In today’s challenging regulatory environment, a new corporate role of regulatory liaison with staff to support it is emerging to provide a central point of contact for the regulatory community. This role known by different names effectively is a liaison for an organization in their management of their regulators, and assists together with other support functions, e.g., legal, risk and compliance, to manage a organization’s regulatory issues. Historically, this role was assigned to a single executive dedicated to regulatory risk management, or as a part-time responsibility of that executive who usually was a member within the C-Suite of the bank, e.g. the chief operating officer (COO) or chief administrative officer (CAO). However, as the complexity and impact of regulations continued to develop and capture significant amounts of management’s time , many organizations began to recognize the need for a more comprehensive Regulatory Liaison Office (RLO) outfitted with staff consistent with other functions within the risk and compliance organizations.
The RLO typically has both tactical and strategic responsibilities. Specifically from the tactical perspective of managing regulatory examinations to ensure communication both written in the form of responding to deliverables, and verbal in the every-day working with exam regulators is clear and responsive to the regulatory exam team. The RLO provides regulators with a single point of contact during an examination — someone who is responsible for coordinating and overseeing all aspects of the exam, and delegating activities as appropriate depending upon the size of the review. Separate to the exam process, an effective RLO should provide transparent and detailed approaches for identifying, monitoring and reporting on matters of regulatory risk.
One key way the RLO can create value is by improving the communication and coordination of regulatory risk activities across national and multinational boundaries, including within individual business units and regions. Having personnel from the RLO in all regions, coordinated through global reporting lines, can help accelerate delivery of critical regulatory information back to the home office. This centralized information flow can be invaluable to senior management as an early warning indicator for emerging issues.
In addition, the RLO can play a critical strategic role by advising the organization on how prospective regulation may impact business operations, controls and strategies due to regulatory evolving demands. Beyond understanding the impact of the business’ strategy on the inherent regulatory risks of the organization, the RLO can help an organization understand regulatory expectations about how it can effectively mitigate those inherent risks. If the RLO is in touch with the regulatory community and its peers throughout the industry, it should be able to advise appropriately on the organization’s strategy and risk appetite — and in some cases help craft, shape or redirect the organization’s strategic approach.
A well-staffed, focused and respected RLO with the proper executive leadership can help an organization manage its regulatory concerns more effectively and speak with a single voice to the regulators that oversee its operations. Investing in an effective RLO can increase the organization’s credibility with regulators and may reduce misunderstandings related to issue remediation. Although quantifying the RLO’s value in absolute dollars can be difficult, in today’s regulatory climate of fast-paced change and increased scrutiny, many organizations are finding their RLO isn’t just a smart investment — it’s a basic operating necessity.
Posted by Tom Rollauer, Executive Director, Center for Regulatory Strategies, Deloitte & Touche LLP and Peter Reynolds, Director, Deloitte & Touche LLP