In today’s evolving regulatory landscape, firms authorised and regulated by the FCA face increasing pressure to evidence good customer outcomes and demonstrate compliance with a variety of rules and guidelines, as well as running their day-to-day business. As we have seen recently, a failure to comply can lead to financial redress for consumers, as well as the reputational damage it can have on your brand and people.
Effective compliance monitoring is necessary for firms to manage risks and comply with regulatory requirements. Managing compliance monitoring internally can be complex, resource-intensive, and difficult to keep up due to constantly changing regulations. Many firms are challenging the status quo and seeking alternative options that bring capability, capacity and other benefits.
What is Compliance Monitoring?
Compliance monitoring is the ongoing process of assessing your firm’s adherence to internal policies, industry standards, and regulatory requirements. Effective monitoring involves conducting regular risk-based reviews and assessments to identify potential risks, weaknesses, or non-compliance issues. It not only ensures regulatory compliance but with the right resource, also challenges existing ways of working that can enhance operational efficiency, mitigate risk, and foster a culture of accountability and transparency within a firm. Expectation under the Consumer Duty is that firms’ compliance monitoring supports the ongoing assessment of good customer outcomes and overall compliance with the Duty.
The Benefits of Outsourcing Compliance Monitoring
At Square 4, regulated firms are seeking our help with targeted and thematic compliance reviews to gain several key benefits:
Access to Specialised Expertise
Regulatory requirements and best practice are constantly evolving, and keeping up with the latest changes requires deep knowledge and experience. At Square 4 we pride ourselves on employing highly skilled compliance professionals with specialised expertise in regulatory frameworks across different sectors. These experts stay up to date with the latest regulatory developments and industry best practices. We work with firms to deploy their knowledge across different businesses. In engaging with Square 4, firms benefit from access to our people, their knowledge and experience.
Flexible and Tailored Approach
Working with us, firms can choose from different engagement models based on their specific needs:
- Fully Managed Reviews – We take complete ownership of the compliance review process, from planning and execution to reporting and any next steps/remediation guidance, ensuring thorough and independent oversight.
- Co-Sourced Reviews – We work alongside your internal team, providing additional expertise and our tried and tested material and resources to support execution while strengthening internal capabilities.
- Advisory Support – We assist in the firm’s own design, methodology, and best practices for compliance reviews, ensuring they align with regulatory expectations and deliver meaningful insights.
This flexibility allows firms to enhance their compliance function, improve efficiency, and ensure robust oversight without disrupting day-to-day operations.
Cost Efficiency and Resource Optimisation
Building an in-house compliance team is costly and time-consuming, requiring skilled hires, continuous training, and technology investment. Outsourcing compliance monitoring reduces these costs, offering expert services at a lower price. It allows internal teams to focus on core operations without dealing with regulatory complexities. Temporary outsourcing can also help firms maintain oversight and manage regulatory risks while developing their in-house team.
Objective and Independent Assessments
An external consultancy like Square 4 offers an unbiased assessment of a firm’s compliance status. Internal teams might miss risks due to familiarity or bias, but our experts provide objective reviews and audits. This fresh perspective helps firms identify hidden vulnerabilities and strengthen compliance strategies.
Best Practices and Industry Insights
Square 4 work with multiple clients across various sectors, including Retail Lending, Wealth Management and Insurance. This allows us to bring valuable insights and best practices to our clients that may be inaccessible to in-house teams. We can benchmark compliance programs against industry standards and suggest improvements to enhance efficiency and effectiveness.
Final Thoughts
The complexity of compliance monitoring is significant, as are the risks associated with non-compliance. By outsourcing compliance monitoring to a specialist consultancy like Square 4, firms can effectively navigate the regulatory landscape, maintain ongoing compliance, and concentrate on their core activities without being distracted by changing regulations. To learn more about our Outcomes Monitoring service offerings click [here] to read.
As we all know, while outsourcing compliance functions can offer operational efficiencies, firms remain fully accountable for their regulatory obligations. It is therefore essential for firms to establish robust oversight of any outsourcing partner firm, have a clear contractual agreement in place, and ensure that outsourcing arrangements do not impede the FCA’s ability to supervise the firm.
