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What Gets Measured AI Will Automate: Compliance Lessons in the Age of AI

“What gets measured gets managed” is a long-standing business adage attributed to management guru Peter Drucker. Today, in the age of artificial intelligence (AI), we can adapt this adage into a new compliance paradigm: “What gets measured gets automated.” Compliance professionals must grasp this shift, anticipate its impacts, and leverage AI strategically to enhance their compliance programs.

Automation is no longer confined to repetitive, mundane tasks. As highlighted by Christian Catalini, Jane Wu, and Kevin Zhang in their recent HBR article, What Gets Measured, AI Will Automate, AI’s capabilities now encompass complex cognitive tasks such as analysis, design, and even creative writing. This transformation is facilitated by powerful models that can rapidly absorb, analyze, and act upon extensive data sets. For compliance professionals, this signifies that areas heavily reliant on data, such as financial analysis, audits, regulatory monitoring, and reporting, are prime candidates for automation.

Understanding AI’s Automation Potential in Compliance

To effectively leverage AI, compliance professionals must first understand the scope of its potential. The article underscores that any task definable by data, a measurable outcome, and sufficient computational power is ripe for AI-driven automation. Compliance activities, such as monitoring transaction data for suspicious activities, continuously tracking regulatory updates, and managing compliance audits, fit neatly into this framework.

Consider transaction monitoring under anti-money laundering (AML) regulations. AI systems, once trained on vast historical transaction data, can instantly identify anomalies far beyond human capability, significantly enhancing detection accuracy and reducing false positives. Similarly, AI tools can autonomously track regulatory changes across jurisdictions, interpret updates, and swiftly integrate them into compliance frameworks, ensuring continuous alignment with legal mandates.

Embracing the Automation Imperative

Catalini, Wu, and Zhang note the increasing trend toward automation, citing statistics from AI firm Anthropic, which indicate that 43% of interactions with AI involve automated tasks rather than human-augmented activities. This trend underscores the need for compliance departments to adopt automation proactively.

Organizations must actively identify and prioritize measurable compliance processes for automation, thereby reallocating human resources to areas that require complex judgment and strategic decision-making. Automation in compliance does not imply reducing the significance of the workforce; instead, it empowers compliance professionals to focus on higher-order tasks that require nuanced understanding and contextual judgment.

Navigating the Human-AI Collaboration

A crucial takeaway from the authors is the delineation between tasks suited for automation and those demanding inherent human judgment, such as ethical decision-making, nuanced risk assessments, and novel compliance strategies. Tasks involving uncertainty or requiring a human touch, like ethical deliberations and whistleblower investigations, remain less suited for full automation.

Incorporating AI, therefore, should not be an all-or-nothing strategy. Compliance professionals must strive for a harmonious partnership between humans and AI, leveraging the strengths of each. For instance, AI can efficiently manage regulatory changes while compliance teams interpret these insights and apply them strategically within their organizational context.

Strategic Implementation of AI in Compliance

The authors advocate for a strategic approach that identifies tasks that AI can readily automate based on three foundational components: data availability, measurable objectives, and computational feasibility. Compliance teams should systematically catalog compliance processes against these criteria to identify opportunities for automation and optimization.

For example, continuous monitoring systems can integrate AI to streamline monitoring and enhance predictive capabilities, proactively flagging emerging compliance risks before they manifest. AI-driven platforms can analyze extensive datasets from past compliance breaches to identify patterns and predict potential future risks, thereby enabling compliance teams to act preemptively.

Leveraging AI for Continuous Improvement

One significant advantage emphasized by the authors is AI’s ability to improve through iterative learning cycles continually. Compliance automation, supported by machine learning algorithms, continuously refines itself, becoming increasingly accurate and responsive. This capability is particularly critical in compliance, where the risk landscape constantly evolves.

By integrating AI-driven continuous improvement into their compliance monitoring systems, companies can achieve significant efficiency gains. For instance, iterative improvements in anomaly detection algorithms reduce false positives over time, enabling more precise resource allocation in compliance investigations.

Confronting Challenges and Risks

Despite AI’s potential, compliance professionals must remain vigilant regarding inherent challenges and risks, such as algorithmic bias, data privacy concerns, and model transparency. Effective governance structures must oversee the implementation of AI, ensuring its ethical deployment is aligned with regulatory expectations and organizational values.

Transparency and explainability of AI-driven compliance decisions will increasingly become regulatory imperatives, underscoring the need for models that clearly articulate their decision-making processes. Compliance professionals must advocate for model interpretability, working closely with data scientists to develop explainable AI solutions that withstand regulatory scrutiny.

