People
Compliance has shifted from a back-office obligation to a boardroom priority. Regulatory demands intensified following the global financial crisis, and as socio-economic priorities have also evolved, the cost of maintaining compliance has surged. For many organisations, compliance budgets now rival those of revenue-generating functions, yet the pressure to contain costs remains relentless.
This presents a fundamental challenge: how can Compliance functions remain effective – ensuring regulatory adherence and risk mitigation – while also becoming more efficient? How can they achieve more, with fewer resources? The answer lies not in choosing between efficiency and effectiveness, but in striking the right balance through strategic transformation.
The complexity of compliance today
Modern Compliance functions operate in an environment of unprecedented complexity.
Regulatory scrutiny remains high
For Boards, the cost of non-compliance – both financial and reputational – remains a top concern. Global regulators are demanding greater transparency, faster response times, and demonstrable control frameworks, particularly as bad actors exploit rapidly evolving AI tools to commit increasingly sophisticated offences.
On top of this, organisations must manoeuvre through a complex web of evolving regulations that vary by jurisdiction, industry, and even specific business activities. Developing a robust compliance infrastructure capable of adapting to changing regulations efficiently is essential.
Global operations face fragmented regulation
Multinational organisations must navigate a patchwork of local, regional, and extraterritorial regulations. This challenge is further amplified by the current geopolitical landscape, where deglobalisation is fragmenting markets, and the measure of “regulatory burden” is increasingly used by authorities as a strategic tool to gain competitive advantage for their jurisdictions.
This fragmented regulatory environment often results in duplication of controls across jurisdictions, increasing the pressure on Compliance teams. For instance, a financial institution operating in multiple countries must comply with each country's specific regulatory requirements, often leading to redundant processes and increased operational costs. Harmonising these requirements and creating a unified compliance strategy is essential to drive efficiency.
Data challenges and innovation opportunities
Today’s Compliance functions are awash with data, but often lack the tools to harness it effectively. By leveraging emerging technologies such as AI, machine learning, and robotic process automation to transform compliance delivery, organisations can analyse vast amounts of data, identify patterns, and predict potential compliance risks – improving decision-making at the Board level. However, successful integration of these technologies into existing compliance frameworks requires careful planning and execution.
Reimagining the Compliance function: Strategies for effectiveness
Historically, as regulatory risks and compliance requirements have grown, firms have often layered on Compliance resources to address new regimes. This has resulted in inefficiencies in the compliance framework, and challenges in balancing the Board’s desire for cost-effectiveness with Compliance’s ability to manage fast-evolving risks and regulatory demands.
To address these pressures, Compliance functions must be fundamentally reimagined, not just incrementally improved. Our work with global financial institutions demonstrates that compliance costs can be reduced by over 30%, while simultaneously improving effectiveness and resource allocation. This shift enables firms to address the most critical regulatory risks, both current and future.
Achieving strategic alignment with business goals
Too often, Compliance functions operate in isolation, rather than in alignment with the business. They must, of course, remain an independent function – in the second line of defence – but embedding Compliance’s objectives within the core business strategy can drive far greater value. This alignment fosters a culture of compliance, where every employee understands the importance of – and their role in – maintaining regulatory adherence and protecting the firm.
Shifting from reactive policing to proactive risk management is equally powerful. Traditional Compliance functions have focused on identifying and addressing issues retroactively, alongside their advisory and independent sign-off roles. A transition to a more proactive approach leverages smarter ways to monitor business activity, anticipate risks, and implement preventative measures before problems arise. Adopting this proactive stance requires advanced capabilities to monitor market and regulatory trends, and assess their potential impact.
Empowering the first line of defence – typically business units and operational teams – with clear frameworks and tools is also essential. Dedicated first line teams within global institutions have developed significantly over the last decade. In the early stages, these control teams primarily focused on managing financial risks, while the development of capabilities to effectively manage non-financial risks is ongoing. Providing these teams with cutting edge tools, training and frameworks enables the first line of defence to take ownership of compliance and address issues at source – fostering responsibility and accountability across the organisation.
