Author: Huw Jones, Director of the Governance Team at Leathwaite. 

The role of a compliance officer was once a relatively low profile position, working diligently outside of the spotlight at most financial organisations. It was arguably something of a ‘plumbing’ issue at board level: generally not in “front of mind”, unless something went awry. Then came the financial crisis, where the plumbing went wrong for pretty much everyone at once. Since those seismic years, the head of compliance has rocketed to prominence at board level. This has led to a surge in demand for candidates who can operate at the new level demanded by the role.

The compliance department was previously a handful of people sharing generalist compliance experience, but now the function can be staffed by thousands, each with a specific focus. Heads of compliance need to be able to manage these teams, process huge amounts of vitally important information, and keep both the board and the regulators happy.

The compliance officer is now one of the CEO’s most important advisers. Below, we’ll look at the five top qualities for which CEOs need to look when hiring a Head of Compliance.

Excellent communication skills

The most important quality is communication skills. New regulations such as the Senior Managers Regime have placed an unprecedented amount of liability at the top of an organisation. With consequences that can potentially include prison time, senior staff need someone who can process and talk them through the new rules and identify exposed risks. An encyclopaedic knowledge of regulation is not useful if management cannot get the information they need to make sensible strategic decisions.

When seeking heads of compliance, a lack of communication skills presents a red flag, and often one that testing tools and psychological profiles will miss. The best indicator of strong communication skills is experience: where have they worked, to who did they report and who has provided references for them. This can be an effective way to filter for those that can communicate at the highest levels.

Regulator relationships

Working in compliance means working with the regulator. When this relationship is dysfunctional, setbacks and headaches are inevitable. Heads of compliance need to be credible to the regulators, which means understanding how they work and what they want. A good rapport built on mutual trust and clarity can make all the difference for a business to operate smoothly.

This has led, amongst some firms, to a surge in demand for candidates who have any experience working at the regulator. Unfortunately, this is not as safe a bet as it may seem. As with any field, some regulators leave their work with strong contacts and ties while others might leave few friends behind. Again, thorough referencing is needed to understand how these candidates are perceived by the regulator and the esteem they have earned from colleagues.

It is worth saying that these relationships are not used to trade favours or as ‘get out of jail free’ cards. The best candidates can provide functional, direct lines of contact in both day-to-day oversight and during investigations and enforcement. Candidates who will do well with the regulators are those who have been consistent, direct, clear and firm.

Big (finance) picture thinking

An interest in the activities of the regulator is crucial, but it is no longer the sole focus of the compliance officer. They must now understand the wider business in which they operate, as well as the forces affecting strategic decision making. At board level, it is not sufficient to dogmatically lecture leaders on what they can or cannot do. Understanding the market and the goals of the senior teams permits compliance officers to identify better business approaches that allow for growth while staying aligned to new regime rules. The need for compliance officers capable of both putting their foot down and working to identify a positive solution, has favoured those with front-office backgrounds or who have worked as lawyers. These tend to be more understanding of the pressures boards can be under and how rules are applied in specific sectors.

Team Leadership

Compliance headcounts have exploded in the past eight years, meaning heads are now managing bigger, less cohesive teams. Morale in the compliance departments at many companies has been low, due to constant pressure from both regulators and bosses, short deadlines and little positive feedback. The introduction of a strong leader can help inspire teams and ensure their contribution is recognised at board level.

Again, prospective compliance officers should be referenced not only through peers and bosses, but also the teams that supported them. Knowing whether their staff felt supported or inspired in their work, and how they felt about how challenges were addressed, is incredibly useful in determining if someone can inspire and bring teams with them. Though market wide hiring has resulted in compliance offers being better paid than ever, it remains a challenging field, requiring long hours and rigorous attention. A strong leader can stem attrition rates and ensure the team is able to monitor for, and anticipate, problems down the line.

Battle Scars

Longstanding compliance officers have survived one of the biggest waves of change the financial services industry has ever seen. Not all compliance officers have had the same experience of this change, however. A prospective head should be judged by the extent and severity of the issues they have tackled – the scars they have earned – and how valuable these experiences will be to their new role. Candidates who have all the qualities previously raised may still come up short if they lack experience with the kind of trials a big multi-national organisation or niche operator may encounter. Soon after the crisis, some compliance officers were overlooked for being associated with firms encountering problems, for fear of bad association. Where those officers were not to blame for the failings, this showed surprising disregard for the value of that experience.

The compliance officer of 10 years ago is vastly different from that of today. It was previously a junior role where technical aptitude, productivity and attention to detail were paramount. Now appointing a head of compliance means looking for a personality. Having the right technical expertise will serve a firm poorly if the candidate is not the right cultural fit, cannot make themselves understood or motivate their team, alienates the regulator or cannot keep their heads in a crisis.