The CFPB has recently required both depository institutions and independent mortgage companies to increase their compliance staff. A number of companies are struggling to understand how many compliance resources are needed. We think ratios are a crude and relatively ineffective tool in this evaluation. Lenders have diverse needs for compliance staffing based not only on the jobs the compliance staff perform but also on the company’s overall culture and operating model. A combination of an integrated and modular approach to compliance management can help diminish the total staffing needs while allowing the organization to appropriately budget for growth.

The keys to an effective compliance management system are:

1. Identifying problems before they become widespread,
2. Effectively discovering and correcting the root cause to prevent recurrence,
3. Testing to insure the corrections are effective, and
4. Documenting the process to show examiners that appropriate controls are in place.

Not surprisingly, those are also objectives of operating an efficient and profitable organization that reports its corrective actions to senior management.

Compliance management necessitates the alignment of a company’s operations to its policies and procedures. Absent such alignment, oversight through additional staffing is inefficient at best and potentially futile. Experience shows that alignment is much harder to achieve through dictated mandates from the compliance department. Technology can be a significant aid but is not an end all solution.

An organization that engages employees in continuously improving procedures is more likely to achieve the goal of maintaining alignment of operations and procedures. This allows the organization to rely on those procedures for compliance purposes as well as for strategic business planning.

We recommend a process diagram along with procedure and training manuals. A process diagram that is truly aligned with the operational process allows management to readily visualize the present and future operations. This empowers management to implement effective change for compliance corrections as well as for rapid growth or strategic posturing.

Absent continuous alignment of procedures and operations, change requires an expensive and time consuming assessment of the present state of operations before the company can begin making changes. Misalignment also opens the door for multiple undocumented alternative processes, which can lead to changes being ineffective in all but the one instance that prompted the change. This may be compounded if post corrective monitoring assumes a uniform process yet detects ongoing violations and errantly reports the change as ineffective.

With the right approach and discipline, organizations can have a best in class compliance management system that enhances management’s flexibility and strategic response times. Staffing is distributed throughout the organization by utilizing all departments in a coordinated effort including IT, Operations, Quality Control, HR, Accounting, Strategic Development, Production, and Compliance.

We believe that a compliance initiative should help a company grow rather than hold it back. Our experience with large and small company process re-engineering and workflow modeling allows us to provide any level of support in your CMS design and policy and procedure alignment projects.