Future-proofing compliance

New technologies and new ways of working have implications for the skillset required of the compliance practitioner, writes Mark Taylor

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Are you looking in the rear-view mirror or horizon scanning? Are you recruiting from the same old narrow talent pool or are you looking to other disciplines? Are you consuming knowledge or innovating? These were just a few of the questions discussed during a recent series of ICA Roundtable events, at which senior ICA members and partners considered the future of compliance.

The discussions were open, honest and at times intense – and why not? Compliance teams have some pivotal decisions to make. There is a need to address many interrelated issues, including technological innovation, rising expectations and cost pressures. All these challenges need to be dealt with at pace as new technologies are propelling change. As ICA’s Helen Langton recently highlighted: “Getting to grips with the technology revolution is paramount ... we need to get on top of the risks and opportunities”.

The direction of travel for compliance

Interestingly, the Roundtable groups spent little time talking about individual digital technologies but focussed instead on where compliance is going. It was felt that introducing digital solutions in isolation – i.e. adding new digital elements to an existing framework – is not the answer. Instead it was agreed that the first step should be to engage with other key stakeholders across the organisation in order to determine priorities, responsibilities and focus. One goal many participants cited was the need to develop more efficient ways of working. It was agreed that fragmented systems and manual ‘rear-view’ processing are no longer sustainable – there is a need for compliance-related systems to be integrated. The key is to agree ownership and controls before looking at potential solutions and automation.

Imagine a future world in which all compliance systems are interconnected, predictive analytics are used on a continuous basis and regulators use automated stress testing on live data

New ways of working – time for transformation

The Roundtable groups considered potential changes for compliance that are exciting but also disconcerting. Imagine a future world in which all compliance systems are interconnected, predictive analytics are used on a continuous basis and regulators use automated stress testing on live data. In this new world, compliance efforts will go beyond relaying what has happened to anticipating what will happen.

Having the ability to predict compliance risks and conduct issues is a profound development. Compliance teams will have an opportunity to be proactive, to provide timely insights and to work alongside business colleagues as a valued partner. Data analytics could help to identify red flags in a host of areas including customer complaints, customer attrition, outsourcing, new products, sales volumes and, of course, KYC/CDD.

Having your finger on the pulse in real time would be a welcome leap forward but also brings dilemmas: rules and regulations cannot keep pace with fast moving technological developments, standards for analytics are still developing and there is a need to guard against privacy-invasive behaviour. On a practical level, the way compliance gathers, distributes and shares information will change. However, internal IT systems, hierarchical structures and ineffective data management processes could be barriers to change. In summary, introducing new ways of working will be a challenge and will require leadership, vision and collaboration.

Recruitment and retention

The participants identified a number of emerging challenges with regard to recruitment and retention of compliance personnel.

Time to address the skills shift – In addition to the new ways of working discussed already, it was suggested that there is a need to tackle emerging skills gaps.

Technical skills: specialist or generalist? – Many compliance functions are noting a greater demand from business areas for versatile and experienced compliance professionals who can discuss broader regulatory risks and themes. This is particularly relevant for transformation projects in which ‘agile’ techniques are used and ‘generalising specialists’ are the norm. To flourish in this environment, compliance teams will need more people with both deep technical skills and a broad knowledge of other regulatory areas not necessarily related to their core expertise.

Interpersonal skills – A study conducted by a data analytics company, Research Insights, and IBMconcluded that the biggest skills gaps are not ‘digital skills’, but behavioural skills (i.e. the willingness to be adaptable to change). A recent survey supported by ICA and involving over 200 international risk and compliance specialists, came to a similar conclusion, i.e. “organisational dexterity (agility and flexibility) is the key to technology change”.

But what does this all mean in practice for the compliance function? In short, training and recruitment plans need to prioritise soft skills. The aim is to ensure compliance teams have people with good levels of emotional intelligence and resilience who can adapt to the changing environment. The roundtable groups discussed this aspect and agreed that ‘tone from the top’ is important if this aim is to be achieved. People are far more likely to be flexible and adaptable if they are in an environment of trust in which they feel supported and in which communication about changes is clear, timely and transparent.

Compliance teams will need more people with both deep technical skills and a broad knowledge of other regulatory areas not necessarily related to their core expertise

Diversity

The Roundtable participants concluded that compliance functions can only be future-proof and effective if they have a truly diverse team with a strong blend of technical and interpersonal skills. This sounds straightforward but is not without its challenges.

In practice, there are signs that some of our most highly-skilled compliance practitioners are leaving the profession to pursue other interests, particularly those feeling a little battle-weary from constant change, scrutiny and challenge. Age discrimination also plays its part. Yet these are the very people who may have strong interpersonal skills and a holistic approach to compliance and conduct. In some cases, they would be well-suited to mentoring, training and quality assurance roles.

At the other end of the spectrum, there is a younger generation bringing drive, creativity, new tools and an appetite for change. However, these people are not necessarily sitting in a compliance function or even in the same sector.

In short, there is a need to be open minded when looking at recruitment and retention. Compliance teams may need to look outside of their sector in order to identify people with the right soft skills and a good understanding of the technologies relevant to the business.

Training

Looking to the future, it will be particularly important for compliance professionals to have a rich combination of technical knowledge, interpersonal skills and creativity. Many of the Roundtable participants felt that these skills are best developed through real-world experiences and strongly supported role rotation, secondments and special assignments.

The importance of formal training and continuous learning was also recognised with many attendees welcoming the current trend towards ‘ubiquitous learning’ (i.e. the use of mobile devices to deliver digital content on an ‘anytime and anywhere’ basis). There was also an interest in the emergence and evolution of innovation labs, which can sometimes help to create ‘breakthrough solutions’.

Looking to the future, it will be particularly important for compliance professionals to have a rich combination of technical knowledge, interpersonal skills and creativity

Culture, conduct and ethics – competitive advantage?

Inevitably the Roundtable discussions turned to culture. There was a strong consensus that compliance professionals will have an ever more important role to play in nurturing good behavioural skills.

A recent IBM poll concluded that ethics and integrity are critical from a consumer perspective. This is very relevant to both treating customers fairly and being competitive. If customer engagement is open, balanced and easily understood, customers feel safe and this breeds loyalty. These points are so important to keep in mind when collecting data, undertaking promotional activities or devising risk disclosures.

A new dynamic model

The future is with us – we are already experiencing a growing use of Artificial Intelligence, more automation and greater interconnection among systems. These new technologies are revolutionising the way companies gather, distribute and share information. A new dynamic model is evolving in which compliance will be able to make insights and predict future risk scenarios quickly and clearly.

The days when compliance staff spent time poring over spreadsheets, manually checking monitoring schedules or answering routine queries are coming to an end.

From a practical perspective, Compliance functions need to be proactive and to lead and influence discussions which relate to the remodelling of information structures and control processes. The key is to work closely with your colleagues and take an active interest in the technical capabilities that are transforming our lives.

 

 

 Mark P Taylor is Product Director at ICA

This article first appeared in inCOMPLIANCE®, the
industry publication exclusively authored and edited for ICA

 

 

 

 

 

International Compliance Association

Digital Marketing Manager, International Compliance Association (ICA)

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