Adam Frey, Managing Director at K2 Integrity, returns to the Innovation In Compliance podcast this week. He and Tom Fox have an interesting conversation about the important role of compliance in the organization, as well as how to create a culture of compliance from the front lines.
Owning the Risk
Tom comments on one of Adam’s catchphrases, “own the risk”. Adam explains that the front line must internalize the compliance risk of their day-to-day activities, as well as the business and personal impact of noncompliance. The back office as well as the front line must work together to have a seamless compliance solution. Adam says that this involves taking a holistic view of every transaction and the risks it presents. “I think it’s important for them to understand how [compliance risks] can impact at an operational level… and that they’re an integral component of preventing the company from potentially being in noncompliance… I think it’s important not to see it as just something that is somebody else’s job.” He shares that leaders should explain the ‘why’ of compliance. “One of the things that I find is that it’s really important to demonstrate to everybody involved why something is important, not just tell them that it’s important. I think they really appreciate when they can understand it, that they have a more of a stake in the outcome.”
Compliance as a Key Function
Tom and Adam discuss why compliance should have a seat at the table. Compliance is a key business function, they both agree. When management sees compliance as a collaborative partner instead of an obstacle, the front line will more likely come to compliance professionals with potential issues. “You get better buy-in when people understand that everybody is hopefully working towards the same goal and objective,” Adam says. Every employee should also internalize compliance as an individual function. This message and attitude should come from the top, as well as the middle and bottom, Adam argues. Compliance “has to be emphasized from the top until it gets internalized to the point where it becomes bottom-up, as well,” he says.
Training & Communication
“Where do you see training as a tactic that could be utilized here?” Tom asks Adam. “Training is absolutely one of the critical components of leveraging the tone from the top but also throughout the whole organization,” Adam responds. Training should be targeted and segmented according to the exposure and risk level of trainees. “It’s important to have training not just on compliance, but you can integrate training on the actual tone from the top, on code of conduct, on compliance culture, where those issues are integrated into your training, so you’re constantly re-emphasizing and reiterating those points as part of that process,” Adam continues.
Ongoing communication about the importance of compliance is also critical. Adam shares practical tips leaders and compliance professionals can use to spread the message of compliance both in word and actions.
Resources
K2Integrity.com
Adam Frey on LinkedIn
Tag: K2 Integrity
Tom Fox welcomes Brett Manwaring to this week’s Innovation In Compliance podcast. Brett is a Managing Director, Financial Crimes Risk Management at K2 Integrity. Prior to joining K2 Integrity 8 years ago, he served at KPMG and JP Morgan Chase. Brett and Tom talk about the importance of documentation, from both a regulatory and business perspective.
Innovation Can Happen Organically
It’s a common perception that banks are resistant to innovation, Tom comments. In response, Brett remarks that banks, like most people, are resistant to change and innovation is closely tied to change. However, if banks realized what they have and what they can control, innovation could happen organically. A key component is understanding your data, he points out. K2 Integrity can help businesses organize their data into a central repository, which any department can access and leverage.
Poised for Innovation but Unaware
“When it comes to innovation,” Tom asks, “do you see smaller or perhaps midsized companies more poised to engage in innovation?” Brett replies that smaller companies are indeed more poised, but they often don’t know it. The reason they can innovate quicker is that they have less customers, transactions, and data to control. Less data equals more opportunity to innovate quickly. He shares tips on how companies can innovate but still remain compliant with financial regulations. One strategy is to do a data lineage exercise, which Brett says can set up companies for a positive yearly review with regulators. “[Great] reporting creates great discussion, and that great discussion creates great decision points, and those decision points – if they’re implemented correctly – are the basis for your yearly review with regulators.”
The Case for Documentation
To every line of business, including new products and services, there should be a compliance officer attached. “Every decision has a downstream impact,” Brett reminds listeners. “The decision you make is going to impact somebody else.” As such, the compliance officer helps the company to anticipate and mitigate the associated risks. “That will eventually lead to a good review at the end of the year from your regulator because everything’s ticked and tied and you thought downstream,” he adds. We face additional changes and risks due to the pandemic, so companies should make sure that their reporting reflects those changes. “The three most important things in any compliance program are the following: document, document, document,” Tom quips. “You laid out the business case of why documentation could be such a powerful business tool and a part of your overall business plan going forward,” he commends Brett.
Resources
K2Integrity.com
K2 Integrity on Twitter | LinkedIn
Brett Manwaring on LinkedIn
