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Into the Chair - Tales from Chief Compliance Officers

Into the Chair, Tales from Chief Compliance Officers: Rafael Capa on Mastering Risk Management for Success in Compliance

Welcome to the latest edition of the Compliance Podcast Network: Into the Chair: Tales from Chief Compliance Officers, which details the journey to and in the role of a Chief Compliance Officer. How does one come to sit in the CCO chair? What are some of the skills a CCO needs to navigate the compliance waters of any company successfully? What are some of the top challenges CCOs have faced, and how did they meet them? These questions and many others will be explored in this new podcast series. Into the Chair: Tales from Chief Compliance Officers is a Comply podcast hosted by Tom Fox and is a production of the Compliance Podcast Network. In this episode, I visit with Rafael Capa, who has a background in risk management and is in compliance.

Rafael Capa is a highly experienced risk management professional with a career spanning over two decades in various sectors, including market risk, counterparty credit risk, liquidity risk, and operational risk. His perspective on the overall risk management strategy is shaped by his extensive experience. It is centered on the belief that it should be proactive, efficient, and tailored to the specific needs of the business lines. Capa emphasizes the importance of identifying, measuring, monitoring, reporting, and remediating risks in compliance and encourages firms to be proactive in assessing and implementing policies and procedures rather than waiting for regulations to be put in place. He also advocates for using data analytics and artificial intelligence in compliance to enhance effectiveness and efficiency. Furthermore, Capa, who holds a certificate in climate risk, underscores the emerging significance of this field in the compliance role and the necessity for compliance to keep pace with risk management in addressing this issue.

 

Key Highlights:

  • Proactive Risk Management Strategy Implementation
  • Building a Proactive Compliance Program with Data Analytics and AI
  • Enhancing Compliance through Customized Risk Assessment

Resources:

Rafael Capa on LinkedIn

Haitong International Securities Group

Comply

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Blog

Tailored Risk Management in the Third Sector

Compliance and risk management are crucial aspects of any organization; the third sector is no exception. In this week’s episode of Great Women in Compliance, hosted by Hemma Lomax, she visited with Sabrina Segal on compliance and risk management in the third sector. The third sector, which includes charities and nonprofits, operates in areas where the private sector doesn’t see value and where government regulations have failed. As a result, risk management becomes even more crucial in these high-risk environments with limited resources.

Sabrina Segal is a seasoned third-sector integrity risk and compliance advisor with a legal background, currently based in Rwanda as part of an international development and humanitarian assistance team. Her perspective on compliance and risk management in the third sector is that it is inherently high risk due to its operation in areas where the private sector does not see value and where government regulations have failed. Segal believes that the current risk management approaches, which are quantitative-heavy and designed for industries like finance and oil and gas, are not suitable for the third sector, which is more qualitative-heavy.

Drawing from her experiences, she emphasizes the need for bespoke approaches tailored to the specific needs and constraints of small and medium-sized charities and nonprofits. Segal has developed a strategy called objective-centered risk management for the third sector, which focuses on achieving objectives, identifying threats and opportunities, and directly influencing decision-making, viewing her work in compliance and risk management to improve organizations’ overall programming and impact in the third sector.

Segal advocates for an objective-centered approach to risk management in the third sector. This approach focuses on achieving objectives rather than simply creating static risk registers and matrices. By tying risk analysis directly to objectives, organizations can better understand the impact of uncertainty on their goals and make informed decisions. This approach also integrates risk management into project management, recognizing the dynamic nature of risks and their effect on objectives.

Compliance and risk management are essential for any organization, but they are significant in the third sector. Non-profit organizations often rely on public trust and funding, making it crucial to maintain a strong reputation. Compliance ensures that organizations adhere to legal and ethical standards, while risk management helps identify and mitigate potential threats to the organization’s mission and sustainability.

Another approach highlighted by Segal is Active Monitoring and Mitigation. This approach involves identifying and addressing threats and opportunities to achieve objectives. By mapping the causes of these threats and opportunities, organizations can implement active monitoring or mitigation steps to minimize risks and maximize opportunities.

One of the challenges faced by the third sector is the lack of quantitative data for risk analysis. While the finance or oil and gas industries can rely on quantitative tools such as Monte Carlo simulations or Bayesian statistics, the third sector often deals with qualitative data and dynamic systems. Segal emphasizes the need for bespoke approaches that work well for charities and nonprofits, tiny and medium-sized organizations with limited resources. She suggests using quantitative tools where possible and creating data trust in the third sector to improve risk management advice. Organizations can identify and assess potential risks more effectively using data-driven approaches. Risk matrices, statistical analysis, and predictive modeling can help quantify risks and prioritize them based on their likely impact. This allows organizations to allocate resources efficiently and make informed decisions to mitigate risks.

