Just over a year ago, reports had just started emerging regarding a novel virus. At that point, we had no idea how much impact COVID-19 would end up having on our professional and personal lives.

However, 2021, with the commencement of mass vaccinations, offers hope of a more predictable and consistent future – one where businesses will be able to start focusing on compliance again.

Biggest Compliance Challenges in 2021:

1)   Post-COVID work environment:

Moving towards the second half of 2021, we are observing a lot of COVID-related workplace restrictions being eased down. However, for a lot of businesses, the past year-and-a-half has disrupted their operational models to such an extent that they can never go back to how they were before.

Although smaller businesses might find a workplace return more feasible, even for them, employee expectations might have completely changed. Some workers might be willing to come back while others won’t feel as confident – even with vaccines more widely available. Furthermore, a lot of workers might have got used to the extra time they can now spend with their families and might not want to give that up in exchange for expensive and time-consuming commutes.

How will all this impact staff compliance? Firms will have to reassess their compliance risks, but this time on a long-term basis. The risk of management conduct is perhaps the greatest challenge of all.

There are plenty of diverse issues, including managing front office workers in investment firms, ensuring the proper management and disposal of documents, executing timely trades, and allowing easy access for clients.

Remote oversight shall be a more prominent aspect of risk-management, such as preventing market abuse, avoiding inappropriate advice, and adhering to sales processes.

2)   Company culture:

The two main culture-related factors that firms will need to focus on are inclusion and diversity.

Alongside the increasing social pressure that firms are facing regarding transparency in these areas, they will also have to deal with regulatory pressures. According to the FCA, firms should adopt cultures that embrace inclusion and diversity.

An example of such a culture could be that BAME (Black, Asian, and Minority Ethnic) individuals have the same access to employment as their counterparts from other ethnicities. Moreover, an appropriate percentage of women should be present in senior roles and on boards.

But the foundation for all of this is the overall awareness that firms need to be more welcoming to people with varied ethnic backgrounds, sexual orientations, gender identifications, et cetera.

3)   Employee wellbeing and mental health:

From dealing with challenging domestic situations to struggling with remote working, the past year or so has not been an easy ride for employees. Naturally, all these complications have adversely affected employees’ mental health and psychological wellbeing.

Companies will have to come up with ways to move away from the more conventional modes of wellbeing that focus more on the physical aspects (such as accidents and injury prevention), and instead look for a more holistic approach that also focuses on mental health and ways to avoid conflict, stress, and burnout.

Psychological safety also needs to be considered – employees should not shy away from speaking out and, simultaneously, should not be treated disproportionately or inappropriately should anything go wrong. A psychological culture where employees can speak their mind is likely to lead to reduced mistakes, greater engagement, and lower turnover.

4)   Focusing on fraud:

While ordinary people have seen COVID-19 as a threat, criminals have taken it to be a golden opportunity, particularly with respect to fraud.

According to a LIMRA survey, 42% of respondents had experienced an elevation in fraud, and for account takeover fraud in particular, that figure went as high as 47%.

Two major fraud risks:

  • Criminals targeting vulnerable areas for as long as the pandemic persists:

Examples of such fraud include the false promise of PPE and vaccine delivery in order to get money from businesses, or money requests for individuals who are seemingly trapped abroad and are unable to come back. Firms need to ensure system robustness and staff vigilance to detect and report any such activity in a timely manner.

  • Exploitation attempts at remote working structures:

Since workers have no direct interaction with their colleagues, fraud monitoring has become a lot more complicated. Individuals who work by themselves are far more vulnerable to fraud and may not be able to detect it before it is too late.

The key to ensuring fraud prevention is that employees are adequately informed, trained, and made aware of the risks of fraud and are encouraged to implement their learning on a day-to-day basis.

5)   Climate change:

Since climate change can lead to financial, reputational, legal, and operational risks, it has become a vital issue from a governance and regulatory standpoint. The physical risks due to climate change are manifesting in the form of more frequent floods, storms, wildfires, and droughts. Furthermore, you cannot ignore the regulatory risks due to policy changes that might declare investments – such as buying diesel vehicles – worthless.

Regulators of financial sectors expect companies to handle the financial and physical risks resulting from climate change – be it the reduced value of investments or the physical threats to insured assets.

Final Word:

2021 is the year where new and more challenging compliance issues are going to show up, and companies and regulatory bodies throughout the UK should be well-poised to deal with them. To stay up-to-date with corporate compliance best practices, please visit us at aadmi.com.