Strategic Planning For Compliance

Chicago Compliance GroupChicago Compliance GroupFebruary 8, 2010

Strategic Planning for Compliance

Ann OglanianCEO and PresidentCEO and PresidentReGroup, LLC

The Problem

How do we get it all done?gHow do I get some help?

The Solution

Translated strategic planningConnect to the businessSpeak their languageReSet ExpectationsReSet Expectations

2©ReGroup, LLC 2010

Presentation Overview

Part OnePart One•Why do strategic planning?•The 5 Step Process for Planning

Part Two•Strategic Planning

Part Three:•Getting Buy-inMeas ring progress•Measuring progress

Part Four: •Discussion – identifying and communicating the value of compliance


There is nothing so useless as gdoing efficiently that which should not be done at all should not be done at all.

~Peter F. Drucker


YOUSuccess is Linked

YOU

Compliance ProgramProgram

Your Firm

The Industry

Regulation


Your Skill Set

Actual vs PerceivedActual vs. PerceivedTechnical skills get you in the game; conducting yourself professionally leverages your chances of winningwinning#1 Problem area: Communication skillsHow can strategic planning increase your credibility


The Mindset

Why and how to define your jobWhy and how to define your jobWhat does success look like?

•

•

•

•

Wh t d it t b ff tiWhat does it mean to become an effective compliance professional?How do you measure success?


Time Analysis: Current (%)


Matching Allocation to Priorities


Why Do Strategic Planning?

Powerful tool to help define your own successPowerful tool to help define your own successEffective execution and measurable resultsFocus on the right issues Create consensus Credibility:

• Holding yourself to a high standard of accountability• Effective commutating in “CEO”

C t titi d t f fiCreate a competitive advantage for your firmMake a strong (and successful) argument for resources


Why Create a Written Document?

CredibilityCredibilityMeasurabilityClarity – basic management and disciplineEvidence – to meet the “show me” standardEvidence to meet the show me standard To share with others


Who are Your Constituencies?

Internal ClientsInternal Clients• Supervisory functions/Business Units

Control groupsManagementCompliance Steering CommitteeCompliance staffRegulatorsSh h ldShareholders


Using Your Constituencies for Planning

Information Gathering PhaseInformation Gathering PhaseParticipating in the planning process

• Represent business units?• Represent control groups?Represent control groups?

Participating in the Buy- In Process


The Five Steps of Strategic Planning

Step 1: Identifying Issues/Risks

Annual Review resultsPast, Present and Future Business

• Growth in assets and complexityGrowth in assets and complexity• New product development• Expertise and capacity• (Pre-Step 1: gather information on the direction of your

firm)firm)SEC best practices


Identifying Issues

The SWOT AnalysisThe SWOT Analysis• Strengths (internal)• Weaknesses (internal)• Opportunities (external)Opportunities (external)• Threats (external)

Factors that are both STRENGTHS (internal) and OPPORTUNITIES (external) = a potential area for growthFactors that represent WEAKNESSES (internal) and threats (external) = require action


SWOT AnalysisStrengths Weaknesses

O t iti Opportunity OpportunityOpportunities Opportunity-Strength (OS)

Use strengths to take advantage of

Opportunity-Weakness (OW)Overcome weaknesses by taking advantage

Internaltake advantage of opportunities

taking advantage of opportunities

Threats Threat-Strength Threat-Weakness (TS)

Use strengths to avoid threats

(TW)

Minimize weaknesses and

Externalavoid threats


SWOT Analysis

Strengths Weaknesses

Internal

Opportunities Threats

External


Step 2: Prioritize Issues

Not every issue deserves the same weight; you must prioritizeNot every issue deserves the same weight; you must prioritize because you cannot do everything at once.Factors:

• Business goalsSEC i t t• SEC interests

• Patterns of conduct• Change• Intuition• Intuition

Value judgments


Don’t Be Tempted to…

Demote issues thatDemote issues that…• You don’t know how to address• You think will be expensive…(cost comes later)• Relate to senior managementRelate to senior management

Give priority to issues that are…• Arguably petty or unsupportable• That already have overbuilt solutionsat a eady a e o e bu t so ut o s


Step 3: Match Objectives to the Risks

Define Categories:Define Categories:• Compliance Process:

P&PTrainingE l tiEscalationExceptions

• Substantive areasDeliverablesDeliverablesMilestones/Calendaring


SMART Plan

SpecificSpecificMeasurableAccountableAccountableRealisticTime-Bounded


Step 4: Identify Necessary Resources

Executive AttentionExecutive Attention• Corporate Governance: who decides?

