Why Compliance Programs Fail – And How to Fix Them | HBR

Starling Team

Despite hundreds of millions of dollars in spend and huge hiring increases, firms have yet to figure out how to manage compliance effectively. In this article from the Harvard Business Review, the authors argue that the problem lies not with the compliance tools being deployed but rather with the lack of effective measurement tools. Firms simply lack the necessary tools to know what works and what does not.

Certainly firm leaders attempt to signal commitment to compliance through pronouncements from above. Efforts to establish a ‘tone from the top’ will only go so far – particularly when the tone from the middle is that general employees lack trust in senior management and are reluctant to speak out from a belief that whistle-blowers face retaliation.

With greater and greater scrutiny place on compliance programs, those that can not show meaningful results will fail to meet the stronger regulatory standards being applied today.

Read the article: Why Compliance Programs Fail

Expand

Compliance could be perfect if it didn’t involve people | FCPA Blog

Starling Team

Alison Taylor, managing director of advisory services at BSR discusses the importance of incorporating behavioral science and relational dynamics into compliance programs in an excellent blog piece on FCPA Blog. Where most compliance programs assume that actors are rational beings, numerous research studies have shown this model does not always play out in reality.

Alison cites research by NYU’s Ethical Systems which generates tools and research to help companies build more effective compliance programs. The OECD has also weighed in via their Integrity Forum in March of last year where they found that the traditional approaches to compliance are ineffective and that firms must work on building “cultures of integrity.”

The full post is available here: Alison Taylor: Compliance could be perfect if it didn’t involve people

Expand

How Behavior Spreads: The Science of Complex Contagions

Starling Team

We at Starling are eagerly anticipating the release of the book How Behavior Spreads: The Science of Complex Contagions, edited by Karen S. Cook, professor of sociology at Stanford and Academic Advisor to Starling.

The book covers research covering over a decade by the author, Damon Centola. Damon has studied how behaviors spread through society, not unlike how diseases move through a population. While it turns out that the factors that encourage the spread of disease are quite different from those that encourage the spread of behaviors, the result is the same. By understanding the forces that encourage behaviors to spread we can learn to be proactive in our reactions to them. At Starling we have turned this insight into intuitive tools that managers can use to predict how and where behaviors of interest will spread so they can reduce risk and boost productivity.

The book is scheduled to be released on June 12th on Amazon: How Behavior Spreads: The Science of Complex Contagions

Expand

Achieving Integrated GRC in an Interconnected Digital Age | Thomson Reuters

Starling Team

Thomson Reuters and Celent have published a report on how companies are approaching the challenge of managing effective GRC programs. The authors interviewed close to 30 Tier 1 financial institutions globally to better understand the challenges facing risk and compliance executives, as well as the technology improvements that are needed to support an integrated GRC paradigm to
overcome these issues.

The report finds that leaders responsible for the various lines of defense must think of their areas as technology-enabled business ecosystems. They operate more like a central nervous system — one that governs the health of an organization through responsive two-way feedback and risk mitigation mechanisms. At the same time, they must be able to be managed and operated in a decentralized way by various stakeholders and end-users. Fortunately, the same processes that make for strong GRC controls also make good business sense and will increasingly differentiate winners from losers.

The risk and compliance executives that were interviewed expect to see real benefits from digital technologies. The current state of the art is focused on moving away from incumbent platforms towards an open, integrated GRC hub.

Such a next-gen platform would support real-time, rules-based monitoring of data and models and would enable an integrated, dynamic approach to managing risk and controls across functional areas and lines of defense. Starling is currently working with banks to realize this vision whereby behaviors and relational dynamics can be monitored in real-time to provide feedback on the effectiveness of risk management processes and controls. Further enhancements are available as Starling is able to make the connection between risk team dynamics and critical outcomes measurable.

The Report is Available: Achieving Integrated GRC in an Interconnected Digital Age

Expand

Preventing Toxic Culture through Investment in Social Capital | Harvard Business Review

Starling Team

Kevin Stiroh, Head of Supervision for the Federal Reserve Bank of New York, describes the powerful market forces that work to encourage toxic behaviors. Furthermore, these behaviors are often not contained within firms but impose negative costs on shareholders, industry, and society as a whole. These behaviors can be mitigated through investments in social capital. Stiroh goes on to argue for a public sector role in encouraging such investments in order to build stronger, more resilient bank cultures.

Read the blog post: The Economics of Why Companies Don’t Fix Their Toxic Cultures

Expand