Preparing for the Future

The authors emphasize a clear message: in the future landscape of compliance, tasks amenable to measurement and automation will swiftly transition into the AI domain. Compliance leaders must proactively identify these tasks, implementing robust automation strategies while simultaneously focusing human effort on navigating uncertainty, making strategic decisions, and addressing ethical considerations.

Compliance professionals can draw inspiration from innovators like Amar Bose, mentioned by the authors, who succeeded by prioritizing qualitative human experiences over quantitative metrics alone. Similarly, compliance programs must strike a balance between measurable automation efficiencies and qualitative human judgment, thereby fostering resilience and adaptability.

The future of compliance lies not in resisting automation but in embracing it strategically. Compliance professionals equipped to leverage AI’s capabilities proactively will find themselves better positioned to manage evolving risks effectively. By automating measurable tasks, compliance teams can reallocate resources to address complex uncertainties, enhancing their strategic impact and ultimately strengthening organizational integrity.

In the age of AI, compliance professionals who effectively combine automated precision with nuanced human judgment will set new benchmarks in compliance excellence.

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Compliance Tip of the Day

Compliance Tip of the Day – AI, Behavioral Analytics and Cyber Security

Welcome to “Compliance Tip of the Day,” the podcast that brings you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements. Whether you’re a seasoned compliance professional or just starting your journey, our goal is to provide you with bite-sized, actionable tips to help you stay ahead in your compliance efforts. Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law. Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

Today, we explore how pairing AI with behavioral analytics can enhance your cybersecurity.

For more information on this topic, refer to The Compliance Handbook: A Guide to Operationalizing Your Compliance Program, 6th edition, recently released by LexisNexis. It is available here.

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SBR - Authors' Podcast

SBR-Author’s Podcast: Upping Your (Compliance) Game

Welcome to the SBR-Authors Podcast! In this podcast series, host Tom Fox visits with authors in the compliance arena and beyond. Today, the tables are turned as Caitlyn Tobey and Ellen Hunt from The Seven Elements Compliance Book Club host Tom to talk about his most recent book, Upping Your Game.

They explore how AI and machine learning can transform compliance operations, turning them into strategic business functions. He discusses the operationalization of compliance, the importance of integrating ethics into business practices, and the role of AI in enhancing the effectiveness of compliance. Notable examples, such as Wells Fargo’s use of AI in compliance and the concept of compliance by design, demonstrate how technology can facilitate more efficient business processes and foster a proactive compliance culture.

Key highlights:

  • Reframing Compliance in the Trump Era
  • The Role of AI in Compliance
  • Ethics and Compliance: A Strategic Partnership
  • Challenges and Risks of AI in Compliance
  • AI Chatbots in Compliance

Resources:

Upping Your Game on Amazon.com

Tom Fox

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FCPA Compliance Report

#Risk New York Speaker Series – AI Investments and Political Uncertainty with Chris Mason

Join Tom Fox and hundreds of other GRC professionals in the city that never sleeps, New York City, on July 9 & 10 for one of the top conferences around, #Risk New York. The current US landscape, shaped by evolving policies, rapid advancements in AI, and shifting global dynamics, demands adaptive strategies and cross-functional collaboration.

At #RISK New York, you will master the New Regulatory Reality by getting ahead of US regulatory shifts and their impact. Conquer AI and Tech Risk by Safeguarding Your Organization in an AI-Driven World and Understanding the Implications of Major Tech Investments. Navigate Financial and Crypto Volatility by Protecting Your Assets and Exploring Solutions in a Dynamic Market. Strengthen Your GRC Framework by Leveraging Governance, Risk, and Compliance for Strategic Advantage. Protect Digital Trust by addressing challenges in cybersecurity and data privacy and combating misinformation. All while meeting with the country’s top #Risk management professionals.

In this episode, Tom Fox talks with Chris Mason, who recently launched his risk advisory practice, Woodhorn Global, focusing on due diligence investigations. Chris shares insights about his upcoming presentations at the #RiskGRC conference in July, focusing on AI investments and the impact of political uncertainty on the GRC (Governance, Risk, and Compliance) community. They discuss the significance of AI in the field and the importance of adapting to political changes. Chris also emphasizes the value of in-person events in understanding best practices and navigating the evolving risk landscape.

Resources:

#Risk Conference Series

#RiskNYC—Tickets and Information

Chris Mason on LinkedIn

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FCPA Compliance Report

#Risk New York Speaker Series – Exploring AI Risks in Compliance with Gwen Hassan

Join Tom Fox and hundreds of other GRC professionals in the city that never sleeps, New York City, on July 9 & 10 for one of the top conferences around, #Risk New York. The current US landscape, shaped by evolving policies, rapid advancements in AI, and shifting global dynamics, demands adaptive strategies and cross-functional collaboration.

