Synopsis of article “Compliance Risk in the Evolution of the Investment Services – Characteristics, Control Tools and Organizational Issues”

Synopsis of the article, dedicated to compliance risk in the evolution of the investment services is done. Business research and its purposes are identified, investigated problems and categories of research are listed. Data collection methods used for this research are considered. Main results and conclusions are outlined and discussed.

Keywords: compliance, risk management, risk measurement.




The purpose of business research concerning compliance was to analyze current situation of compliance practice in banks and investment companies, and to estimate possible trends in compliance practices. Four main areas of investigation were defined: place of compliance function within organizations, roles of compliance functions, methods of risk management in investment sphere (namely: measuring, transferring and mitigating compliance-related risks) and interaction of compliance processes inside organizations and in outside environment.

Data collection was performed using a questionnaire designed and implemented by researchers from SDA Bocconi School of Management.

The questionnaire was prepared basing on the results of pilot research which took place in January and February 2007. The main investigation took place from Novermber 2006 up to February 2007 and included 35 banks and investment companies. During research they were classified both by environmental features (companies working internationally or domestically) and by their function (banks or other financial intermediaries).

The results of the research can also be classified according to investigation areas. Concerning the position of compliance function within organizations, the research has shown that compliance mainly is executed and controlled by someone of the supervisors, or a person who reports to them directly. For companies operating internationally, decentralized compliance decisions are more common, and for those operating nationally ”“ the centralized model is used often. Links between those dealing with compliance issues and other support units are quite limited, and there is no separate budget for compliance usually.

Functions necessary for compliance are quite diversified, and adequate employees should be assigned these tasks. In general, compliance functions are more developed within companies operating internationally.

Concerning methods of risk management, a lack of methodical approach for compliance has been detected, both in IT sphere and in compliance risk measurement. Companies with greater complexity have shown better awareness of compliance problems. Low awareness of the importance of compliance functions has turned out to be a major factor hindering MiFID implementation processes. Finally, compliance should be part of the financial ethics for banks and other financial intermediaries. Research has shown that if compliance functions are included into the company’s value system, it becomes more visible and gains concreteness.

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