Improving Compliance Management Performance Through Better Metrics and Workflows

When a challenge is approached, the most important thing to find a solution is to first ensure that proper research has been conducted and the decision makers have enough information and data to put in corrective measures. Many banks want to improve the way their organization manages compliance, improving the pace at which compliance issues are detected and resolved. The main issue that banks run into is that they often do not have the proper metrics or assessments of compliance performance, which can make it difficult to track performance improvements.

Whenever a performance improvement plan is put in place, the first step is to assess the current performance, then decide what ideal performance levels are for the organization. This enables banks to determine the gap between the current performance and acceptable performance levels. Banks can then create strategies to reach ideal performance levels, with periodic assessments to determine the effectiveness of the current course of action. In the absence of any performance metrics it becomes almost impossible for banks to create meaningful compliance performance improvement programs.

The Lack of Compliance Performance Data

Banks have an enormous amount of compliance data. Compliance performance data, on the other hand, is much less commonly seen in banks. Every bank will know the total number of compliance violations the bank detected in the previous year or quarter, but few banks will be able to provide information on how long it took the bank on average to resolve compliance issues.

The lack of performance data often results in banks using performance-related compliance data. A bank can, theoretically, look at the number of compliance violations in a time period and compare it to the number of violations detected in another time period, but the insights gained from such a comparison are very limited. While the number of compliance violations is a very meaningful metric when a bank is assessing its overall compliance performance, it does not really shed a light on the performance of the compliance team.

Decreasing compliance issues are an indicator of better compliance management, but not necessarily compliance performance because there are too many other factors affecting the outcome. Increasing compliance violations are also not always a sign that something is wrong – it can even be a positive data point, because it may show that the compliance team is getting better at detecting issues, which will mean the team is performing better than before.

Generating Meaningful Performance Metrics

Not all metrics are created equal. Some metrics provide banks with insights about compliance performance that help them improve compliance management. One such metric is mean time to resolution. The mean time to resolution metric tracks the time between a compliance issue being detected and the issue being resolved – whether it is through a corrective action or through better plans to avoid similar incidents in the future. This is an essential metric because it tells the bank how long it takes the bank’s compliance team to resolve a compliance issue, irrespective of the total number of compliance issues in the organization.

Another important and similar metric is ‘mean time to detection’. This metric measures the gap between the time a compliance incident occurred (e.g. a KYC form was not submitted for a new customer) and the time it took for the issue to be detected by the bank. This metric is very insightful because it tells a bank how good its compliance detection framework is at detecting problems. These are the type of metrics which a bank can track if it wants to monitor compliance performance. Comparing such metrics over different time periods can help a bank determine opportunities for improvement in its compliance framework.

Attempting to manually capture these metrics results in performance improvements but is usually an unsustainable approach towards the problem. If a bank wants to urgently assess compliance performance, it can make a team sit down and go through compliance documentation to get the dates for when a compliance issue was resolved. The team may also have to go through different email threads to determine when the issue was first flagged. This process can be done on a temporary basis but asking bank compliance managers and officers to keep extensive track of all actions they take will quickly result in a significant drop in compliance efficiency because of how long it can take.

Banks that use compliance management systems will have no problem accessing these important metrics. Modern compliance management solutions like the American Bankers Association endorsed Predict360 Compliance Intelligence Suite are built around a platform that supports compliance activity management. Since all actions, from monitoring to detection to resolution, are handled under the same platform, the platform can provide real-time metrics on compliance performance. The compliance manager and the board of directors can view compliance metrics on executive dashboards and take any required corrective actions instantly.

Want to see how Predict360 will work within your organization’s compliance framework? Get in touch with our compliance experts for a demonstration.