The E&C Pulse - April 18, 2019

April 18, 2019 LRN Corporation

Technology, Agility Key Components of Next Generation of Compliance

profile_pics_5Faced with a future of unending disruption, as new technologies change the way business is conducted, ethics and compliance teams in the financial services sector must maximize use of this new tech to become more agile in identifying risks.

A report from professional services firm Accenture, based on a global survey of 151 senior compliance executives in the financial sector, found while 87% of respondents see investments in compliance increasing in the next two years, 72% said they have quantitative cost-cutting goals of more than 10% over the next three years.

“Such a dichotomy calls for incisive and bold thinking. Proofs of concept that showed a promising but uncharted path to a desired future, or that are no longer able to deliver the gains required, should give way to more industrialized deployment of new technologies that can provide a more flexible architecture able to drive risk management in the information age,” stated the report.

This will put a greater reliance upon the E&C function to embrace new technologies, and to forge more fruitful relationships with other business units, as 35% of respondents said business growth is the greatest driver of compliance program transformation.

In short, the report says it may be time for a new type of compliance leader.

“With financial institutions fueling growth with new business models, traditional approaches to compliance seem to be no longer fit for the future,” it said. “Compliance should take steps to modernize its thinking to remain relevant as an advisor to business amidst the pace of the fourth industrial revolution.”

One reason is the efficiencies achieved through use of artificial intelligence, machine learning, fintech and other innovations shaping how work is done. Another is front offices are taking on greater oversight of compliance, becoming what the report called a true first line of defense.

This was reflected by 60% of respondents who said things they once did as part of compliance in the second line of defense now are being handled by the first line, enabling compliance to spend more time on the highest-priority risks.

“The stature of compliance has been established in recent years, enabled to some degree by year-on-year increases in investment,” following the global financial crisis, said Ben Shorten, Accenture’s compliance transformation lead for North America in the finance and risk practice, and a co-author of the report. 

“As with any other area of the business driving to improved returns on investment, expectations of compliance have evolved and programs are being challenged to increase productivity from existing resources,” he said.

Tasked with doing more with less, how should E&C departments respond? Shorten said solving with technology over headcount is paramount, as teams will have to use new technologies and train their people to exploit them to increase output.

They also should streamline the operating model to further shift activity to the first line where appropriate, and to improve sharing of capability with peer-control functions in the second line, such as operational risk, risk assessment, testing and analytics, he said. With compliance spending as much as 13% of its time liaising with other business units, finding a more efficient way to work together is imperative.

“The next stage of the transformation journey for compliance is now centered upon re-confirming roles and responsibilities--between lines of defense and across the second line where appropriate--and their involvement in new organizational processes that require compliance advice and guidance,” stated the report. “Continued clarity in these responsibilities is key to compliance retaining the stature and ‘seat at the table‘ that it first earned post-crisis and should maintain amidst a new business environment.”

The report found compliance executives worried about employee retention, with 50% saying they face a level of unmanaged employee attrition that is beyond their expectation. One respondent said the biggest risk for their compliance department was “not evolving at a pace fast enough to attract the right level of talent.”

Some of the budget challenges cited in the report will be addressed through better equipping employees to achieve more using the available technologies, said Shorten.

“In turn this can drive a new generation of compliance officer, able to better diagnose and engage in risk management in the information age, rather than spend time in more administrative tasks.” he said. “We see this as driving a new experience for compliance officers who are better equipped to partner with the business and mitigate a changing risk profile.”


Ben DiPietro



Research from Ethics and Compliance Initiative found 84% of employees at companies considered to have optimized ethics and compliance programs say their culture of ethics is strong, compared to 13% at companies with underperforming programs.



A coalition of investors who manage around $32 trillion in assets are forcing some of the world's biggest polluters to change how they address climate issues, Bloomberg reports. Climate may cause the next financial crisis, Pedro da Costa writes in MarketWatch.

The former president of Peru, Alan García, shot and killed himself as police were coming to arrest him as part of a corruption scandal, Washington Post reports.

Volkswagen Chief Executive Herbert Diess says he wasn't aware China was holding members of the Uighur community in internment camps in the region of the country where his company built a factory as part of a joint venture, Washington Post reports.

A confidential internal report obtained by the Guardian shows Deutsche Bank is prepared for significant fines and penalties, including the possibility of top executives being sent to prison, for the bank's role in laundering Russian money.

Lawmakers in Europe passed a law to fine tech companies such as Facebook and Google up to 4% of their revenue if they fail to remove extremist content within one hour of being asked to do so, Reuters reports. 

The Food and Drug Administration told two companies to stop selling surgical mesh used in some pelvic operations, citing safety concerns, CNBC reports.

When Corie Barry takes over as chief executive of Best Buy in June, she will be the 26th female in charge of an S&P 500 company; women comprise 5.2% of the total, CNN reports. 

A company's leadership can own honesty or deceit: the FCPA Blog looks at differences in companies that choose one over the other.



Yesterday, LRN launched new ethics & compliance podcast, Principled. Learn from experts as they share professional insights and experiences. Tune into the first two episodes with Bertrand Rossert of World Bank Group and Ellen Hunt of AARP.



Just in case you weren't able to join LRN's March 27th webcast, "Using Tools as Well as Rules: How to Operationalize Your E&C Program with Data Analytics", you can view now on-demand. Watch to learn how to use data to enhance E&C program effectiveness.



About the Author

By combining values-based education, rich insights, and expert advisory services into innovative, comprehensive solutions, LRN can help elevate behavior and the bottom line for your company.

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