Active monitoring and mitigation involve continuously monitoring potential risks and proactively addressing them. Rather than waiting for risks to materialize, organizations in the third sector should adopt a proactive approach. This includes regular assessments, monitoring key performance indicators, and implementing control measures to prevent or minimize the impact of identified risks. By actively monitoring and mitigating risks, organizations can ensure the smooth operation of their programs and protect their stakeholders.

Risk analysis should be closely tied to an organization’s objectives in the third sector. By aligning risk analysis with objectives, organizations can prioritize risks that have the most significant potential to hinder the achievement of their mission. This involves identifying the risks that could impact the organization’s ability to deliver its programs or services. By linking risk analysis to objectives, organizations can develop targeted strategies to manage and mitigate these risks, ensuring the successful fulfillment of their mission.

In addition to risk management, compliance is another critical aspect of the third sector. Segal highlights the role of lawyers and compliance professionals in ensuring restorative justice and breaking the cycle of vengeance. By including all stakeholders and giving voice to the voiceless, lawyers and compliance professionals contribute to the success of restorative justice initiatives and create durable solutions in post-conflict environments.

Overall, compliance and risk management in the third sector require tailored approaches that consider charities and nonprofits’ unique challenges and limited resources. By focusing on objectives, actively monitoring and mitigating risks, and considering unforeseen risks, organizations in the third sector can improve their programming and significantly impact the communities they serve.

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Adventures in Compliance

The Return of Sherlock Holmes – Compliance Lessons from The Norwood Builder

Welcome to a review of all the Sherlock Holmes stories that are collected in the work “The Return of Sherlock Holmes.“. It is a collection of thirteen detective stories written by Sir Arthur Conan Doyle, marking the reappearance of the brilliant detective Sherlock Holmes after his apparent death in “The Final Problem.” The collection spans various intriguing cases and mysteries that Holmes and his loyal friend Dr. John Watson tackle. Today we take up The Adventure of the Norwood Builder and mine it for compliance lessons for the CCO and compliance professionals.

The intriguing world of Sherlock Holmes’ investigative methods offers a wealth of lessons for compliance professionals. In The Adventure of the Norwood Builder, Holmes’ meticulous approach to a murder case, emphasizing thorough due diligence, attention to detail, verification of information, critical thinking, data-based decision-making, and ethical conduct, mirrors the approach that compliance officers should adopt. Tom Fox, a seasoned compliance expert, underscores the importance of these principles in navigating the complex landscape of corporate compliance. Fox’s perspective is shaped by his extensive experience in the field, and he advocates for a proactive, data-based approach, prioritizing integrity, attention to detail, trust but verify, critical thinking, database decision-making, ethics, risk assessment, and documentation. He encourages compliance professionals to embrace continuous learning and persistence, much like Sherlock Holmes. Join Tom Fox in this episode of the Adventures in Compliance podcast as he delves deeper into these fascinating parallels between the world’s greatest detective and the demanding field of compliance.

 

Key Compliance Lessons Learned

  1. Due Diligence.
  2. Risk Management.
  3. Document Document Document.
  4. Data-driven compliance.
  5. Trust but verify.
  6. Attention to detail.
  7. Ethical conduct by compliance professionals
  8. Institutional Justice and Institutional Fairness

Resources:

The New Annotated Sherlock Holmes

Sherlock Holmes FAQ

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Blog

Nicholas Latham on Implementing Frameworks for Effective Risk Management in Organizations

I recently had the opportunity to visit with folks from Diligent. We look down the road at key issues in 2024 in a podcast series sponsored by Diligent entitled Compliance Professionals Adapting to Change: Industries, Regulations, and Beyond. I could chat with Nicholas Latham, Renee Murphy, Jessica Czeczuga, Yee Chow, and Alexander Cotoia. Over this series, we discussed compliance communications in regulated industries, managing conflicts of interest at the Board level, the Board’s role in compliance training and communications, navigating the current ESG landscape, and professional growth and mentorship in compliance. In this first blog post, we discuss accounting and risk management frameworks.

