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If your firm isn’t already using an outside consultant, you may want to ask yourself “why not?” Oftentimes at hedge funds, compliance officers struggle to successfully fulfill the requirements of the job without an essential tool in their toolbox: the outside compliance consultant. Why? The primary reason is simple: resources. When your head is down and you are doing your job on a day-to-day basis, it is very difficult – practically impossible – to stay up to date with regulatory developments, and perhaps more importantly, business best practices.
Time is Money …
All of us have limited resources in terms of time. In a nutshell, the outside compliance consultant has their ear to the ground on a full-time basis. It is his or her job to be aware of the latest regulatory developments while an in-house person focuses on the day-to-day challenges of their firm’s business. An outside compliance consultant also has the advantage of insight into how a range of firms, often a large segment of the market of peers and competitors, implement best practices. Even finding the time to attend an industry conference can be a challenge. For every in-house counsel or compliance officer that finds the time to attend, there are dozens more who may not be able to break away from their offices. The outside compliance consultant can fill in the blanks for those who cannot make it themselves, and offer help by filling in knowledge gaps. In effect, it’s almost like being in two places at once.
The second reason is efficiency. How many times have you needed to find a template for a new policy required to adapt to a change to your business activity? Or maybe you need to know the industry best practice for mitigating a specific conflict of interest that’s arisen. Rather than trying to Google the right answer or attempting to guess which of your peers might have had a similar experience, outside compliance consultants have collective knowledge within their firm. You’ll find the speediness of a response to your issue invaluable.
If you run a cost-benefit analysis for your own firm, it’s hard not to see that it is absolutely worth engaging an outside compliance consultant on an annual basis for these reasons alone. But an additional reason is to handle one-off projects or conduct ongoing regular compliance testing that your in-house staff doesn’t have the bandwidth to complete. Without an outside compliance consultant, you may find that certain projects are constantly “back-burnered.” Using a compliance consultant to supplement your full-time staff can help your firm to clear out the backlog of compliance projects that you need to get done.
But Quality Matters…
Not all compliance consultants are created equal. It is not enough to have an outside compliance consultant that knows the rules and that can run down a checklist. A quality consultant should get to know your business and gain a real understanding of its business risks as well as how your compliance program is designed to mitigate those risks.
A compliance consultant should work with you over the long haul (beware firms that have high turnover) and become an ongoing advisor. He or she should understand your business — and be able to understand what it is like to walk in your shoes — so that the information they provide to you is customized and relevant. No one needs additional “busy work” or to generate more paper solely to check a box.
The recommendations a compliance consultant makes and the value they add to your hedge fund business should result in less work for you and your staff, implementation of industry best practices and overall mitigated risk to your firm.
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CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.