Compliance costs happen to be as results of local, national or even international regulation (for instance MiFID II or GDPR applying to countries in European Union).
Global firms operating all over the world with varying new regulations in each country tend to face significantly larger compliance costs than those functionating solely in one region.
It may include variance compliance – human resources policies, independent audits, quarterly reports, environmental assessments etc.
If that is the case, enterprises already competing in the concrete market mostly favor new regulations in order to keep new entrants from entering and making bigger competition.
Although exceptions exist, some said they considered exiting market due to rising regulations, others admitted thinking about moving their fund domicile.
[5] The OECD established a taxonomy of regulatory costs[6] that goest like this : Banks have faced a huge wave of new regulations in the decade after financial crisis in year 2008.
The pace of incoming changes was enormous, so banks have been forced to hire remarkable number of employees to manage with this situation and be ahead of the regulations and avoid paying fees for any breaches.
Expectation on compliance has largely changed mainly over the decade after crisis in 3 areas – culture and conduct risk, personal liability, technology.
And as regulations keep coming, alongside companies try and focus more on transparency and firm’s ethics, money and time spend on compliance grow.
[11] If we compare compliance and non-compliance costs, breaches of the rules mostly lead to negative reactions from population, fines or in rare cases to prohibiting to do a business activity.