PwC’s 2015 State of Compliance Survey: The Role of the Chief Compliance Officer Must Evolve

CCOs called upon to be more strategic, move beyond baseline requirements

New York, June 22, 2015 – Compliance officers and the compliance function should actively participate in setting the corporate strategy, according to the fifth annual State of Compliance Survey (2015) released today by PwC US. While baseline compliance remains a big responsibility – and a big challenge – for compliance officers, according to PwC’s survey, it is necessary to look beyond these obligations for the compliance function to grow and add value to the enterprise.

PwC’s Global CEO Survey (released earlier this year) highlighted the challenges CEOs face in today’s fast-changing environment. The bottom line? It’s not simply economic fundamentals that worry CEOs. Seventy-eight percent of CEOs surveyed said they were concerned with over-regulation and its impact on their ability to achieve their companies’ strategies. However, according to PwC’s State of Compliance Survey, despite this data and other broad and pervasive business trends, the ethics and compliance function has experienced only incremental change. Only one third of companies surveyed said they involve their CCOs in corporate strategy. 

“Fulfilling baseline compliance requirements remains a critically important function, particularly for industries faced with increasing regulatory scrutiny – but it’s time for CCOs to evolve and become a more strategic partner to the CEO,” said Sally Bernstein, principal with PwC. “Addressing compliance needs within the context of the broader business strategy can help put organizations in a better position to drive growth while proactively navigating risk and regulatory complexity.”

According to PwC, it is critical for compliance to become a more active participant in setting corporate strategy. Compliance officers can offer valuable insights into the key business decisions that impact a company’s growth targets and other strategic imperatives. Effective compliance management can provide CEOs and other senior leadership with the ability – and confidence – to take risks to implement growth strategies.

In many organizations, the compliance function sits within or reports to the legal department. PwC found that General Counsel is the de facto CCO at 48 percent of companies that do not have a named CCO.

“Compliance leaders must reevaluate and reimagine their roles in order to be more strategic and align with the broader needs of the business,” said Andrea Falcione, managing director with PwC. “CCOs need to better understand what the compliance obligations are across the business, where those obligations sit, and how they get reported. Once defined, they can drive collaboration across business units to ensure all obligations are being managed effectively, while also helping develop solutions that address potential regulatory risks and concerns upfront.”

According to PwC’s survey, the top three areas of central compliance function responsibility are: Code of Conduct (86 percent ownership), Ethics Program and Controls (84 percent ownership), and FCPA / Anti-Bribery and Anti-Corruption (76 percent ownership).

“Some compliance organizations have seen budget reductions in the last year despite an increase in certain regulatory requirements. The challenge for compliance officers will be how to increase operational efficiency and effectiveness while keeping costs in check,” added Falcione.

While 41 percent of CCOs measure compliance costs, 35 percent of respondents said they do not even attempt to track costs. Only 33 percent of compliance departments have budgets greater than $1 million – and in the last year, budgets have not increased as much as in years prior. As such, compliance leaders will need to focus on more efficient execution in the year ahead. According to PwC, there is opportunity to gain efficiencies in three key areas: risk identification and assessment; compliance monitoring and testing; and technology solutions.

“Applicable laws and regulations will always be primary responsibilities for compliance officers. But the compliance function can be so much more. By expanding the views of the compliance function and the strategic value they offer, CCOs can become a more valued member of the executive team – and a future star of the C-suite,” added Bernstein.

PwC shares insights on how compliance leaders can increase their strategic value to their organizations:

  • Actively express interest in participating in strategy decisions, and proactively articulate to the CEO the strategic value that compliance can deliver.
  • Review the strategy plan and develop ideas for handling new or unusual compliance risks or for leveraging them to gain competitive advantage.
  • Forge close relationships with key business leaders through the company and offer insights to help the business identify and mitigate risks related to compliance issues.
  • Define or redefine the scope of compliance across the organization and build partnerships with compliance owners with in the business to ensure that all issues are being managed effectively.
  • Implement efficiency initiatives to improve the effectiveness of the compliance function and reduce compliance-related costs.

PwC will host a webinar to discuss key findings from PwC’s State of Compliance Survey on Monday, June 22 at 2 pm ET. To register, visit: www.meetpwc.com/SOCsurveywebcastjun2015

Download a copy of PwC’s 2015 State of Compliance Survey report at: www.pwc.com/us/stateofcompliance

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