“It doesn’t matter whether you win by an inch or a mile; winning is winning.” Dominic Toretto, MDRT 

Picture this: you’re driving a car in the pro-stock circuit. 

Last race of the season, coming into the final turn, but instead of looking out the windscreen, you’re focused on the rear-view mirror. 

Focusing on what’s behind you isn’t the safest way to drive. Sure, you might see Kenny Linder before he taps you into the wall at a hundred and twenty miles an hour, but you won’t see the opportunities or obstacles ahead of you. Looking backward won’t help you get to where you’re going, but this is how many businesses approach compliance—constantly looking backward, reviewing past issues, and reacting to problems that have already occurred.

This is the same criticism often directed at the Australian Securities and Investments Commission (ASIC); too often criticised for simply “turning up at the scene of an accident” to clear the mess and care for the injured instead preventing the conduct that caused the injury. In short, for being “defensive, inward looking, risk averse, and reactive.”

That’s reactive compliance for you—constantly cleaning up after the mess, rather than preventing it. It’s a mindset that’s outdated and, frankly, dangerous in today’s fast-paced, ever-evolving regulatory landscape.

But what if we flipped that script? What if, instead of waiting for problems to arise, compliance functions (and regulators) became forward-facing, proactively anticipating challenges and driving business improvement? A compliance function that looks ahead not only keeps the business safe but also adds value in ways a reactive one simply can’t. 

Proactive compliance 

• Helps you stay ahead of the curve
• Shifts Compliance from a Cost Centre to a Value-Add
• Builds Trust with Stakeholders

I understand your objections; Proactive Compliance is a costly and utopian solution that doesn’t work in the real world. 

Except it can (and the status quo is even less effective).

You may recall that in his November 2018 appearance before the Hayne Royal Commission, CBA Chief Executive Matt Comyn explained that CBA’s “reactive rather than proactive management of risk and compliance issues” was a significant contributor to the identified misconduct. In terms of managing regulatory compliance this admission is significant: CBA acknowledged that backward-looking compliance arrangements are both profoundly dangerous and wildly ineffective.  

Although CBA was only the first to admit it, the reality is that AFS Licensee’s reliance on backward-looking compliance arrangements was a significant contributor to the systemic compliance failures identified by Commissioner Hayne.  

Let’s explore why forward-facing compliance is not just a smart choice but an essential shift and consider how this transformation can be achieved without the need for significant resources or large capital investments.

Before we do, we need to address the “if it ain’t broke, don’t fix it” view of financial services compliance.  

The Problem with Reactive Compliance

Reactive compliance is like cleaning up after an active toddler. Every time you fix one mess, another one pops up. This cycle is exhausting, and worse still, it’s ineffective in the long run. 

• Always Behind the Curve: Reactive compliance is constantly chasing yesterday’s problems. Sure, you might fix the breach or respond to the regulator’s notice, but by the time you do, the damage is done. Clients may have lost trust, reputations may be tarnished, and penalties may have been imposed.
• Lack of Strategic Value: A compliance function that’s always looking backward isn’t adding strategic value. It’s like being the ambulance that shows up to the scene of the accident, rather than the person who anticipates and prevents the accident. A reactive approach might keep the business out of court (most of the time), but it’s not going to help the business thrive. Neither is it, to the dismay of Tony D’Aliosio, an acceptable approach for ASIC to adopt. Instead of adopting a reactive compliance approach by placing an ambulance at the bottom of a cliff, proactive compliance builds a fence at the top. 
• Regulatory Pressure: Let’s not forget the increasing pressure from regulators. ASIC isn’t just looking at whether businesses follow the rules—they’re scrutinising how businesses anticipate and manage risks. A reactive compliance function is going to struggle to meet those expectations, leading to more scrutiny, more audits, and more fines.

In short, reactive compliance keeps businesses stuck in a constant loop of crisis management. And in today’s environment, that’s a recipe for failure.