At #RISK New York, you will master the New Regulatory Reality by getting ahead of US regulatory shifts and their impact. Conquer AI and Tech Risk by Safeguarding Your Organization in an AI-Driven World and Understanding the Implications of Major Tech Investments. Navigate Financial and Crypto Volatility by Protecting Your Assets and Exploring Solutions in a Dynamic Market. Strengthen Your GRC Framework by Leveraging Governance, Risk, and Compliance for Strategic Advantage. Protect Digital Trust by addressing challenges in cybersecurity and data privacy, and combating misinformation. All while meeting with the country’s top #Risk management professionals.

In this episode, Tom Fox talks with Gwen Hassan, the Chief Compliance Officer for Unisys Corporation, about her role and the upcoming #RiskNYC conference. Gwen shares insights into Unisys’ operations, including the various technologies and services they provide, and highlights her responsibilities in managing global ethics, compliance, and trade compliance risks. She also gives a teaser about her panel presentation on the compliance and ethics risks associated with artificial intelligence, stressing the importance of understanding AI’s impact on company culture and regulatory compliance. Gwen expresses her excitement about the conference, emphasizing the value of engaging with fellow risk management experts.

Resources:

#Risk Conference Series

#RiskNYC—Tickets and Information

Gwen Hassan on LinkedIn

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Everything Compliance

Everything Compliance: Episode 155, To Tesla and Beyond Edition

Welcome to this edition of the award-winning Everything Compliance. In this episode, we have the quartet of Matt Kelly, Jonathan Marks, Jonathan Armstrong, and special guest panelist Hemma Lomax, all hosted by Tom Fox, the Compliance Evangelist.

  1. Hemma Lomax examines the customers of a compliance program and introduces us to the terms EX and CX. She shouts out to AI for podcasters.
  2. Matt Kelly delves into Google’s compliance spending announcement and asks why the company does not have a Chief Compliance Officer. He both shouts out and rants about Marjorie Taylor Greene and her reading list.
  3. Jonathan Marks gives us a primer on corporate governance. He shouts out the quiet compliance professionals who do the day-to-day spadework of compliance.
  4. Jonathan Armstrong takes a deep dive into the finances of Tesla and its profitability. He shouts out to Operation Spider’s Web.
  5. Tom Fox highlights Wells Fargo’s compliance remediation, the Fed’s asset cap placed on Wells Fargo, and its subsequent removal.

The members of Everything Compliance are:

Tom Fox, the Voice of Compliance, is the host, producer, and sometimes panelist of Everything Compliance. He can be reached at tfox@tfoxlaw.com. The award-winning Everything Compliance is part of the Compliance Podcast Network.

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FCPA Compliance Report

#Risk New York Speaker Series – The Future of AI Governance in GRC with Matt Kelly

Join Tom Fox and hundreds of other GRC professionals in the city that never sleeps, New York City, on July 9 & 10 for one of the top conferences around, #Risk New York. The current US landscape, shaped by evolving policies, rapid advancements in AI, and shifting global dynamics, demands adaptive strategies and cross-functional collaboration.

At #RISK New York, you will master the New Regulatory Reality by getting ahead of US regulatory shifts and their impact. Conquer AI and Tech Risk by Safeguarding Your Organization in an AI-Driven World and Understanding the Implications of Major Tech Investments. Navigate Financial and Crypto Volatility by Protecting Your Assets and Exploring Solutions in a Dynamic Market. Strengthen Your GRC Framework by Leveraging Governance, Risk, and Compliance for Strategic Advantage. Protect Digital Trust by addressing challenges in cybersecurity and data privacy, and combating misinformation. All while meeting with the country’s top #Risk management professionals.

In this episode, Tom Fox talks with Matt Kelly about his presentation on the importance of understanding how AI can be productively adopted within enterprises, as well as the ethical challenges it presents, including discrimination and data validity. Matt also discusses the importance of AI governance and offers a preview of his upcoming presentation on this topic. Matt expresses his eagerness to engage with other GRC professionals at the forthcoming conference to exchange ideas and discuss emerging risks in third-party and vendor risk management.

Resources:

#Risk Conference Series

#RiskNYC—Tickets and Information

Matt Kelly on LinkedIn

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Upping Your Game

Upping Your Game – Continuous Monitoring with AI

In February, the Trump Administration suspended investigations under and enforcement of the FCPA. Many compliance professionals have since wondered what this will mean for corporate compliance programs going forward. Hui Chen challenged compliance professionals with the message, “It’s time to up your game.”

