The Regulatory Compliance Market

Financial institutions are struggling to comply with the growing number of rules, regulations, and standards and are investing tremendous resources in the way of money, time, and people toward attaining compliance. The enormity of these investments has provided ample opportunity for new entrants into the regulatory compliance consulting market. Once the traditional stronghold of public accounting firms, the service provider market for regulatory compliance consulting has expanded over the past decade.

Public accounting firms continue to be well-positioned in this market due to the depth and breadth of their regulatory subject matter expertise obtained through compliance assurance for large and complex organizations doing business across multiple geographic jurisdictions. Building on this strength, the Big Four firms, in particular, go beyond just providing technical expertise, by combining comprehensive risk, tax, and consulting services to help clients design and implement appropriate operating models and management systems that shape the compliance organization.

Stricter regulatory enforcement and the resulting wave of high-profile enforcement actions against large financial institutions are providing an entry point for more traditional management consulting firms. Several of the big strategy houses, in particular, offer robust crisis resolution and program management capabilities but also lend clients their brand recognition and credibility in appeasing regulators that their remediation efforts are serious. Remediation projects additionally position these firms well for follow-on operations excellence and transformation projects that utilize their traditional strengths in strategy, organizational design, operations excellence and customer experience.

Transactions and legal-oriented consulting firms with strong forensics and investigative capabilities are also organizing to provide high-quality compliance services at much lower price points than their larger peers. They not only offer technical expertise but staff augmentation and technology automation for laborious and data-intensive regulatory-mandated lookback analyses and calendar-dictated risk assessments, program evaluations, and exam testing through project, co-sourced, and outsourcing arrangements. GRC technology platform companies also offer consulting services alongside turn-key compliance systems and solutions that aggregate, automate and standardize the production of timely compliance reporting.

There are a number of foundational capabilities required by consultants seeking to enter this market.

• Subject Matter Expertise. Clients require and expect deep regulatory expertise to be able to discern and prioritize the diversity of often vague and contradictory laws, standards, and regulations by issue, industry and geographical jurisdiction. Technical regulatory knowledge is table stakes in compliance consulting, but how firms attain this understanding varies. On one extreme, a few firms have set up dedicated centers of excellence as repositories for regulatory knowledge, while on the other, firms retain needed expertise through contract arrangements.

• Operating Model Design.  In establishing their compliance programs, companies look for firms that can provide market insights, organizational design, best practices and benchmarking metrics to design and develop compliance programs appropriate to their size, complexity and risk appetite.

• Regulatory Change Management. Technical adherence to rules is no longer sufficient in today’s regulatory environment. Organizations must build compliance programs that not only result in technical compliance with all applicable regulation but also demonstrate to regulators both an organizational commitment to compliance and program effectiveness in maintaining compliance. For consultants, this means deriving metrics that prove to regulators that client organizations possess a culture of compliance and can implement new rules to remain compliant.

• Transformation. As institutions realize regulatory compliance is here to stay they seek to obtain better value from their compliance investments. They are using the current relative lull in new regulation to rethink and restructure the compliance function and organization and to streamline and rationalize duplicative organizational structures and processes in meeting overlapping requirements of multiple regulatory agencies and stakeholders.