Compliance is Dead

Why compliance is dead as a survival strategy for corporations including banks and financial services. Part of financial services and banking keynote for Xpedition by Patrick Dixon, Futurist conference keynote speaker. https://xpedition.co.uk

The cost of compliance, amid ever-widening regulation, is growing apace.

Large corporations in America spend around $40m each on record-keeping systems to comply with more than 300,000 separate legal statutes.

Smaller companies don’t have the resources to cope, so can end up the wrong side of the law straight away.

Compliance really matters. However, as many bankers discovered, compliance with every law may keep you out of prison but cannot protect your brand or reputation, or build trust.

* "How AI Will Change Your Life - A Futurist's Guide to a Super-Smart World" - Patrick Dixon's latest book on AI is published in September 2024 by Profile Books.  It contains 38 chapters on the impact of AI across different industries, government and our wider world, including the impact of AI on compliance, company reporting, risk management and law firms.

You can comply perfectly with every regulation in every country in every year, but that will not help you when public mood changes. A scandal happens, which is followed by a public reaction, which leads to new regulations. These are interpreted by lawyers, who try to work out what it means.

And then your compliance teams turn it into another box-ticking exercise, to check you really are compliant.

But you are only complying with history. For example, until recently it was perfectly legal for a European company to pay a large bribe in another nation outside the EU, list it as a business expense, get it signed off by the auditors, and claim back tax from government. The more they bribed, the more tax refunds they received.

But it is no good today for the chairman of such a company to declare that he was well aware of bribes being paid back then and that ‘it was all done perfectly legally’. He will lose his job, will never work again, and the reputation of his company will be damaged.

We will see many new regulations in consuming regions like the EU to stop corporations from escaping their moral obligations in developed nations. We have seen examples of this in global action to stop children working in textile factories. Doing well by doing good Companies like Unilever have led the way in reducing environmental footprint, and increasing positive social impact, with aims to help a billion people improve their health and well-being, halve the environmental impact of its products and source all its agricultural materials sustainably.

In three years, the amount of sustainable agricultural supplies it used increased from 14% to 48%. Companies such as Patagonia, Interface, Marks and Spencer, Nestlé, Nike, Natura, GE, Walmart, Puma, IKEA and Coca-Cola have taken similar steps. And many others have focused on particular areas such as reducing plastic waste.