One of the key topics discussed in the episode was the importance of risk assessment frameworks in identifying and mitigating organizational risks. Latham highlighted two widely used frameworks, the COSO Framework for Internal Controls and ISO 31,000, which both provide a comprehensive approach to risk management. These frameworks help organizations establish effective communication processes and gain a holistic view of risk across different departments.

The COSO Framework for Internal Controls focuses on enterprise risk management. It emphasizes the need to assess an organization’s control environment, determine risk appetite, and identify crucial risks for the business’s success. Information and communication processes, including training and monitoring activities, are built around these assessments to ensure effective risk management.

We next discussed the relevance of the “Single Pane of Glass” concept, often associated with the COSO Framework for Internal Controls. This concept provides a unified view of an organization’s operations and risk management, flattening hierarchical structures and promoting transparency. By implementing this approach, executives and leaders can comprehensively understand what is happening across the organization rather than just within individual departments.

We noted the challenges associated with compliance communication issues, particularly in e-communications. Latham emphasized the importance of setting the tone at the top, with executive leadership emphasizing the criticality of compliance and its impact on the organization and its customers. Training plays a crucial role in ensuring compliance, but Latham noted that the amount and frequency of training in today’s environment may not be sufficient. He stressed the need for organizations to step up their training efforts and be prepared for increasingly stringent regulatory scrutiny.

Monitoring e-communications poses a significant challenge due to the sheer volume of interactions. Latham suggested leveraging artificial intelligence (AI) to analyze a larger communications sample and identify potential risks. This approach could help organizations identify improper processes, training gaps, or script issues that may contribute to compliance breaches.

As a compliance professional, your understanding of risk assessment frameworks, such as the COSO Framework for Internal Controls and ISO 31,000, highlights the importance of comprehensive risk management practices. The “Single Pane of Glass” concept and the challenges associated with compliance communication issues provide valuable guidance for organizations navigating the complex risk and compliance landscape. As regulatory scrutiny continues to increase, compliance professional’s expertise will continue to serve as a valuable resource for organizations seeking to enhance their risk management practices and ensure compliance in an ever-evolving technological landscape.

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com

Join us tomorrow when we consider conflicts of interest at the Board of Directors.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Data Analytics: Day 4 – AI Driven Risk Management and Fraud Prevention

Through leveraging AI-driven solutions, companies can collect and analyze survey data to identify patterns and trends that may indicate potential risks. This empowers organizations to take proactive measures to mitigate these risks and foster a culture of trust and transparency.

Another area of significance is mapping risks to controls. This allows a compliance professional or risk manager to know where risks are occurring within an organization and then map them to corresponding controls. This permits compliance functions to assess the effectiveness of their controls and identify areas that require improvement. By leveraging AI-driven solutions, organizations can gain a comprehensive understanding of their risk landscape and make data-driven decisions to strengthen their control environment.

AI-driven solutions have the potential to revolutionize risk assessment and fraud prevention. By leveraging these solutions, companies can enhance their compliance efforts, improve efficiency, and make data-driven decisions. However, it is crucial to balance automation with human expertise and address challenges related to data availability and quality. Ultimately, the successful implementation of AI-driven solutions requires a holistic approach that considers the impact on employees, fosters a culture of trust and transparency, and aligns with the organization’s risk management objectives.

Three key takeaways:

  1. Data visibility allows organizations to effectively manage their compliance efforts and make data-driven decisions.
  2. By leveraging AI-driven solutions, compliance functions can generate dashboards and analytics that provide real-time insights into their risk landscape.
  3. This not only improves efficiency but also enables auditors to focus on understanding the data and identifying potential risks.

For more information on this month’s sponsor check out KonaAI.com.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Data Analytics: Day 2 – Data-Driven Solutions for Compliance and Risk Management

In today’s rapidly evolving business landscape, compliance and risk management have become critical components of any successful organization. With the increasing complexity of regulations and the growing need for transparency, companies are turning to AI and data-driven solutions to enhance their compliance programs and mitigate risks. A key to this approach is the user adoption of AI-driven compliance tools.

AI and data-driven solutions have the potential to revolutionize compliance and risk management practices. By leveraging advanced analytics, machine learning, and automation, organizations can enhance decision-making processes, improve efficiency, and proactively address compliance risks. However, it is essential to prioritize user adoption, consider the impact on user experience, and strike a balance between automation and human judgment. With the right approach, AI and data-driven solutions can become valuable assets in the pursuit of effective compliance and risk management.

 Three key takeaways:

1. Compliance, risk management and corporate legal can all benefit from a data-driven approach to risk management.

2. By setting up alerts, compliance officers can be notified in real-time about potential risks or non-compliant activities.

