Tag: innovation in compliance

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Compliance Tip of the Day

Compliance Tip of the Day: Compliance Innovation Through KPIs

Welcome to “Compliance Tip of the Day,” the podcast where we bring 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 aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

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.

In this episode, we consider innovation in compliance through Key Performance Indicators (KPIs).

For more information on Ethico and a free White Paper on top compliance issues in 2024, click here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program: Day 12 – A Seat at the Table

Going into the 2020s and beyond, a corporate compliance function must be integral to your business strategy. One of the key reasons is that the ever-important debate of compliance as a cost center will become more critical in the future in this decade. If compliance programs are ineffective, enforcement actions will continue to be highly costly. Over the last 10 years, there has been an increasing impact on the business where you must have compliance resources focused on remediation and business resources. This has only grown greater with reputational risks amplified by social media.

This is because as significant (and costly) as these regulatory fines and penalties have been, it is the intangible reputational damage that, in the long run, maybe even more expensive. Multiple stakeholders who might not desire to play out on the risk curve might be at higher risk, located in higher jurisdictions, or operating in higher-risk industries. Further, there are other consequential impacts if compliance does not have a seat at the table. Suppose compliance has a seat at the table. In that case, there can be some leeway for compliance officers and firms to figure out how best to roll out a compliance program that is commensurate with the organization’s risk and compliant with the regulations. If compliance is relegated to the back of the (corporate) bus, there will be little chance to do so.

Three key takeaways:

  1. It will be even more important for compliance to sit at the table in the future.
  2. Look for synergies with other types of compliance.
  3. Such synergies can be a big cost savings.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Innovation: Day 5 – Communication to see Around Corners

The more you can operationalize compliance, the more it works to operationalize culture in your organization. It works for all levels of a company, literally from the Boardroom to the shop floor. The DOJ and SEC recognized this when they noted in their 2020 FCPA Resource Guide, “A compliance program should apply from the board room to the supply room – no one should be beyond its reach.” Yet culture can provide more than simply an ethical foundation, and it is also a part of the business foundation of an entity.

Using such an approach to communications allows a CCO to “see around corners” and can be one of the greatest strengths of a best practices compliance program. The reason is listening. Listening is a key leadership component, and there are certainly many ways to listen. You can sit in your office and wait for a call or report on the hotline, or you can go out into the field and find out what challenges employees are facing. From this, you can work with them to craft a solution that works for the company and holds to the company’s ethical and compliance values.

Using social media tools, a CCO can move towards Thomas’ next key ingredient of a successful corporate culture, which is trust. Thomas said, “I’m obsessive about the culture that we create specifically around trust, and this is an adjustment for some people when they come here. If you join our team, there’s trust by default here. That means you trust in the competence of your teammates. You trust in their intentions and what they’re saying. At some companies, the culture is that trust is earned over time, but that means if everyone in the organization says you have to earn trust, the amount of energy that actually goes into the trust-earning process is a distraction from our mission.”

Three key takeaways:

  1. A company can fail if it does not get its culture right.
  2. Using communications to “see around corners.”
  3. Trust works as a business strategy.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Innovation: Day 3 – The Digital Transformation of Compliance

Through restructuring, senior leadership can signal that digital transformation in compliance is critical for the future of the organization. From this point, the compliance function can work with an internal digital product design group. By doing so, the corporate compliance function can work with a team dedicated to supervising the development of the new compliance solution through product design, testing, and analysis, which will include customized generative design and analysis tools. Top management can signal the importance of the compliance digital transformation by using this dedicated team to spearhead the compliance function’s digital transformation development process.

One of the great things about the compliance world is that we are only limited by our own imaginations. If you can imagine a better way for your company to comply fully, it is at your disposal to do so. Yet, rarely do we think about the structure of how compliance activates as a way to operationalize compliance more fully. By identifying and bringing in the skills needed to move forward with compliance innovation, you can help kick-start the compliance operationalize process through a digital transformation of your compliance regime. By doing so, you may make all the difference between success and failure coming out of the Coronavirus health crisis as the world reopens for business.

Three key takeaways:

  1. Have you considered a generational team approach to a digital transformation in compliance?
  2. Have non-compliance professionals aid in compliance program development.
  3. In compliance, you are only limited by your imagination.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Innovation: Day 2 – Taming Complexity in Compliance

One of the lessons we have learned from various FCPA enforcement actions over the years is how complexity in business organizations can work to defeat compliance programs. Whether a corrupt employee is working to actively hide a pot of money, which can or will be used to pay a bribe, or an improper payment slips through the cracks, complexity can work to defeat a best practices compliance program. A compliance function needs visibility into a business unit, how it does business, and where its payments are going, or else it may be due to design defects or inadvertent complexity.

