What to Look for in a Modern Head of Compliance
If you ever find yourself walking to a final interview with a prospective Head of Compliance with a creeping sense of dread, it might be time to reassess. The days of the bureaucratic enforcer are gone, and the modern regulatory professional needs to have an abundance of communications skills in order to succeed. At this point in their career, one might assume that deep technical knowledge and understanding of the laws and regulation is a given, but this isn’t enough; your new Head of Compliance must also be a salesman.
It goes without saying that appointing the right Head of Compliance is a critical decision for any organisation, with the risk of hefty fines from the FCA if your new hire isn’t up to scratch. So, without further ado, let’s jump straight into some tips and insights that you can apply to your search to avoid making common and at times costly mistakes.
You may not necessarily end up inviting your new Head of Compliance to Val d’Isere next year, but you do at least need to be sold on their vision for the function. People buy into people – if your Head of Compliance can’t sell you their own credibility, how are they going to collaborate with the business as a partner, build consensus with the front office, or get buy-in from individual PMs and traders? An ideal candidate must be capable of influencing both internal and external stakeholders. They must also be able to cultivate a relationship with the regulator and provide leadership within their team.
Another factor just as crucial in this market is the need to build a network externally to ensure your firm is at the forefront of best practice. In short, your Head of Compliance must be a natural relationship person and a cultural fit. Ask yourself, did you bond with the interviewee? If you didn’t, they are not going to be able to win hearts and minds.
The ‘Operational Ceiling’
The typical CEO is naturally alive to compliance officer commerciality, and increasingly regulatory professionals are taking on an investor-facing role. Scenario-based questions will help determine if there is a philosophical alignment in terms of risk appetite and proportionality. Wide-ranging conversations about what regulatory developments might affect the firm can be revelatory, but we have found that it is just as important to scrutinise the candidate’s understanding of their ‘operational ceiling’; what is their idea of balance between strategic-level work through to the more tactical and ‘granular’ tasks?
Managing expectations here is particularly important for smaller firms where priorities are constantly shifting, but it can be a risk for any business when this is not properly aligned. Honesty is critical, -and a clash of views is a typical cause of year-one Heads of Compliance departing. The FCA and SEC like a certain amount of paper at the end of the day, since being compliant and demonstrating compliance are two different things. Your Head of Compliance should not baulk at a form, but at the same time you are not paying them to take their eyes off the bigger picture.
An Expert View
"Hire right, because the penalties of hiring wrong are huge."
As Ray Dalio, founder of Bridgewater Associates, asserts in ‘Principles’, there’s much more to hiring than a manager simply looking for similar traits to their own. One of his key takeaways puts great emphasis on the interviewee’s track record: in order to avoid a bad hire, look for credible and deeper references that go beyond dates on a resume. As Dalio states, “talk to believable people who know them, look for documented evidence, and ask for past reviews from their bosses, subordinates, and peers”.
So, you’ve found your perfect Head of Compliance candidate and they’ve passed the interview stages with flying colours. But you’ve now got to make sure they accept. If you find, as Dalio writes, that ‘sparkle’ or ‘click’ in a candidate, don’t beat around the bush – make a competitive salary offer that trumps their last role, and ensure it is commensurate to the risk profile of the role and firm.