This podcast series, sponsored by Ethico and co-hosted with Ethico co-CEO Nick Gallo, hopes to meet Hui Chen’s challenge. We will discuss how compliance professionals can ‘Up Their Game’ by utilizing currently existing Generative AI (GenAI) tools to significantly enhance their compliance programs. As compliance professionals, it is critical to recognize that this moment is not merely about incremental improvements but about elevating our profession to an entirely new level of effectiveness, efficiency, and organizational value.

In this episode, hosts Tom Fox and Nick Gallo dive into the revolutionary potential of AI in continuous monitoring within compliance programs. They discuss how AI can provide real-time data insights, facilitate course corrections, and meet regulatory expectations.

The conversation explores the practical applications of AI tools, the importance of a proactive and open mindset, and the game-changing impact these technologies can have across various business functions, including mergers and acquisitions (M&A) and internal control reviews. They also highlight valuable case studies, such as Citibank’s anti-money laundering tool and Budweiser’s pre-pandemic data analytics program, underscoring the broad utility and transformative power of AI in modern business practices.

Key highlights:

  • The Promise of AI in Continuous Monitoring
  • Regulatory Expectations and AI
  • Practical Applications of AI in Compliance
  • Case Studies: AI in Action
  • AI Governance and Best Practices

Resources:

Upping Your Game- How Compliance and Risk Management Move to 2030 and Beyond on Amazon.com

Nick Gallo on LinkedIn

Ethico

For an Ethico White Paper on this topic, click here.

Tom Fox

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Everything Compliance - Shout Outs and Rants

Shout Outs and Rants: Episode 155, To Tesla and Beyond

Welcome to this edition of Everything Compliance, Shout-Outs, and Rants. In this episode, we have the quintet of Matt Kelly, Jonathan Armstrong, Jonathan Marks, and Special Guest Panelist Hemma Lomax, all hosted by Tom Fox.

  1. Hemma Lomax shouts out to AI for podcasters.
  2. Matt Kelly both shouts out and rants about Marjorie Taylor Greene and her reading list.
  3. Jonathan Marks highlights the quiet compliance professionals who do the day-to-day work of compliance.
  4. Jonathan Armstrong delves into the finances of Tesla, examining its profitability. He shouts out to Operation Spider’s Web.
  5. Tom Fox highlights Wells Fargo’s compliance remediation, the Fed’s asset cap placed on Wells Fargo, and its subsequent removal.

The members of Everything Compliance are:

Tom Fox, the Voice of Compliance, is the host, producer, and sometimes panelist of Everything Compliance. He can be reached at tfox@tfoxlaw.com. The award-winning Everything Compliance is part of the Compliance Podcast Network.

Categories
Blog

AI in the Supply Chain: Transformative Insights for Compliance Professionals

Compliance professionals responsible for managing risk, regulatory adherence, and organizational integrity must understand how AI technologies are being integrated into supply chains to effectively manage compliance obligations and leverage these advancements for optimal business outcomes. The integration of AI technologies within supply chain operations provides organizations with substantial advantages, including enhanced efficiency, reduced costs, and improved decision-making. From demand forecasting and supplier risk management to customs clearance and sustainability, AI is transforming every facet of the supply chain. Compliance professionals must navigate this technological evolution with careful understanding and deliberate strategy. In an article in Reuters, László Serester explored these issues. I have adapted his article for a corporate compliance audience.

Enhanced Demand Forecasting

Accurate demand forecasting is crucial for maintaining optimal inventory levels and preventing costly stockouts or overstocking situations. The use of machine learning algorithms enables businesses like Walmart and Amazon to analyze vast datasets, including historical sales data, market trends, seasonal patterns, and economic indicators. This granular analysis allows organizations to predict product demand with unprecedented accuracy.

For instance, companies such as Unilever and Pfizer utilize AI-driven forecasts to proactively adjust production schedules and ensure the continuous availability of raw materials. The introduction of autonomous agentic AI systems capable of independently adjusting production schedules without human approval signifies a leap towards greater operational autonomy, demanding vigilant compliance oversight to ensure appropriate checks and balances remain robustly in place.

Proactive Supplier Risk Management

Procurement processes are inherently complex, with multiple suppliers contributing to a single supply chain. AI systems, like SAP Ariba’s machine learning solutions, streamline supplier risk management by providing real-time insights into supplier performance. This capability enables quicker and more informed procurement decisions, significantly mitigating the risks associated with unreliable suppliers.