Compliance is now in an era of brisk innovation and evolution. It is prone to technological change and rapid obsolescence of the lawyer-driven, spreadsheets, and word document-based compliance programs. As we advance, the compliance professional needs to understand that a “package of resilience, adaptability, coordination, and inimitability becomes more attractive than the package of efficiency, understandability, manageability, and predictability.” The key is to learn how to harness complexity on a sustainable basis.

Three key takeaways:

  1. Not all complexity is bad.
  2. If you cannot figure out how a foreigner does business, you have a problem.
  3. Compliance is now properly seen as a business process.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Innovation: Day 1 – Originating a Compliance Ecosystem

The compliance profession is at an inflection point, moving away from the lawyer-driven written policies and procedures to a more operationalized regime where compliance is a part of the overall ecosystem embedded directly in the business process-focused discipline. Seen in this manner, compliance will be seen not as a cost center but as a value creation center, helping the company to make business processes more efficient and then more profitable. To be the orchestrator and prime mover of a compliance ecosystem, you need a superior compliance service that is hard to replicate. This means some combination of compliance, an extensive network of internal users, and strong branding.

Compliance is undergoing a paradigm shift as a result of technological and digital innovation. CCOs who cannot interpret the data from their systems will likely find themselves consigned to the dustbin of corporate luddites. Compliance will be moving into a new era of collaboration and connection to more fully operationalize compliance to make all business stakeholders more efficient and more profitable.

Three Key Takeaways:

  1. Compliance is undergoing a paradigm shift as a result of technological and digital innovation.
  2. To be the orchestrator and prime mover of a compliance ecosystem, you need a superior service that is hard to replicate.
  3. Compliance should help other corporate functions.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program in Training and Communications – Sharing to 360-Degrees of Communication

Why do people share information? The answer to that question has important implications for every compliance practitioner and compliance program. Sharing is a primary method to communicate and connect. This is always a challenge in any far-flung international corporation, particularly for disciplines that can be viewed as home office overhead at best and the Land of No at worst. Work to hone your message through social media. Part of this is based on experimenting with what message to send and how to send it. Another aspect was based upon the Wave (of all things), its development, and coming to fruition in the early 1980s. It took some time for it to become popular, but once it was communicated to enough disparate communications, it took off. “It’s the same thing with social media. On social media, we think something will go viral because the art is beautiful or the science is full of deep analytics, but it takes time to build the community.”

This means that you will need to work to hone your message and continue to plug away to send that message out. The Morgan Stanley declination will always be instructional as one of the reasons the DOJ did not prosecute the company, as they sent out 35 compliance reminders to its workforce over seven years. Social media can be used in the same cost-effective way to get the message of compliance out and to receive information and communications back from your customer base, the company employees.

Three key takeaways:

  1. What makes your employees want to share information?
  2. Facilitate mechanisms that allow sharing with the compliance function.
  3. The Morgan Stanley declination still resonates.

For more information, check out The Compliance Handbook, 4th edition, here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program in Training and Communications – Using Social Media to Innovate in Compliance

I am a huge fan of using social media in your compliance function. But how can you get your arms around how to structure such a program for your company?  After acknowledging that social media focuses on the social aspects of communication, the most important thing to remember is that communication in social media is two-way, both inbound and outbound. It helps to bring your employee base together in an efficient manner to create an environment conducive to compliance for your organization. It also has the benefit of continued engagement. It is more than putting on training or even a set of initiatives; you can continue the conversation and enthusiasm about compliance going forward throughout the year. The authors break this down further into three parts that emphasize 1) the need to listen to and learn from user-generated content, 2) the need to engage and facilitate dialogue with employee innovators, and 3) to find an audience of early adopters to create excitement and collect feedback.

If your goal in the compliance function is to create awareness and publicize your compliance program and initiatives, social media can be a powerful tool. This is so paramount that it should become a core activity of your compliance function. Using social media tools, your compliance function can tell the story of compliance, communicate expectations, and even train. Yet again, it is simply more than a one-way tool. Just as employees are more apt to tell you about a concern immediately or soon after being trained on that issue, they may well communicate directly with you after receiving social media communication on subjects such as managing third-party relationships.
CCOs and compliance practitioners must develop a dedicated compliance strategy around social media in the context of their corporate objectives. It allows you a 360-degree view of compliance, through which you can take input from your employee base and create a compliance experience that your employees will embrace.

