Chief compliance officers face a delicate balancing act in today’s business and political climate. Leaders we’ve talked to at financial institutions report intensifying pressure to cut costs while maintaining or enhancing compliance effectiveness. This push stems from anticipated reductions in regulatory oversight under the Trump administration, advancements in artificial intelligence (AI) that offer new capabilities, and ongoing cost pressures due to business volatility. Financial institutions have historically struggled to reduce compliance spending due to ever-increasing regulatory pressures and business complexity. However, with the potential for lessened regulatory burdens and increasing pressure for maintaining or growing profit margins even as the business environment remains very uncertain, there is a risk of substantial budget cuts that could jeopardize the effectiveness of compliance programs.

Fortunately, transforming compliance processes presents a significant opportunity for financial institutions. We estimate that roughly 60% of compliance team activity is executing processes that are ripe for transformation, including mapping laws, rules and regulation to risk taxonomies, policies, procedures, and controls; conducting investigations; and performing monitoring and testing. Compliance leaders who proactively navigate this challenge can reduce overall compliance costs by 15% to 30% while enhancing efficiency across their program without compromising effectiveness.

Our latest report, “Process-Driven Approach To Compliance Transformation,” lays out a strategic framework that advocates for a process-forward methodology, focusing on simplifying existing processes and enhancing interconnections. We explore how this approach not only addresses current inefficiencies in a holistic, risk-sensitive, and sequential manner but also prepares organizations for future challenges.

Overcoming challenges in compliance amid budget pressures

The majority of compliance teams reported growing headcounts over the last two years, according to our 2024 Annual Chief Compliance Officer Survey, conducted in collaboration with the Risk Management Association (RMA), but many anticipated budget constraints and a new era of doing more with less. In addition, we are seeing a pronounced shift in priorities from regulatory remediation to effectiveness and efficiency. This presents an opportunity for transformation.

In our view, financial institutions should avoid classic top-down cost-reduction efforts, as they often overlook the nuances of compliance programs and the specific expectations of regulators, such as requirements for financial institutions to maintain a comprehensive library of laws, rules, and regulations. A well-designed and tailored cost-reduction program can protect the compliance function from one-size-fits-all strategies while ensuring the effectiveness of compliance programs throughout regulatory cycles.

Transform your compliance with a process-driven approach

In our experience, compliance programs often rely on manual, narrative-based, and loosely connected risk management processes. These are prime candidates for transformation. Financial institutions can take action to transform compliance and reduce costs while maintaining and improving efficacy. The key is to take a process-forward approach to transformation.