Your Levels of Defense

Proactive – before trouble grows

A thorough vetting and hiring process is the first defense your firm has against regulatory or legal problems. Don’t hire advisors or staff that will cause you problems. Having a documented and tested process will strengthen your risk management and your bottom line.

Every firm tries to minimize operations costs, balancing services levels with expenses. And nobody really wants to pay a lot for compliance. Why not integrate compliance into your operations structure? Increase the number of eyes looking out for your firm. As an added benefit, you can usually increase productivity once you map all the actual processes.

A proper process requires testing that will enhance audit outcomes. If you can give regulators and senior management evidence of a rigorous audit program, with root cause analysis and corrective actions, it boosts their confidence in your program. Teaching your audit team process improvement skills can lead to them finding more cost savings.

Reactive – when trouble comes

If, or when (it happens to the best of us), your problem becomes an investigation or legal action, a quality testing and process improvement program may lower your legal costs or awards. A mistake can always be made, but if you show that you seriously tried to anticipate how to detect and prevent problems, it only adds to your credibility.

A root-cause analysis can help to permanently eliminate the source of your trouble. It also shows you are committed to your responsibility to detect and prevent violations of the rules. Keep asking "Why did this happen?" Then you can fix it. And document it. And maybe come across some efficiencies along the way.

You can’t control for everything but if you have a process to deal with the surprises, the black swans, the once in a lifetime disaster, you are ahead of the curve.