Chicago Compliance Group

February 8, 2010

Strategic Planning for Compliance

Ann Oglanian
CEO and President
ReGroup, LLC
 The Problem

 How do we get it all done?

 How do I get some help?

The Solution

 Translated strategic planning

 Connect to the business
 Speak their language
 ReSet Expectations

©ReGroup, LLC 2010

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 Presentation Overview

 Part One
• Why do strategic planning?
• The 5 Step Process for Planning
 Part Two
• Strategic Planning
 Part Three:
• Getting Buy-in
• Measuring progress
 Part Four:
• Discussion – identifying and communicating the value
of compliance

©ReGroup, LLC 2010

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 There is nothing so useless as
doing efficiently that which
should not be done at all.
~Peter F. Drucker

©ReGroup, LLC 2010

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 – YOU
Success is Linked
– Compliance
– Program

– Your Firm

– The Industry

– Regulation

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 Your Skill Set

 Actual vs. Perceived

 Technical skills get you in the game; conducting
yourself professionally leverages your chances of
winning
 #1 Problem area: Communication skills
 How can strategic planning increase your
credibility

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 The Mindset

 Why and how to define your job

 What does success look like?
•
•
•
•
 What does it mean to become an effective
compliance professional?
 How do you measure success?

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 Time Analysis: Current (%)

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 Matching Allocation to Priorities

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 Why Do Strategic Planning?

 Powerful tool to help define your own success

 Effective execution and measurable results
 Focus on the right issues
 Create consensus
 Credibility:
• Holding yourself to a high standard of accountability
• Effective commutating in “CEO”
 Create a competitive advantage for your firm
 Make a strong (and successful) argument for resources

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 Why Create a Written Document?

 Credibility
 Measurability
 Clarity – basic management and discipline
 Evidence – to meet the “show me” standard
 To share with others

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 Who are Your Constituencies?

 Internal Clients
• Supervisory functions/Business Units
 Control groups
 Management
 Compliance Steering Committee
 Compliance staff
 Regulators
 Shareholders

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 Using Your Constituencies for Planning

 Information Gathering Phase

 Participating in the planning process
• Represent business units?
• Represent control groups?
 Participating in the Buy- In Process

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 The Five Steps of Strategic Planning
Step 1: Identifying Issues/Risks

 Annual Review results

 Past, Present and Future Business
• Growth in assets and complexity
• New product development
• Expertise and capacity
• (Pre-Step 1: gather information on the direction of your
firm)
 SEC best practices

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 Identifying Issues

The SWOT Analysis

• Strengths (internal)
• Weaknesses (internal)
• Opportunities (external)
• Threats (external)
 Factors that are both STRENGTHS (internal) and
OPPORTUNITIES (external) = a potential area for growth
 Factors that represent WEAKNESSES (internal) and threats
(external) = require action

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 SWOT Analysis
Strengths Weaknesses
Opportunities Opportunity- Opportunity-
Strength (OS) Weakness (OW)
Overcome
Internal Use strengths to weaknesses by
take advantage of taking advantage
opportunities of opportunities

Threats Threat-Strength Threat-Weakness

(TS) (TW)

Use strengths to Minimize

External avoid threats weaknesses and
avoid threats

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 SWOT Analysis

 Strengths  Weaknesses
Internal

 Opportunities  Threats
External

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 Step 2: Prioritize Issues

 Not every issue deserves the same weight; you must prioritize
because you cannot do everything at once.
 Factors:
• Business goals
• SEC interests
• Patterns of conduct
• Change
• Intuition
 Value judgments

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 Don’t Be Tempted to…

 Demote issues that…

• You don’t know how to address
• You think will be expensive…(cost comes later)
• Relate to senior management
 Give priority to issues that are…
• Arguably petty or unsupportable
• That already have overbuilt solutions

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 Step 3: Match Objectives to the Risks

 Define Categories:
• Compliance Process:
 P&P
 Training
 Escalation
 Exceptions
• Substantive areas
 Deliverables
 Milestones/Calendaring

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 SMART Plan

 Specific
 Measurable
 Accountable
 Realistic
 Time-Bounded

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 Step 4: Identify Necessary Resources