3. There will always be the need for a balance between automation and human judgment.

For more information on this month’s sponsor KonaAI, check out their website, here.

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31 Days to More Effective Compliance Programs

One Month to More Effective Written Standards: Day 17 – Policies for Third-Parties

As every compliance practitioner is well aware, third-parties still present the highest risk under the FCPA. The DOJ 2023 ECCP devotes an entire prong to third-party management. It begins with the following: A well-designed compliance program should apply risk-based due diligence to its third-party relationships.  Although the degree of appropriate due diligence may vary based on the size and nature of the company or transaction, prosecutors should assess the extent to which the company has an understanding of the qualifications and associations of third-party partners, including the agents, consultants, and distributors that are commonly used to conceal misconduct, such as the payment of bribes to foreign officials in international business transactions.
This set of queries clearly specifies the DOJ expects an integrated approach that is operationalized throughout the company. This means your compliance program must have a process for the full life cycle of third-party risk management. There are five steps in the life cycle of third-party management: 1) business justification; 2) questionnaire to third-party; 3) due diligence on third-party; 4) compliance terms and conditions, including payment terms; and 5) management and oversight of third parties after contract signing.
I continually give my mantra of compliance, which is “Document, Document, and Document”. Each of the steps you take in the management of your third parties must be documented. Not only must they be documented but they must be stored and managed in a manner that you can retrieve them with relative ease. The management of third parties is absolutely critical in any best practices compliance program.

Three key takeaways:

  1. Use the full five-step process for third-party management.
  2. Make sure you have Business Development involvement and buy-in.
  3. Operationalize all steps going forward by including business unit representatives.

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

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Blog

Managing Culture Risk

Welcome to a special five-part blog series on building a stronger culture of compliance, sponsored by Diligent. In this series I will visit with Yvette Hollingsworth-Clark, Viktor Cuijak, Jessica Czeczuga; Michael Parker; and Alexander Cotoia. In this series, we will consider what is culture, how to assess culture, putting together a strategy to manage culture based upon this assessment, the monitoring of that strategy going forward and using information from your monitoring to engage in continuous improvement of your culture.

Many compliance professionals struggle with the ‘softness’ of culture. However, properly viewed culture can be seen as another type of risk for any organization. Viewed through this lens, culture can then be assessed, managed, monitored and improved as any other business risk. This has become even more important since the announcement in October 2021 by Deputy Attorney General Lisa Monaco, that the Department of Justice would assess corporate culture as a part of corporate compliance enforcement action. In this Part 3, we consider how to manage your culture risk through the crucial role of managers with assess your culture with Jessica Czeczuga.

Jessica Czeczuga is a seasoned professional with over two decades of experience in the training and development field, specializing in areas such as finance, quality, compliance and ethics, leadership, and communication training. Jessica brings a unique perspective to the compliance space, emphasizing the pivotal role of managers in shaping and reinforcing company culture. She believes that managers, being the most influential group within an organization, should be adequately trained to align with the desired culture and equipped with the necessary tools to effectively communicate and reinforce cultural values. Jessica also advocates for the collaboration between compliance professionals and HR to improve culture, leveraging their counseling skills and creating clear processes for reporting and addressing culture-related issues.

According to Czeczuga, managers are the most influential group in an organization when it comes to shaping company culture. They are the boots on the ground, constantly interacting with the employees that report to them. Their ability to talk and influence gives them a lot of power in driving the desired culture. Therefore, it is crucial for organizations to reach out to managers and get them on board with the desired culture, as they will naturally drive that message deeper into the organization.

She emphasized the importance of managers in shaping and reinforcing company culture was discussed. Managers play a significant role in driving the desired culture deeper into the organization, as they are in constant contact with employees and have the ability to support, promote, permit, or ignore certain behaviors and values.

To effectively manage culture, compliance professionals need to empower and train managers. Just like any other training program, a strong training program should be set up for managers, focusing not only on providing them with information about the desired culture but also on practical application. Role-playing and conversations with employees are key to driving behavior change and ensuring that managers are equipped to deliver the desired cultural messages.

The collaboration between HR and compliance departments is also important in reinforcing the importance of culture and driving a culture of reporting. HR, with its extensive touchpoints with employees, plays a crucial role in reinforcing compliance and culture messages. By partnering with HR, compliance professionals can ensure that the messages about culture are consistent and delivered from multiple angles, making them stronger and more impactful.