While reactive compliance keeps you stuck in a cycle of crisis management, forward-facing compliance offers a way out, allowing businesses to not only survive but thrive.

Why Forward-Facing Compliance Matters

So, what does forward-facing compliance look like? In essence, it’s a proactive approach where compliance teams focus on anticipating potential risks, understanding emerging trends, and embedding compliance into the strategic direction of the business.

Here’s why that shift matters:

1. It Helps You Stay Ahead of the Curve

In the world of financial services, change is the only constant. Regulations evolve, consumer expectations shift, and technology transforms how we do business. A forward-facing compliance function doesn’t wait for these changes to catch them off guard. Instead, it anticipates them and prepares accordingly.

• Regulatory Foresight: By keeping a finger on the pulse of regulatory developments, forward-facing compliance teams can anticipate changes in the law and ensure the business is ready to comply before the rules are even enforced. This reduces the risk of non-compliance and allows the business to operate with confidence.
• By integrating Compliance Risk Assessment and Mitigation Services into your strategy, your business can better anticipate and manage emerging risks.
• Adapting to Innovation: Take fintech, for example. New technologies like AI, blockchain, and robo-advice are disrupting the industry. A forward-facing compliance team would be evaluating these innovations, identifying the potential risks, and advising on how to use them while staying within the regulatory framework.

2. It Shifts Compliance from a Cost Centre to a Value-Add

Let’s be honest—most people view compliance as a cost centre, a necessary evil that drains resources but doesn’t contribute to the bottom line. But a forward-facing compliance function can change that perception.

• Risk Management as a Competitive Advantage: By anticipating risks, forward-facing compliance teams can turn risk management into a competitive advantage. When you’re prepared for potential issues, you can avoid costly mistakes and reputational damage, which gives you a leg up over competitors who are still putting out fires.
• Better Business Decisions: When compliance is embedded in the strategic decision-making process, it helps the business make better, more informed choices. Whether it’s entering new markets, launching new products, or adopting new technologies, a compliance team that looks ahead ensures that risks are mitigated from the start, not dealt with later.

3. It Builds Trust with Stakeholders

Trust is a fragile thing in the financial services industry. Clients, regulators, and even employees expect transparency, accountability, and integrity. A reactive compliance function struggles to maintain that trust because it’s always one step behind.

• Client Trust: Forward-facing compliance builds client trust by ensuring that the business operates ethically and responsibly. When clients know that a business isn’t just reacting to problems but actively working to prevent them, they’re more likely to stay loyal.
• Regulator Trust: Regulators aren’t just there to catch businesses out—they want to see that companies are making genuine efforts to comply with the law. A forward-facing compliance function signals to the regulator that the business is serious about compliance, reducing the likelihood of enforcement action.
• Stakeholder Trust. Implementing a robust Compliance Framework not only ensures Regulatory Compliance but also strengthens your Corporate Governance.

How to Shift to a Forward-Facing Compliance Model

“It’s also essential to ensure that risk identification and remediation is not just reactive and complacent, but empowered, challenging, and striving. This means banks and other financial services providers will need to adopt a proactive approach for managing and reporting on operational risk and compliance controls.”  Money Management, 14 November 2018

Of course, making the shift from reactive to forward-facing compliance isn’t going to happen overnight. But it’s entirely possible with the right mindset and approach. Here are a few strategies to get started:

• • Invest in Training and Education: A forward-facing compliance function requires up-to-date knowledge of the regulatory landscape, industry trends, and emerging risks. Ongoing training and professional development for compliance staff are critical.
  • Embrace Technology: Technology can help automate many of the mundane, backward-looking tasks that compliance teams get bogged down in—think monitoring, reporting, and record-keeping. By freeing up time and resources, compliance teams can focus on higher-value, forward-facing activities. In fact, technology, like [complye], might be essential to sustaining a proactive compliance framework. Leveraging regulatory technology and advanced software solutions for compliance management to automate tasks, streamline data collection, and deliver real-time insights improves efficiency and enables businesses to quickly detect and correct any deviations from compliance standards.
  • Collaborate with the Business: Compliance can’t operate in a silo. Forward-facing compliance teams need to work closely with other departments—particularly risk, legal, and operations—to ensure that compliance is integrated into the business’s strategic planning. It’s about being part of the conversation from the beginning, not being brought in at the eleventh hour to clean up a mess.
  • Anticipate. Anticipating regulatory changes and potential risks is fundamental to a proactive compliance framework. Consistently tracking legislative updates, industry standards, and best practices enables businesses to stay informed and adjust their operations as needed. By predicting potential challenges, organisations can develop flexible strategies that allow them to easily avoid problems and adapt to new compliance requirements.
  • Focus on Culture: Forward-facing compliance has the power to transform workplace culture by shifting the emphasis from mere rule-following to a mission-driven, purpose-led approach. Instead of viewing compliance as a bureaucratic necessity or box-ticking exercise, employees can begin to see it as a strategic function that protects the organisation’s integrity and supports long-term success. When compliance becomes proactive—anticipating risks, fostering ethical behaviour, and aligning with core company values—it evolves into a shared responsibility that empowers employees at every level. This collective commitment deepens engagement, as individuals no longer see regulations as a burden, but as an opportunity to contribute to a culture of accountability, trust, and continuous improvement. By embedding compliance within the business’ mission, employees gain a stronger sense of purpose, knowing their efforts go beyond legal requirements to help build a sustainable, ethical, and innovative business. This cultural shift not only boosts job satisfaction but also encourages collaboration and fosters a more cohesive, resilient workforce.

Addressing Challenges for Smaller Firms

Now, let’s address the elephant in the room—what if you’re a smaller firm without the resources to throw at technology, training, and large-scale compliance initiatives? It’s easy to talk about forward-facing compliance when you’ve got a team of specialists and a budget to match. But for many smaller firms, it can feel like an impossible task. The good news is that even without massive resources, you can still build a forward-facing compliance function. Here’s how:

• Prioritise Critical Risks: You don’t need to tackle every potential risk at once. Focus on the key risks that are most relevant to your business. For example, if you’re a small advice business, your compliance function should focus on client engagement, best interests duty, and disclosure obligations. By narrowing your focus, you can make meaningful improvements without stretching your resources too thin.
• Leverage External Expertise: If hiring an internal compliance expert isn’t feasible, consider outsourcing compliance tasks to external consultants or compliance service providers. This can be a cost-effective way to access expertise without the ongoing overhead. Many smaller firms already take advantage of this by engaging third parties for annual audits, advice reviews, and even training. Consider the example of Nexia (Sydney)Financial Solutions Pty Ltd, an advisory firm that transitioned to forward-facing compliance. By implementing regular reviews, training and feedback sessions, they not only reduced compliance breaches but also improved client trust and business efficiency. This proactive approach led to a 10.3% increase in advice quality.
• Tap Shared Services or Group Resources: If you’re a smaller firm struggling with compliance costs, consider partnering with other small businesses to pool resources. Whether it’s co-investing in compliance training, sharing access to compliance tools, or even creating a shared compliance function, this approach can spread the costs across multiple businesses while ensuring everyone benefits from forward-facing compliance practices.
• Start Small with Technology: You don’t need a full-fledged enterprise risk management platform to get started. Effective and affordable software solutions, like [complye], can provide the compliance framework, tools, insights and regulatory support to better manage your obligations and free your capacity to look ahead. Even something as basic as cloud-based document management or low-cost compliance software can free up time to focus on more strategic, forward-looking initiatives. The key is to start small and build from there.
• Educate Your Team In-House: If formal training programs seem out of reach, consider running in-house training sessions. You can use free resources available from industry bodies, regulators, or even online webinars to keep your team informed about key compliance issues and regulatory changes. It might not be as polished as a third-party training provider, but it’s a start, and it ensures that compliance stays top of mind.

