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Calculating your Cost of Compliance

I am always surprised when I have to remind compliance professionals that compliance happens in the first line. It’s obvious when you verbalise it but I find that even people who are aware of it don’t really realise it.

One way to “test” this is to ask firms their cost of compliance. Often you will find people rushing to tally up the consultant’s invoices along with the compliance and risk overhead, but very few actually think about the business team and the Exec’s time.

Here is how a medium-sized insurer spends over half a million per year on compliance activities that add no value to the business:

      • 1. Execs & the Board: 120k / year
        At least 4 Board members (@150k/year loaded cost) spend 20% of their time worrying about compliance due to lack of transparency and accountability within the business.
      • 2. Risk Teams: 191k / year
        A Risk team of 3 members (@85k/year loaded cost) spend 75% of their time collecting, sanitizing and preparing risk reports that just get the cursory flick-through to tick a box, leaving them with little time for meaningful analysis.
      • 3. Business Team: 75k / year
        A typical business with five key functions (Finance, Actuarial, IT, Ops, HR) means at least 10 people are involved in the quarterly risk reporting cycles (Executive owner + direct report @75k/year loaded cost) spending 10% of their time on compliance-related tasks that add little to their day-jobs.
      • 4. Compliance Team: 120k / year
        A Compliance team of 2 members (@75k/year loaded cost) spend 80% of their time navigating and managing regulatory text, leaving them with little time for meaningful interpretation.
      • 5. Consultants: 10k-50k / year
        This is discretionary but given a new set of regulation being implemented almost annually – GDPR, IDD, SM&CR etc. medium-size firms are more likely to engage consultants for support once or twice a year at 10k to 25k per engagement.

Struggling with your compliance overhead? Minimising compliance overhead is what we are best at CoVi Analytics so get in touch today to see how we can help – info@covianalytics.com.

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