Compliance at Any Cost?
Friday, June 29, 2007
Posted in: Compliance
Want to put a number to your cost of compliance? The American Bankers Association can help.
Last week while I was doing research to prepare for a presentation I gave on compliance to a group of banking and finance executives, I stumbled across a compliance cost calculator spreadsheet available for download on the ABA website.
Before you start plugging your own data into the spreadsheet, here’s some data to help put the overall cost of compliance into perspective:
- "Over the past few years...budgets that were dedicated to dealing with regulations were rising at a rate that was twice as fast as the IT budgets." — Jorge Lopez, Managing VP, Gartner Research
- “AMR Research released a study that predicts the cost of compliance over the next five years will reach the $80 billion mark.”
- “Extrapolating from an assessment of the federal regulatory enterprise by economist Mark Crain, regulatory costs hit an estimated $1.13 trillion in 2005”
You can only control the cost of compliance to your business when you can monitor and measure the cost. Can you really measure the cost of manual compliance tasks all the time? Yes. As they say: everything can (and should) be measured – especially compliance activities. I’ve seen first-hand the shock when a customer sees the actual cost calculated from our software compared with what they thought it would cost – shock and awe. But the ability to measure compliance costs has given them the ability to reduce costs – and reduce them they have.
The ABA spreadsheet model isn’t the same as actually collecting the real costs, but it will get you in the ballpark.
A final word of caution before you use the ABA spreadsheet: the website quotes one CEO who after seeing the total cost numbers groaned -- "That's a scary sum…"