Bank of England Deputy Governor Warns of Crackdown on Financial Sector |Iternational Investments

Starling Team

The Bank of England (BoE) Deputy Governor Sam Woods recently warned that Britain’s financial sector that regulators may crackdown and enforce their rules to ensure the financial system is safe a decade after the financial crisis. Woods, the head of the BoE’s banking supervisory arm, told the Telegraph that he wants to avoid “a return to the buccaneering ‘heads I win, tails you lose’ culture that we had before the crisis”.

“I think it’s possible that as we come out of the reform phase, and enter a phase where we’re defending the reforms that have been put in place, that you may see more enforcement activity,” he explained. He also warned that bankers expecting less strict regulations after Brexit will be disappointed. He says it doesn’t make sense for a global trading centre to let its domestic banking system to get jumbled up with the risky side of finance.

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ASIC Widens Culture and Pay Crackdown | Financial Review

Starling Team

The ASIC plans to crackdown on boards, culture and pay from banks to other big listed companies. Chairman James Shipton recently spoke of continued “blindness to reality” among some boards. He also warned that ASIC’s corporate governance taskforce would reach beyond banks and examine listed company boards. “Financial risk is very mature here but that same revolution is required in non-financial risks,” Mr. Shipton told the Financial Review.

According to the ASIC, non-financial risks include operational risk and conduct risk. This also includes risks from not treating customers fairly. The aim is to detect cultural and organisational and management failings that may lead to conduct issues and breaches.

It is clear that boards among all large listed firms in Australia will need to give greater attention to non-financial risk matters. They should insist that management has developed a robust ability to report meaningfully with regard to such risks and to forecast where risk issues are most likely to appear and to demand focused mitigation efforts.

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FCA and Bank of England Announce Proposals for Data Reforms Across the UK Financial Sector | Bank of England

Starling Team

Starling has frequently noted how both the UK’s Financial Conduct Authority (FCA) and the Bank of England (BoE)’s Prudential Regulatory Authority have put increasing emphasis on the importance of non-financial risks, and especially those that flow from culture and misconduct. In an interesting development, on January 7th the FCA and BoE jointly released a plan to further develop their data and analytics capabilities. As we learn more about this new strategy, it will be very interesting to see how it may align with those regulatory priorities.

Both authorities already rely on high-quality data to fulfill missions of maintaining financial stability, competition and market integrity. This new strategy goes further to lay out a plan to invest in new technology and skills in order to make better and more efficient use of data. It outlines the organization’s focus on using advanced data analytics and automation techniques to gain an understanding of how firms function. Specifically, the conduct regulator aspires to “predict, monitor and respond” to market issues. The FCA will also invest in skills and new ways of working to understand data and technology.

“In keeping with our Mission, a data-driven approach to regulation allows us to anticipate harms before they crystallise, better understand the effect on consumers of changing business models and to regulate an increasing number of firms efficiently and effectively,” said Christopher Woolard, Executive Director of Strategy and Competition at the FCA.

We believe it is particularly interesting to note the regulators’ interest in using data and advanced analytics capabilities to “predict” where issues of regulatory interest may arise within firms and markets, and to “anticipate harms before they crystallise.” Innovation in data analytics has demonstrated that there are rich, untapped data sources within firms that can provide insight into non-financial risk with predictive reliability. Given the stated priorities of these regulators as noted above, we are looking forward to seeing what new capabilities this data initiative will make possible.

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UK Companies Are Only ‘Paying Lip Service’ to Governance Reform | Financial Times

Starling Team

The UK’s Financial Reporting Council, which sets the country’s corporate governance code, has criticized UK listed companies for merely “paying lip service” to changes in Britain’s corporate governance guidelines that recently came into effect. The UK boardroom regulator said that a review found that many companies prioritize “strict compliance” but give “insufficient consideration” to the importance of culture and strategy in the context of ensuring good corporate governance.”

The FRC revamped the UK’s 25-year-old corporate governance code in 2018, introducing guidelines for boards to scrutinize corporate culture, among other duties. The FRC also urged boards to pressure management to take action — to be detailed in annual reports — when it finds culture to be in tension with the company’s stated strategy.

“Concentrating on achieving box-ticking compliance, at the expense of effective governance and reporting, is paying lip service to the spirit of the code and does a disservice to the interests of shareholders and wider stakeholders, including the public,” said Jon Thompson, FRC chief executive. In the wake of several high profile corporate failures, the FRC urges companies to put greater focus on the outcomes of implementing its governance code in 2020.