 Three key takeaways:

  • Never forget that social media is a two-way communication.
  • Company employees are the customers of the compliance department.
  • As with all compliance issues, assess what works for your company and appropriately tailor your social media approach.

For more information, check out The Compliance Handbook, 4th edition here.

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31 Days to More Effective Compliance Programs

Third-Parties as Compliance Innovation Partners

It is universally recognized that third parties are your highest FCPA risk. Could you turn your third party from liability under the FCPA to an innovation partner for your compliance program? This is an area that only a few compliance professionals have mined, but once again, in compliance, you are only limited by your imagination. In a Supply Chain Management Review article by Jennifer Blackhurst, Pam Manhart, and Emily Kohnke, entitled “The Five Key Components for Supply Chain Innovation,” the authors identified five components common to the most successful innovation partnerships. They are:

Don’t settle for the status quo. This means you should not settle for simply the status quo in compliance.

Hit the road to hit your metrics. To understand your compliance risk from third parties, you must get out of the ivory tower and hit the road.

Send prospectors, not auditors. While an audit clause is critical in any third-party contract, from a commercial and FCPA compliance perspective, you can establish a “point of contact as an innovation manager for your third parties.”

Show and tell. As with all relationships, trust plays an important role in third-party compliance innovation, as “Firms in successful innovations discussed a willingness to share resources and rewards and to develop their partners’ capabilities.”

Who’s running the show? This means “who is doing what, but also what each firm is bringing to the relationship regarding resources and capabilities.”

Three key takeaways:

  1. Use your third parties as innovators to assist your compliance program.
  2. Change your thinking about third parties and make them your partners.
  3. Do not settle for the status quo.
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Innovation in Compliance

The Digital Knowledge Graph with Evgeny Likhoded and Vladimir Ershov

This week’s guests are Evgeny Likhoded, CEO and founder, and Vladimir Ershov, Head of Data Science, of Clausematch. They join Tom Fox to talk about a groundbreaking new innovation, the Digital Knowledge Graph in open source. Learn how this game-changer is revolutionizing the way compliance is managed and what it means for industries, companies, and governments around the world.

Evgeny Likhoded is the CEO and founder of Clausematch, a global compliance and regulatory technology company. He started Clausematch to digitize and structure regulation and help regulators to innovate in the space. Jay has worked to solve a common problem in compliance – managing compliance documents and compliance content. He has brought all of the workflow and content management under one platform to provide compliance professionals a way to collaborate on content in real time.

Vladimir Ershov is the head of Data Science at Clausematch. He has been working in the field of data science for four years and previously worked at Apple. Vladimir is passionate about semantic linkage for law documents and was excited to join Clausematch four years ago to continue his work in this field.

You’ll hear them discuss:

  • The process of developing the Clausematch Knowledge Graph took a year with involvement from multiple teams and experts in the regulatory field.The process included discussions with regulatory experts, data preparation, model training and evaluation, and integration with Clausematch’s tools.
  • The key idea behind Clausematch was to capture data in a structured form from the start, allowing for more to be done with the data.
  • Clausematch was pitched to several financial services regulators, including FCA and ADGM, as a platform for tagging regulation text through expert work and machine learning models.
  • The open source Knowledge Graph generated by Clausematch can be used by other companies and regulators to automatically analyze regulations.
  • The structured regulations can also be applied to a financial institution’s internal compliance documents to identify gaps and contradictions in their policies.
  • The Knowledge Graph helps digitize the meaning of regulations. 
  • The models can be used to look for patterns in regulations and to show regulators if internal policies are compliant with regulatory rules.
  • The ultimate goal is a world where every regulation is structured and consumable via API. The release of the Knowledge Graph in open source will help reach the goal faster.
  • Knowledge Graph technology is relevant to compliance technology. Historically, compliance solutions have been focused on formalizing rules and processes into a framework through manual means. Knowledge Graph technology automates the process of structuring data and extracts entities and obligations to form the framework.
  • Neural network models or reinforcement learning agents can be run on top of the extracted graph to look for compliance patterns.
  • The knowledge graph technology will be available on Clausematch.com and GitHub, and a scientific paper with more information will be released.
  • The graph structure is important in compliance due to the need for exact inference in compliance, unlike the correlation approach in language models like GPT.

 

KEY QUOTATIONS: 

“There is a principal flow in the models like ChatGPT and other language models which are based on correlation approach… [but] in the compliance field we need causation, we need exact inference and that’s why the graph structure is extremely important to be able to build the automation for the compliance.” – Vladimir Ershov

 

Resources 

Evgeny Likhoded | LinkedIn 

Vladimir Ershov |  LinkedIn 

Clausematch

Knowledge Graph Information