How boards can drive compliance transformation

In recent times, however, the function is seen as a value-enhancer for the business and increasingly expected to remain so. It can not only protect the organization, but also create value by providing timely insights that inform strategy and decision-making. For example, the function can better equip the organization to manage risks as it embarks on growth strategies or expands into emerging markets with greater compliance and fraud risks. This shift has made it necessary for the function to transform.

The management is responsible for setting the tone at the top for instilling a culture of integrity as well as the ethics and compliance function’s pace of transformation. Boards provide stewardship to guide the management along this transformation journey and support the function in going beyond fulfilling mandatory requirements to add more strategic value. To do this effectively, boards need to keep abreast of the function’s changing face and the increasing importance of harnessing technology and data in its transformation. 

Technology is a clear game changer in transforming an organization’s compliance program and enables a shift from a reactive to a proactive posture. Timely insights from predictive analytics, digitalized risk assessments, case management workflow and machine learning or artificial intelligence (AI) can help accelerate this shift. 

While various technological solutions are available in the market, many companies, apart from those in highly regulated sectors and multinationals, are behind the curve in building a technology-enabled ethics and compliance function.

How technology can power the ethics and compliance function

With the goal of a technology-enabled ethics and compliance function in mind, boards can steer the management through the function’s transformation road map, which should encompass the following key components.

Survey engines 

An organization’s ethics culture can be monitored using survey engines with dynamic questionnaires in multiple languages. The same is also highly effective for targeted internal and external risk assessments with business partners on matters ranging from bribery and corruption to data protection and cybersecurity risks.

Data analytics and visualization

A variety of internal and external data sources can be aggregated and analyzed using interactive visual dashboards and advanced analytics capabilities, such as AI and machine learning. This facilitates the monitoring of key risk indicators and business partners’ diligence as well as identification of anomalies in financial or transactional data. 

Risk scoring engines

As external and business changes affect the risk landscape, risk scoring engines become essential. These allow the application of weighted risk scoring to transactions, survey data, noncompliance findings and case management output to identify higher risk areas for prioritization and monitoring.

Automated workflow and case management

Abnormalities flagged from risk assessments, data analytics, whistle-blower reports and other means can be actioned upon by using an automated workflow to prevent things from falling through the cracks. A case management tool provides multiple views to monitor active cases and connect relevant ones together to obtain an overview of critical issues in the organization.

Hardwiring integrity into the organizational culture

Technology is a great enabler for reimagining the organization’s ethics and compliance function, but it needs to be buttressed by a culture of integrity in the business for transformation to succeed. Establishing such a culture starts with the board where all directors have to be aligned on the need for an effective ethics and compliance function and program as well as commit to them. 

When reviewing compliance transformation initiatives, the board should question how these can enhance the organization’s objectives and bring value to the enterprise. Boards also need to work with the management to create a culture where ethical behavior is encouraged, recognized and rewarded, and people are empowered to do what is right, not just what is legal.

To build an integrity mindset that paves the way for compliance transformation, the board and management can consider providing ethics training. This reinforces sound principles and consistent messaging to improve employees’ awareness of ethics and integrity issues. Employee surveys can also be used to understand sentiments on the ground and monitor business culture. Whistle-blower programs should be promoted internally and externally to encourage the reporting of unethical or noncompliant behaviors.

Organizations that embed the value of integrity in their strategic vision and day-to-day operations are in a better position to develop a stronger business, sustain their long-term competitive advantage and deliver more value to shareholders. To that end, boards should consider the following questions:  

• Does the organization steer and support the ethics and compliance function to embrace its role in adding value to the business? 
• How should the board evaluate the effectiveness of the organization’s ethics and compliance program?
• What investments are needed to drive the ethics and compliance function to adopt a more proactive posture in risk management? 
• How effectively is technology and data used to identify, measure and respond to compliance and ethical risks?
• How may the organization’s ethics and compliance function benefit from outsourcing its noncore activities to redirect limited human resources to more value-adding work?