Harnessing emerging trends and innovation
An important emerging trend must be considered: the near-term future global ecosystem will see more widespread use of blockchain technology. Coding compliance at the source will therefore be a critical enabler of cost-effective compliance.
As the pace of innovation accelerates, managing compliance risks, alongside other risks, becomes more crucial. Importantly, the faster the rate of innovation in technology and business, the more important it is for Boards to be able to make decisions about risk-taking, not just risk management. Compliance functions play a crucial role in enabling this.
Driving operational optimisation
Firms must apply a structured methodology to identifying and eliminating inefficiencies in their compliance operations. Zero-based redesign is one such approach, involving agreeing the required outputs and value of Compliance functions and building the operating model from the ground up. This includes optimising organisational structure, resourcing strategies, location models, process outsourcing, technology, etc. It challenges legacy structures, including on cost, ensuring that every expense is justified based on current and future needs and priorities. By adopting zero-based redesign, firms can allocate resources more effectively and efficiently.
Organisational hygiene reviews can complement operational optimisation. By assessing the Compliance function's structure, processes, and workflows, firms can identify and streamline areas of duplication and inefficiency to drive significant cost savings and improved operational performance. For example, consolidating overlapping activities across regions and lines of defence can enhance coordination and reduce redundancies.
Additionally, process redesign is essential for simplifying workflows and eliminating non-value-adding activities. This includes automating routine tasks, standardising procedures, and implementing best practices to enhance the overall quality and consistency of compliance activities.
Intelligent automation, analytics, and risk-based approaches
When cutting-edge technology is applied intelligently, it can be transformative. In an era where AI and other technologies are rapidly evolving the methods of misconduct by bad actors, firms must deploy the most advanced technology to safeguard client trust and remain resilient.
Machine learning (ML) offers particularly powerful benefits for Compliance functions. By analysing historical data, ML algorithms can detect patterns and enable teams to prioritise high-risk areas. This predictive capability enhances the focus and effectiveness of Compliance teams, while reducing false alerts regarding potential misconduct.
Automating routine tasks – such as binary sign-off decisions, surveillance alert triage, and case closure – can improve accuracy and consistency, minimising human error while allowing institutions to focus resources on more complex and strategic activities.
Data aggregation is another foundational step for compliance monitoring. Consolidating data from various sources into a single source of truth enables a holistic view of the compliance landscape. This approach enables more effective monitoring, reporting, and decision-making while supporting advanced analytics. Armed with these insights, Compliance teams can identify trends, assess risks, and measure the impact of the firm’s initiatives effectively.
How we help our clients
AlixPartners’ Compliance 4.0 framework outlines a maturity model that moves from fragmented, manual processes to AI-enabled, predictive compliance. This framework provides a roadmap for organisations to transform their Compliance functions, striking a balance between efficiency and effectiveness. By leveraging intelligent automation, advanced analytics, and risk-based approaches, organisations can create agile, responsive, and proactive Compliance functions.
We bring a unique combination of tools, experience, and execution capability to compliance transformation:
- Tools, frameworks, and accelerators: Our proprietary levers span both traditional and digital domains – from procurement spend reviews to robotic process automation. These tools enable us to build tailored transformation roadmaps that balance cost, risk, and impact.
- Industry experience and implementation success: Our teams include former Chief Compliance Officers alongside other experienced professionals who have led compliance transformations at institutions of all sizes and sectors. We deeply understand business priorities, regulatory complexities, and the operational realities that can determine the success or failure of change initiatives in Compliance functions. We don’t just design solutions – we execute them.
The path forward
For CFOs and CEOs, the message is clear: Compliance is far more than a cost centre – it’s a critical strategic lever for managing emerging business threats. But to unlock its full potential in the most cost-effective way, it must be rebalanced.
The time to act is now. Cost pressures will not abate any time soon, and the risks facing businesses, coupled with an increasingly complex regulatory landscape, continue to grow. Organisations that take bold steps to modernise their Compliance functions will not only mitigate risk but secure a tangible competitive advantage, positioning themselves for long-term success.