Legal resourcesHR resourcesTechnology resourcesEducation and TrainingProject ManagementN t kiNetworkingInternal vs. External


Resources Necessary for Success

ExpertiseExpertise• Professional services• Possible selection of counsel with expertise in investment

managementPeople

• Add a full time junior operations person with industryAdd a full time junior operations person with industry experience

• Outsource accounting; requires research to identify the appropriate candidate

Technology• Resources appear to be adequate; utilizing existingResources appear to be adequate; utilizing existing

technologyEducation

• Internal time from colleagues to our consulting model and the due diligence process

• On-going coaching• On-going coaching• May consider a compliance certification (Q4)


Step 5: Identify Costs of the Initiatives

Dollars $$$Dollars $$$Employees – “FTEs”• Compliance Department• Other DepartmentsOther Departments

TimeTechnology/SystemsOutside Counsel/ConsultingOuts de Cou se /Co su t gBenchmarking


Leveraging Leadership Within Compliance

Compliance Plan Which Is Adopted By ManagementCompliance Plan Which Is Adopted By ManagementGoals and Objectives for Each Compliance Sub-unitIndividual Success Criteria Which Feed Into Group Goals


Setting StandardsExpectations for Compliance Professionals

Conduct compliance responsibilities in accordance with the highest p p gethical standards;Demonstrate knowledge of the firm’s technical compliance requirements;Know the role of the compliance department;Demonstrate knowledge of the firm’s business;Conduct compliance responsibilities in a consultative and professional manner;Be pro-active, inquisitive, able to exercise professional skepticism, and able think critically;Contribute to the identification, assessment and mitigation of complianceContribute to the identification, assessment and mitigation of compliance risk;Assist in the creation of policies and procedures to address the identified risks; Properly and appropriately escalating compliance issues; andP ti i t i t i i d t ff t t d l d i l tParticipate as appropriate in industry efforts to develop and implement good compliance practices for advisers


Buy-In Process

Create a management structure that has oversightCreate a management structure that has oversight• Requirement of a Compliance Steering Committee

Mindset: Support vs. ControlPresent the planPresent the plan

• Requested feedback• Asked them to ratify the plan as the firm’s plan

Set expectations by defining successSet e pectat o s by de g successIf all else fails…call it an ‘experiment’


Sample OutlineCompliance Department Mission Statement

4. Supervisory Structure and AccountabilityStatement

Standards of Conduct for Compliance ProfessionalsParticipantsCompliance Credentials

Accountability5. Administration of the Compliance

Program6. Substantive Issues

Compliance CredentialsBackground

• Change• Progress on Previous Plan

A. Books and RecordsB. Trading and Portfolio

ComplianceC. Code of Ethics

Risk Analysis Key Issues (Prioritized)

1.Inspection and Enforcement2.Culture of Compliance

D. New Product/Instrument/Client Type

Required ResourcesCost Anal sis

p3.Risk Identification and Mitigation

Processes

Cost Analysis


Process

Reviewed business modelReviewed business model• Client type, investment mandate• Historic and anticipated growth

Reviewed documents: how we present ourselves in writingReviewed documents: how we present ourselves in writing• Model RFP, Form ADV, IA Agreement, written policies and procedures, sales presentation

Reviewed current time allocation for SabrinaSWOT AnalysisIdentified key operational/compliance risk areasDeveloped alternative mitigation solutions for consideration

©ReGroup, LLC 2010 29

Strategic Planning in Five Steps

• Identify risks based upon conflicts of1

Identify risks based upon conflicts of interest

• Prioritize risks2 • Prioritize risks

3• Mitigate Risk

Link key initiatives and objectives: a “SMART” Plan3 Link key initiatives and objectives: a SMART Plan

4 • Assign Resources and Budget

5 • Report on progress


Communicating the Plan

The compliance program may be considered ‘just overhead’The compliance program may be considered just overhead• Various departments may be asked to contribute to and support the plan with time and money

Consider a mini-PR plan for your Strategic PlanC li D t t• Compliance Department

• Compliance Committee• Executive Management• Various Department Meetings – 10 min• Various Department Meetings – 10 min

Wash, rinse, repeat…good messages bear repetition


M k Y Id Sti kMake Your Ideas Sticky

Compliance ideas are not naturally sticky…or interesting…Sticky = effective

Six Principles of Stickiness 1. Simple2. Unexpectedy

The Curse of Too Much KnowledgeEver try humor?ReGroup Recommended Reading:

• Made to Stick Chip Heath and

p3. Concreteness4. Credentialed 5. Emotional6. Story• Made to Stick, Chip Heath and

Dan Heath y

SUCCESs


Execution: Measurability

Why measureWhy measure• Holding yourselves accountable• Creating expectations

Management• Predictability

ColleaguesDefining your own success

It’ j b ’ th t• It’s your job – you’re the expert• Proactively/empowering compliance

Playing to your strengths


Overhead vs. Value-Added

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Overhead vs. Value-Added

Assist in protecting the firm’s reputationAssist in protecting the firm s reputation

Design a compliance program to meet regulatory requirements and improve internal efficiencies

Strengthen client relationships; improve sales and retentionStrengthen client relationships; improve sales and retention

Create transparency by packaging information in a manner designed to enhance decision-making

Reduce regulatory and business risks

Improve individual employees’ efficient execution of their compliance responsibilities

Interact, transact and integrate with vendors


Credibility: Become a Trusted Adviser

System of compliance must win trust of the boards, employees, y p , p y ,vendors, clients and regulators

Steps to building trust:

Transparent: Open, going beyond current requirements or expectations

Responsible: Clearly acting in the broader and longer term interests of all

Uncompromising: Committed to highest ethical positionSuccessful: Results-drivenTemperate: Structured and executed against risks, avoiding reactionary decisionsavoiding reactionary decisions



Thank You

Ann OglanianPresident and CEOReGroup LLCReGroup, [email protected]