It is important to note the clear distinction the FRC draws between compliance and governance. Too often, the two ideas are conflated. But compliance is about checking to assure that a firm is operating in accordance with mandates imposed upon it by regulators. That is, compliance is externally driven. By contrast, governance should be driven by internally established concerns for shareholder and stakeholder interests.

While governance and compliance priorities may often align neatly, it is governance that is the responsibility of boards, and the FRC has indicated that this responsibility cannot be effectively outsourced to a firm’s compliance function.

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Siew Kai Choy Joins Starling Advisory Board

Starling Team
Starling, an applied behavioral sciences technology company, has announced the appointment of Siew Kai Choy, former Managing Director of GIC Private Limited (the Singapore sovereign wealth fund), to its newly established Risk & Governance Advisory Board. 

With more than 30 years in investment management, Siew Kai Choy retired from GIC after 20 years of service. At GIC he served as head of Enterprise Data & Analytics and held key leadership positions in Governance, Risk & Performance Management, Equities, and with GIC Innovation Labs. He was also a member of the Corporate Management Committee and Group Risk Committee. In his earlier career, Siew Kai had the start-up experience of building from scratch all the functions of a boutique fund management company and leading change initiatives in one of the largest South East Asian banks.  

“In traditional financial institutions, we tend to throw away a lot of data that might be useful,” Siew Kai observed. “Yet Starling has demonstrated that it is possible to distill signal from standard company data sets that tie to critical company performance outcomes – including risk and governance related outcomes that are of key concern to boards and shareholders. While this has immediate application in the finance sector,” he added, “Starling’s analytic tools and data-driven risk metrics are sure to be of interest to anyone looking to better manage non-financial risk – and to demonstrate that ability to supervisors, investors, and insurers. I’m excited to advise Starling’s leadership as it brings these tools to a broader market.”

“There are few who possess the depth and breadth of experience that Siew Kai brings to Starling regarding matters so central to our long-term mission and vision,” said Starling founder & CEO Stephen Scott. “Sovereign and large institutional investors are placing greater emphasis on ESG concerns as they evaluate their holdings. While environmental and social concerns may win most press attention,” Scott added, “it is the governance piece that’s of perhaps greatest concern to these investors. Starling’s analytical tools produce metrics of relevance to this audience, and Siew Kai is uniquely well-placed to help us to better appreciate and serve their needs. We’re privileged to have his counsel.” 

About Siew Kai Choy

Siew Kai’s investment management experience and contributions to GIC spans across enterprise risk & performance management, investment technology/data science, shareholder proxy voting, asset owner stewardship/governance, operations (asset class COO equivalent level), asset class allocation/ rebalancing/ completion management, equities portfolio management, trading, and securities lending.  

Siew Kai currently acts as an independent investor in, and advisor to, listed and private companies and funds located in Singapore, California, United Kingdom, Netherlands and Estonia and operating in Banking, Fintech, Medtech, Blockchain, Cybersecurity and multi-industry Deep-Tech. He will also be transitioning in 2020 into a Board role in a US$10bn+ market cap NYSE listed company. He has a deep interest on the impact of the 4th Industrial Revolution (especially cyber-physical/bio/social systems) on industries, business models and jobs. 

Siew Kai is currently a Distinguished Careers Institute Fellow at Stanford University. He holds a BSc in Computer Science and Management Science (joint honors) and has attended the Wharton School’s Advanced Management Program for Senior Executives. He has a long-time commitment to working with church and community organizations at the national and local levels.


About Starling

Starling is an applied behavioral sciences company using machine learning and network science to build what it calls “augmented management intelligence” tools. Its predictive behavioral analytics technology reveals the performance impact of relational trust dynamics within organizations and generates actionable insights, displayed through intuitive and customizable dashboards, enabling business leaders to drive improved performance and desired culture – and to identify and mitigate behavior-related risks before they cascade into crises.  

Starling is guided by a Scientific & Academic Advisory Board that includes John Seely Brown “JSB,” (former director of the Xerox PARC Research Lab), Thomas Malone (director of MIT’s Center for Collective Intelligence), Nicholas Christakis (director of Yale’s Human Nature Lab), and Karen Cook (director of Stanford’s Institute for Research in the Social Sciences). Senior Regulatory Advisors to the company include Martin Wheatley (former CEO, UK Financial Conduct Authority and Hong Kong Securities & Investments Commission) and Rick Ketchum (former CEO, US Financial Industry Regulatory Authority (FINRA), head of regulation at the NYSE, and President of NASDAQ).
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