5 minute read 2 Nov 2021
Future of compliance and ethics with managed services

Reimagining the future of compliance and ethics with managed services

Authors
Arpinder Singh

EY Global Markets and India Leader, Forensic & Integrity Services

Leading forensic accountant and veteran expert witness. Advising global clients on compliance, anti-corruption and corporate governance. Disruptive thinker. Technology aficionado. Author.

Amit Rahane

EY India Forensic & Integrity Services Partner

Forensic investigator and purpose driven leader. Committed to building data-centric compliance programs. Problem solver.

5 minute read 2 Nov 2021

Through managed services, strategic partner can transform company’s compliance and ethics.

In brief
  • Many large companies are looking to centralize the compliance and ethics functions within their global capability centres (GCCs) to address global regulatory requirements.
  • They are turning to managed services, a differentiated service delivery model that integrates specific organizational functions with an external specialist, that is a strategic partner.
  • Longer-term relationships tend to bring greater value, economies and help the company retain focus on core revenue generating areas.

The uncertainties posed by the pandemic has led organizations to rethink their business models. Global compliance, legal and ethics teams are at the crossroads of a transformative journey today as they strive to balance between managing a rapidly changing regulatory environment and stabilizing costs. These functions are expected to transition into more value-based and strategic roles, while maintaining agility, efficiency and addressing the escalating risk of fraud, non-compliance and misconduct.

Rising challenges for compliance and ethics teams

Global organizations are facing intense market, regulatory, and macroeconomic constraints. The focus on operational efficiency, quality and cost has increased with many companies grappling with diminishing revenue and capital. Compliance, legal and ethics functions are not completely resistant to rapidly increasing costs and tend to opt for implementing manual reviews and traditional approach for controls. This can be an onerous exercise, leaving little time to address other important areas or even keep up with industry trends.

Additionally, many organizations can have processes that may buckle under the pressure of having under-invested legacy systems as they migrate to universally applicable systems. New advancements such as machine learning and artificial intelligence have the ability to transform compliance, risk and integrity frameworks, but building in-house capabilities can be slow and unviable, with costs being a deterrent. Another challenge is the availability of resources present locally with the appropriate skillsets and subject matter expertise. Companies would have typically had to retain large teams to manage the entire gamut of compliance, legal and ethics requirements – from internal investigations, to running data analytics to spot suspicious patterns, document reviews in litigation scenarios and several other processes. Their roles and responsibilities are widening in scope and internal control testing would be required to cover all aspects of compliance and ethics within an organization.

The business environment in a post pandemic world will get increasingly complex. Dealing with the trials of today as well as the roadblocks of tomorrow can be a formidable task. 

More and more organizations are exploring managed services as a model to transform their compliance and ethics functions and tide over these challenges.
Arpinder Singh
EY Global Markets and India Leader, Forensic & Integrity Services

Managed services: a game changer for compliance and ethics

Many large companies are looking to centralize the compliance and ethics functions within their global capability centres (GCCs) to address global regulatory requirements. They are turning to managed services, a differentiated service delivery model that integrates specific organizational functions with an external specialist, that is a strategic partner. This is unlike a traditional third-party consulting model where business support is provided on a one-off or ad hoc basis. The aim here is to solidify the relationship between the organization and external specialists for improved synergies, uniformity and receptiveness. Longer-term relationships tend to bring greater value, economies and help the company retain focus on core revenue generating areas. The competencies gained through a managed services model can also help building a collaborative centre of excellence (CoE) within their own system.

Integrating compliance and ethics functions can enable organizations to meet regulatory expectations, optimize budgets and absorb any variabilities that may arise. Any cost savings or unspent funds can further get channelized to other areas or functions that may need attention. Through flexible pricing models and the ability to scale up or down based on business needs, managed services can help control costs without impacting risk management effectiveness. As a collaborative model, it can also enhance the quality of work, as compared to a traditional business model with a third-party arrangement. For example, onboarding a new consultant for different services can be a cumbersome task, and the time spent could be utilized better to engage with the current managed services partner in discussing sharper delivery through a broader set of value-added services. Other benefits include consistency in performance and improved coordination because of the familiarity with the business and history of compliance issues, closer follow-through on projects, and greater security of information and data being shared.

Businesses are increasingly turning to specialized and strategic partners to provide them with an end-to-end delivery methodology, encompassing the required skills, resources and technology for running compliance and ethics functions efficiently.
Amit Rahane
EY India Forensic & Integrity Services Partner

An external strategic partner can become a trusted advisor to help organizations forge ahead on a growth path, create value while overcoming various challenges. Domain knowledge is preserved with one strategic partner over a period of time in comparison to it being fragmented with several service providers. Knowledge transfer can also be facilitated better for continuous improvement in compliance issues, and technologically enabled solutions tailored to the inherent risks faced by the organization.

Understanding the varied facets of managed services

Through a managed services approach, the strategic partner can transform the company’s compliance and ethics functions along with procedural updates to improve long-term operational quality and effectiveness. This model can operate well for decoupled processes, individuals and areas that may be deemed costly and may not add value to become a competitive differentiator.

  • Operating model: organizations can explore the following models to maximize value.
    • Asset based: the strategic partner would configure, operate and support the organization in their use of the workflows, processes and analytics delivered through a technology framework or a cloud-based platform
    • People based: the strategic partner would deploy a team to the organization’s operating environment, working as part of their team, to deliver specific process outcomes
    • People and asset based: the strategic partner would supply and manage the technology along with compliance personnel to operate the processes
  • CoE enabled: managed services are supported with a CoE team that provide leadership, leading practices, support, training, and collaboration for specific areas for superior results in ethics and compliance process. CoE is a governance model for guiding and managing a program throughout the organization and allows visibility within the company practices and can transform with digital ideas. It can be an intrinsic building block for realizing the potential and deriving value from digital data transformation solutions.
  • Scalability: managed services offers an easy to scale model and can help companies from uncertainties that may arise from several factors such as volume fluctuation, internal attrition or business expansions. Let us take an example of integrating processes and resources post an acquisition by a company. Managing third party onboarding for existing process along with integrating vendors from newly acquired business across the entities can become complex and unwieldy, as there would be a limited time period provided to complete the standard formalities. The existing team may not be equipped to handle the magnitude. The scalability challenges here can be addressed using managed services.
  • Agile model: with an agile methodology at its core, the managed services model can be more flexible. The technical excellence, design and competitive edge brought by agile brings ease and efficiency to overhaul processes and reduce turnaround time.

This article first appeared in Ethisphere Institute’s Business Ethics Leadership Alliance (BELA) South Asia magazine.

Summary

Global compliance, legal and ethics functions are faced with a continuously changing and volatile business environment. A managed services model can be a key tool to power through the disruptive forces led by its robust value proposition.

About this article

Authors
Arpinder Singh

EY Global Markets and India Leader, Forensic & Integrity Services

Leading forensic accountant and veteran expert witness. Advising global clients on compliance, anti-corruption and corporate governance. Disruptive thinker. Technology aficionado. Author.

Amit Rahane

EY India Forensic & Integrity Services Partner

Forensic investigator and purpose driven leader. Committed to building data-centric compliance programs. Problem solver.