We’re Only Human: Culture and Change Management | The New York Fed

Starling Team

In a speech posted on Thursday, September 5th, the New York Fed highlighted the technological changes that bring both promise and risk to the development of healthy cultures.

On the topic of culutre and misconduct, this speech includes the following statement:

“Data scientists maintain that network analysis of communication patterns among employees may identify or even predict problem areas within an organization.”

The NY Fed has run a series of conferences on reforming culture and behavior in banking, as part of there culture inititive Starling’s own Stephen Scott spoke at one of these events in June 2019. You can find more information about that here.

Starling’s machine learning/AI tools ingest internal company electronic communications metadata and distill patterns from such data that correlate, with predictive reliability, to specific behaviors of management interest or concern. Such behaviors may revolve around personal accountability, or a cultural context that promotes a readiness to speak-up and offer challenge when ethical or conduct problems are evident, etc. Starling’s “predictive behavioral analytics” software platform enables financial institutions to predict when poor behaviors – or the lack of desired conduct – is likely to impact non-financial risk oversight and outcomes for customers and stakeholders.

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Can France Rebuild Multilateralism? | GovInside

Starling Team

In 2018, on the 100th anniversary of the World War I armistice. French President Emmanuel Macron launched the Paris Peace Forum “Peace is the ultimate goal of what we’re doing,” says the Forum’s General Director, Justin Vaisse. “How do we organise the planet better, so as to decrease tensions and causes of war?”

The forum is a platform where projects can be scaled up by networking. It selects 10 projects from all over the world every year, and helps initivitates move forward and scale. In case you missed it, Starling’s Stephen Scott and Karen Cook wrote about how war and peace are intimately tied to the ability of economies to provide a path to prosperity. Click here to read that article.

Starling was proud to have been selected for the inaugural event last year. If you’re interested in attending the event this November, you can request an invitation here.

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Capital One Cyber Staff Raised Concerns Before Hack | The Wall Street Journal

Starling Team

“If you think technology can solve your security problems, then you don’t understand the problems and you don’t understand the technology.” – Bruce Schneier

The recently reported hack at Capitol One puts proof to that assertion.

Last month, Capital One revealed that a hacker accessed the information of 106 million credit card applicants and customers. Employees raised their concerns about problems, including staffing issues to senior executives, HR and internal auditors.

This breach was surprising because many believed that the bank was ahead of the curve when it came to technology.

Research from IBM finds that some 60% of cyber attacks are carried out by insiders, 75% of whom are acting with malicious intent rather than a reckless lack of security-mindedness. However, what’s poorly understood is that employees become malicious insiders gradually, over months or even years. Few join an organization with intent to do it harm from day-one. Given that, cybersecurity must start with the “soft stuff” that most in risk management relegate to HR. Human dynamics drove the breach at Capitol One, not “cyber” issues.

As insurance broker Aon has argued, “For businesses to effectively anticipate and manage the external and internal cyber risks in today’s connected world, they will need the co-operation of their most important assets: their people.”

This isn’t to say that firms should view their employees as “threats,” per se. Rather, threats may emerge among their employees. Fot this reason, attention should go to what conditions lead to that unhappy outcome. Often, employees are a firm’s best source of insight into such conditions.

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The Science of Organizational Change | Boston Consulting Group

Starling Team

A recent piece from BCG highlights the ways leaders need to adapt to and approach change. Businesses, like biological systems, behave like nested complex adaptive systems, according to the authors. “Lower-level systems (such as individuals) are embedded in higher-level systems (such as teams, business units, companies, industries, national economies, and societies)—and changes in any system can cause unintended and unpredictable effects in others.”

Leaders will need to embrace this behavior to manage change in complex environments. Letting go of established models will be the key to transforming organizations.

To put this into action, forward-looking companies will leverage AI capabilities as an essential part of their change programs. “For example, machine learning has already shown a remarkable ability to predict the dynamics of some chaotic systems, such as weather.” Technologies like this also have the potential to diagnose organizational health and identify disruptions in real-time.

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ASIC Focuses on Misconduct in Four-Year Corporate Plan| Regulation Asia

Starling Team

ASIC plans to address findings of misconduct in the financial service sector. This four-year plan is expected to cost AUD 270 million (USD 181 million). ASIC will position itself as a more strategic regulator by expanding the use of behavioural sciences, data and technology.

“The public expects financial firms to treat Australians fairly and live up to the expectations of the community and the law,” says ASIC chair James Shipton. “The public expects ASIC to see that they do.”

“In addition, we are engaged in a large volume of work relating to potential misconduct by major financial institutions and their representatives. A number of these are likely to result in referrals for criminal prosecution,” ASIC’s corporate plan states.

ASIC’s strategic plan reflects a growing interest among regulators worldwide in the use of behavioral science in a supervisory context, and in the role that regtech might play in the supervision and governance of culture and conduct risk. Starling is pleased to have been selected by ASIC to explore the application of its tools among Australian financial institutions through the Global Financial Innovation Network.

For more information on behavioural science in culture and conduct supervision, see Stephen Scott’s latest Regulation Asia piece.