HR can also provide valuable insights and skills to the compliance function. HR has as many touchpoints with employees as any other corporate function, making it an ideal partner for compliance in reinforcing culture. HR can help compliance professionals in delivering messages about culture to different levels of employees and can provide guidance on how to address culture issues in conversations with employees.

The key takeaway is that managers have a crucial role in shaping and reinforcing company culture. They are the gatekeepers of culture and have the power to drive the desired culture deeper into the organization. To effectively manage culture, compliance professionals should focus on empowering and training managers, while also collaborating with HR to reinforce culture messages. Practical application, such as role-playing and conversations with employees, is key to driving behavior change and ensuring that managers are equipped to deliver the desired cultural messages.

In conclusion, the role of managers in shaping and reinforcing company culture cannot be underestimated. They have the ability to support, promote, permit, or ignore certain behaviors and values, making them the most influential group in an organization when it comes to culture. By empowering and training managers, and collaborating with HR, compliance professionals can effectively manage culture and drive the desired behaviors and values throughout the organization.

Join us tomorrow where we explore monitoring culture.

Tune into Jessica Czeczuga on the Diligent podcast series Unlocking Success: The Crucial Role of Culture in a Best Practices Compliance Program.

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Innovation in Compliance

Unlocking Success: The Crucial Role of Culture in Compliance: Part 3 – Jessica Czeczuga on Creating a Strategy to Manage Culture

Welcome to a special series on building a stronger culture of compliance through targeted and effective training sponsored by Diligent. I will visit with Yvette Hollingsworth-Clark, Viktor Culjak, Jessica Czeczuga, Michael Parker, and Alexander Cotoia. Over this series, we will consider what culture is, how to assess culture, putting together a strategy to manage culture based upon this assessment, monitoring that strategy in the future, and using information from your monitoring to improve your culture continuously. In Part 3, we visit with Jessica Czeczuga on how to develop a strategy to manage your culture risk.

Jessica Czeczuga is a seasoned professional with over two decades of experience in training and development, specializing in areas such as finance, quality, compliance and ethics, leadership, and communication training. Jessica brings a unique perspective to the compliance space, emphasizing the pivotal role of managers in shaping and reinforcing company culture. She believes that managers, the most influential group within an organization, should be adequately trained to align with the desired culture and equipped with the necessary tools to communicate and reinforce cultural values effectively. Jessica also advocates for collaboration between compliance professionals and HR to improve culture, leveraging their counseling skills and creating clear processes for reporting and addressing culture-related issues. Join Tom Fox and Jessica Czeczuga as we dive deeply into this topic in this Unlocking Success: The Crucial Role of Culture podcast episode.

Key Highlights: 

  • The Impact of Managers on Company Culture
  • Collaborative Partnership: HR and Compliance Driving Reporting
  • The Role of Managers in Shaping Culture

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com.

 Join us tomorrow, where we consider how to monitor culture going forward.

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Data Driven Compliance

Data Driven Compliance: Heidi Hunter on Leveraging AI and Data-Driven Solutions for Risk Management in The Financial Industry

Are you struggling to keep up with the ever-changing compliance programs in your business? Look no further than the award-winning Data Driven Compliance podcast, hosted by Tom Fox, which is a podcast featuring an in-depth conversation around the uses of data and data analytics in compliance programs. Data Driven Compliance is back with another exciting episode The intersection of law, compliance, and data is becoming increasingly important in the world of cross-border transactions and mergers and acquisitions.

In this podcast episode, Tom Fox and Heidi Hunter, Chief Product Officer – GBG Americas, explore the intersection of compliance, risk analysis, fraud detection, and cybersecurity. They discuss the importance of identity verification solutions in meeting regulatory requirements and mitigating fraud during customer onboarding. The conversation also delves into the challenges and opportunities of AI in compliance, emphasizing the need for transparency and documentation. AI’s role in risk analysis and fraud detection is examined, highlighting the need for human reasoning and oversight to overcome AI’s limitations. The importance of understanding and mitigating cybersecurity risks is emphasized, with a discussion on red-team and blue-team exercises. Overall, the episode provides insights into maintaining compliance, mitigating risks, and addressing threats in the financial industry.

·      Identity verification solutions

·      Challenges and Opportunities of AI in Compliance

·      The Role of AI in Risk Analysis

·      AI and Fraud Detection

·      The Importance of Understanding and Mitigating Cybersecurity Risks

Resources:

Heidi Hunter on LinkedIn

GBG

 

Tom Fox 

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