There are additional consequential changes from adopting and proselytizing a compliance culture based on analysis, anticipation and data; it will inevitably lead to your team developing a growth mindset igniting sustained innovation throughout the business. When compliance professionals focus on learning, continuous improvement, and embracing challenges, they evolve from enforcers of rules to strategic partners. By reframing regulatory requirements as opportunities for innovation rather than obstacles, compliance teams can proactively identify emerging risks, optimise processes, and leverage cutting-edge technologies such as AI and automation. 

This forward-thinking approach not only strengthens the agility and resilience of the compliance function but also cultivates a culture of creativity and collaboration across the business. As compliance becomes an integral partner in driving business innovation—anticipating market trends, providing regulatory foresight, and championing ethical decision-making—it fosters smarter decisions, boosts operational efficiency, and builds stronger stakeholder trust across all departments.

Ultimately, forward-facing compliance isn’t about having the biggest budget or the most advanced tech—it’s about mindset and approach. Even smaller firms can adopt a proactive stance by focusing on their most critical risks, making smart use of available resources, and building a culture of compliance from the ground up. The benefits of getting ahead of potential issues and creating a sustainable, compliant business far outweigh the challenges.

The Bottom Line

Forward-facing compliance is particularly crucial in financial services compliance, where the regulatory landscape is constantly evolving. The days of reactive compliance—where the focus is on fixing past problems—are over. To survive and thrive, businesses need compliance functions that look ahead, anticipate risks, and add value to the business.

A forward-facing compliance function doesn’t just keep you out of trouble—it positions your business to succeed in a complex, ever-changing environment. And in the long run, that’s a win for everyone.

Are you ready to stop looking in the rear-view mirror and start driving your business forward?

Partnering with a compliance consultancy can help businesses transition to a more proactive compliance framework. If you’re tired of playing catch-up, maybe it’s time to start looking forward. We’re here to help you make the shift. Contact Assured Support for expert guidance on transitioning to a forward-facing compliance framework and ensure your financial services business thrives in a complex regulatory environment.

If you enjoyed this, we recommend that you read:

Why Compliance isn’t enough

Guide for Advisers and Licensees: AI and Financial Services

Why Compliance Programs Fail

Frequently Asked Questions

1. What is forward-facing compliance?
Forward-facing compliance is a proactive approach to regulatory adherence that focuses on anticipating potential risks, understanding emerging trends, and embedding compliance into an organisation’s strategic direction. This method goes beyond reacting to past issues, enabling businesses to stay ahead of challenges and add value to operations.

2. How does forward-facing compliance benefit financial services businesses?
Forward-facing compliance helps financial services businesses by:

• Anticipating and mitigating risks before they occur.
• Transforming compliance from a cost centre into a strategic asset.
• Building trust with stakeholders, clients, and regulators by demonstrating accountability and foresight.

3. Why is reactive compliance no longer effective?
Reactive compliance focuses on addressing past issues, often leading to constant crisis management. This approach:

• Keeps businesses behind the curve, reacting to problems rather than preventing them.
• Offers minimal strategic value, as it doesn’t contribute to long-term business growth.
• Exposes organisations to increased regulatory scrutiny and potential fines.

4. How can smaller firms adopt forward-facing compliance?
Smaller firms can embrace forward-facing compliance by:

• Prioritising critical risks relevant to their business.
• Leveraging affordable technology, such as cloud-based tools or compliance software.
• Collaborating with other firms to share compliance resources and expertise.
• Conducting in-house training to keep teams informed about key regulatory changes.

5. What role does compliance culture play in forward-facing compliance?
Compliance culture shifts the perception of compliance from a bureaucratic necessity to a shared responsibility that drives innovation and long-term success. By fostering a proactive mindset, compliance becomes integral to business operations, enhancing employee engagement, trust, and collaboration across departments.