compliance landscape. 

They Are More Experienced

Compliance consultants are more experienced than in-house compliance officers. Working with several clients exposes them to many case studies, regulatory situations, and scenarios. The experience comes in handy when your case isn't straightforward and needs consultation with regulators. More often than not, you'll realize that your compliance consultant has dealt with such an issue before, especially when there's confusion due to regulatory overlap. 

So, while in-house training is possible, they are only exposed to issues that affect your business. Someone who has trained outside can share more based on experiences. Therefore, there's little room for trial and error as most solutions have been tried and tested.

They Are Objective

The compliance business needs assertive, highly competent people who can objectively detect, accept, and deal with serious vulnerabilities. It doesn't mean an in-house team isn't assertive, talented, or brave. Now, an in-house compliance team is similar to marking your exam. You may mark it as lenient as possible to score the highest possible marks. 

So, it would help if you had an outsider's eye to rip off the band-aid and press where it hurts for the greater good. Therefore, external compliance consultants provide an unbiased perspective, reducing potential conflicts of interest with in-house compliance personnel.

They Are Efficient Risk and Crisis Managers

Consulting firms can quickly assess an organization's compliance status, identify gaps, and implement necessary changes, helping companies achieve compliance more efficiently. They develop strategies to mitigate risks associated with non-compliance after they assess your organization and identify these risks. They also identify organizational activities and processes that make the institution vulnerable to non-compliance. For example, the IT department allowing all employees to access crucial customer data increases the risk of data privacy violation. Restrict data access only to relevant employees.

Practices that increase vulnerabilities increase non-compliance risks. These risks range from expensive fines and penalties to criminal and civil proceedings and reputation damage. Depending on the severity of these risks, the business may suffer significant dysfunction or total shutdown.

Well, risk management isn't always rosy. The primary role is finding out if you're at risk of non-compliance. Sometimes, the results aren't pretty. Compliance consultants expand their role at this stage, acting as crisis managers. They will help you reduce and control the damage caused, guide you in recovering, and formulate strategies to avoid future occurrences. Better yet, they'll train your whole team on actions to take to prevent these issues from recurring. 

They Offer Personalized Solutions

You may prefer an in-house team because they probably understand your business better than outsiders. So, they'll offer solutions that are specific to the company. This may be true. However, compliance consultants aren't trained to offer one-size-fits-all solutions.

Compliance consultants understand that every business is unique in its operations, employees, products, and culture. Therefore, understanding all these dynamics is a critical aspect of the first stages of the consultancy. 

So, you'll need to avail essential documents. They include compliance policies, operational documents, compliance audit documents, technical security documents, and data privacy documents. You'll also need to allow the consultants to interview members of management and a few members of staff to understand your unique challenges and needs further. Ultimately, compliance consultants create bespoke solutions with this information and their wealth of knowledge.

They Give Access to Technology

Technological advancement is one of the regulatory challenges that organizations face. While it has improved products and services for businesses, malicious people have manipulated technology to favor their illegal activities, such as crime. Unfortunately, financial institutions are exposed to complex vulnerabilities, leading to non-compliance.

For example, investing in technology is an excellent option for dealing with money laundering and customer identity verification issues. Unfortunately, this may be expensive for small businesses. Working with compliance consultants may offer a solution. They have embraced technology for tracking, reporting, and managing compliance, forming partnerships with technology companies. You'll find cases where you contract with a compliance consultant, including access to these software and tools to improve the efficacy of your compliance efforts.

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