During crises, rapid vendor selection and thorough due diligence are paramount. AI-driven software, utilized by corporations like Unilever and Siemens, automates the identification and evaluation of potential new suppliers by analyzing diverse data sources, including financial health, sustainability practices, and compliance history. This systematic evaluation not only enhances operational resilience but also ensures adherence to ethical sourcing standards and regulatory requirements.

Manufacturing and Quality Assurance

AI’s contribution extends deeply into manufacturing processes, improving operational efficiency from design through commercialization. Companies like Siemens, GE, and Bosch harness big data analytics and IoT technologies for real-time monitoring, predictive maintenance, and automation. These innovations reduce downtime, extend equipment lifespan, and minimize operational risks.

AI’s role in quality control, particularly through advanced computer vision, enables companies to inspect products for defects with greater accuracy and speed, thereby significantly enhancing compliance with stringent quality standards. For example, electronics manufacturers utilize AI-driven inspections to detect circuit board defects, directly contributing to higher compliance standards and reduced regulatory risk.

Inventory and Warehousing Optimization

AI-powered inventory management solutions dramatically enhance warehouse operations. Predictive analytics, based on sales history, market trends, and real-time inventory data, enables companies to manage stock replenishment precisely. Organizations like Gather AI have deployed drone technology integrated with AI to perform inventory audits rapidly and accurately, drastically reducing human error and associated compliance risks.

Automation within warehouses, exemplified by Ocado’s autonomous mobile robots and Amazon Robotics’ warehouse solutions, optimizes storage efficiency, minimizes manual labor, and reduces the incidence of workplace injuries. The integration of deep-learning algorithms for recommending suitable alternatives when products are out of stock further illustrates AI’s profound impact on operational compliance and customer satisfaction.

Transportation and Logistics Efficiency

In logistics, AI-driven predictive analytics optimize transportation routes by analyzing traffic patterns, weather conditions, and real-time scheduling data to enhance efficiency. Companies like Maersk and UPS deploy AI systems to significantly enhance delivery efficiency, reduce costs, and improve environmental sustainability through optimized fuel usage.

AI’s capacity to manage freight matching and load optimization minimizes empty truck miles, directly contributing to sustainability goals and compliance with environmental regulations. Autonomous trucking initiatives, such as those from startups like Gatik, demonstrate AI’s transformative potential in the logistics sector, necessitating rigorous compliance oversight to address emerging safety and regulatory concerns.

Streamlined Customs Clearance and Regulatory Compliance

Compliance with customs regulations is greatly enhanced through AI technologies that automate document processing, accurately classify goods, and predict duties and taxes. Systems like ClearMetal’s predictive logistics and Descartes Systems Group’s AI solutions expedite customs declarations, significantly reducing errors and delays.

Moreover, AI-driven cargo screening technologies employed by U.S. Customs and Border Protection officials enhance inspection efficiency, focusing resources on high-risk shipments. Such applications underscore the essential role AI plays in maintaining robust regulatory compliance in international trade.

AI in Legal and Compliance Support

Legal departments supporting supply chain functions can utilize AI to streamline processes ranging from document review to contract management. Solutions like Thomson Reuters’ HighQ and Westlaw Edge facilitate efficient document analysis and rapid identification of potential compliance risks or contract deviations.

AI-enhanced legal research and drafting tools further empower legal professionals by automating repetitive tasks, allowing them to focus on strategic compliance advisory roles that require nuanced judgment and business acumen. This integration highlights the utility of AI in enhancing legal and compliance capabilities, ensuring the precise and efficient management of compliance obligations.

Promoting Sustainability through AI

Finally, sustainability practices benefit significantly from AI technologies that enable comprehensive evaluation and monitoring of supplier sustainability credentials. Platforms like EcoVadis and SupplyShift utilize AI-driven data analytics to rate suppliers on ESG criteria, empowering organizations to uphold rigorous sustainability standards and meet regulatory expectations.

The widespread integration of AI into supply chain operations presents both opportunities and obligations for compliance professionals. Mastery of AI tools and methodologies enables enhanced risk management, regulatory adherence, and organizational resilience. As supply chain operations continue to advance technologically, compliance teams must remain vigilant and adaptive, leveraging AI’s capabilities responsibly to protect organizational integrity and promote sustainable, compliant business practices.

Embracing AI strategically positions compliance professionals not only as guardians of regulatory adherence but also as key facilitators of organizational innovation and sustainability. The thoughtful application of AI within the supply chain thus becomes a cornerstone of a robust compliance strategy, essential for thriving in an increasingly complex regulatory environment.