 Executive Attention
• Corporate Governance: who decides?
 Legal resources
 HR resources
 Technology resources
 Education and Training
 Project Management
 Networking
 Internal vs. External

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 Resources Necessary for Success

 Expertise
• Professional services
• Possible selection of counsel with expertise in investment
management
 People
• Add 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 existing
technology
 Education
• Internal time from colleagues to our consulting model and the
due diligence process
• On-going coaching
• May consider a compliance certification (Q4)

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 Step 5: Identify Costs of the Initiatives

 Dollars $$$
 Employees – “FTEs”
• Compliance Department
• Other Departments
 Time
 Technology/Systems
 Outside Counsel/Consulting
 Benchmarking

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 Leveraging Leadership Within Compliance

 Compliance Plan Which Is Adopted By Management

 Goals and Objectives for Each Compliance Sub-unit
 Individual Success Criteria Which Feed Into Group Goals

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 Setting Standards
Expectations for Compliance Professionals
 Conduct compliance responsibilities in accordance with the highest
ethical 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 compliance
risk;
 Assist in the creation of policies and procedures to address the identified
risks;
 Properly and appropriately escalating compliance issues; and
 Participate as appropriate in industry efforts to develop and implement
good compliance practices for advisers

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 Buy-In Process

 Create a management structure that has oversight

• Requirement of a Compliance Steering Committee
 Mindset: Support vs. Control
 Present the plan
• Requested feedback
• Asked them to ratify the plan as the firm’s plan
 Set expectations by defining success
 If all else fails…call it an ‘experiment’

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 Sample Outline
 Compliance Department Mission 4. Supervisory Structure and
Statement Accountability
 Standards of Conduct for Compliance 5. Administration of the Compliance
Professionals
Program
 Participants
6. Substantive Issues
 Compliance Credentials
A. Books and Records
 Background
B. Trading and Portfolio
• Change
Compliance
• Progress on Previous Plan
C. Code of Ethics
 Risk Analysis
D. New Product/Instrument/Client
 Key Issues (Prioritized)
Type
1.Inspection and Enforcement
 Required Resources
2.Culture of Compliance
 Cost Analysis
3.Risk Identification and Mitigation
Processes

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 Process

 Reviewed business model

• Client type, investment mandate
• Historic and anticipated growth
 Reviewed documents: how we present ourselves in writing
• Model RFP, Form ADV, IA Agreement, written policies and
procedures, sales presentation
 Reviewed current time allocation for Sabrina
 SWOT Analysis
 Identified key operational/compliance risk areas
 Developed alternative mitigation solutions for consideration

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• Report on progress –5
• Assign Resources and Budget –4
• Mitigate Risk –3
Link key initiatives and objectives: a “SMART” Plan
• Prioritize risks –2
• Identify risks based upon conflicts of interest – 1
Strategic Planning in Five Steps
 Communicating the Plan

 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 Plan
• Compliance Department
• Compliance Committee
• Executive Management
• Various Department Meetings – 10 min
 Wash, rinse, repeat…good messages bear repetition

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Make Your Ideas Sticky

 Compliance ideas are not naturally Six Principles of Stickiness

sticky…or interesting… 1. Simple
 Sticky = effective 2. Unexpected
 The Curse of Too Much Knowledge 3. Concreteness
 Ever try humor? 4. Credentialed
 ReGroup Recommended Reading: 5. Emotional
• Made to Stick, Chip Heath and 6. Story
Dan Heath
SUCCESs

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 Execution: Measurability

 Why measure
• Holding yourselves accountable
• Creating expectations
 Management
• Predictability
 Colleagues
 Defining your own success
• It’s your job – you’re the expert
• Proactively/empowering compliance
 Playing to your strengths

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Overhead vs. Value-Added

 
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 Overhead vs. Value-Added

 Assist in protecting the firm’s reputation

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

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 Credibility: Become a Trusted Adviser

System of compliance must win trust of the boards, employees,

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 position
Successful: Results-driven
Temperate: Structured and executed against risks,
avoiding reactionary decisions

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 Insanity:
Doing the same thing over and
over again and expecting
different results.
~Albert Einstein

©ReGroup, LLC 2010

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Thank You

Ann Oglanian
President and CEO
ReGroup, LLC
415.681.2230
aoglanian@regroupllc.com