An Industry Shift is Required in Response to The Australian Royal Commission

The Australian Royal Commission into Misconduct in Banking, Superannuation, and Financial Services publicly released their Final Report earlier this week. Today, the Governance Institute of Australia (“GIA”) weighed in with their perspective on how the industry must respond to the report which caps a traumatic year of testimony and public scrutiny into the culture and practices of its members.

Recognizing the fundamental impact the industry has on the economy as a whole, the GIA notes that “How these institutions respond to Hayne’s report will be vital, because building long term stability and performance of the sector will determine the health of the Australian economy as a whole.”

At the root of the scandals and misconduct revealed by The Royal Commission is a common culture which treated compliance as a purely mechanistic exercise while failing to as the fundamental question which is “Should We?”. Instead, management teams across the industry chose to ignore clear warning signs because their activity was technically ‘compliant’. In the GIA’s words, “[Reform] cannot be based around an attitude of it being a ‘box-ticking’ exercise for compliance purposes.”

What is needed is a wholesale rethink of governance and the tools that executives use to measure and manage their cultures for accountability and to rebuild trust with the public.

Read the article: Royal Commission: Governance Culture of ‘Box-ticking’ is Over

Read the Royal Commission final report: Final Report – Australian Royal Commission into Misconduct in Financial Services


Starling Selected for 2019 Global RegTech 100 List

Starling Team

Starling Selected for 2019 Global RegTech 100 List

Washington, DC – Starling, an applied behavioral sciences RegTech company, announced that it has been selected for the 2019 Global Regtech 100 list. The RegTech 100 List recognizes pioneering companies around the world that are transforming compliance and risk management.

The 2019 list was compiled by RegTech Analyst, a specialist research firm, based on input from a panel of analysts and industry experts. The finalists were recognized for their innovative use of technology to solve a significant industry problem, or to generate cost savings or efficiency improvements across the compliance function.

For 2019, the panel considered applications from over eight hundred RegTech firms around the world, double the number from the year before. This reflects the massive growth in this sector as banks and financial institutions grapple with increased pressure from both the public and regulators. Since the beginning of 2016, over $4 billion has been invested in RegTech companies.

Starling approaches the problem of misconduct in a novel way that equips firms to anticipate risk and to be proactive in managing it. Through its Predictive Behavioral Analytics technology, Starling combines artificial intelligence with the latest advances in behavioral science and organizational network analysis to provide insight into where challenging behaviors are likely to emerge and how they will spread, contagion-like through a firm. Unlike traditional surveillance and monitoring tools that are intrusive and backward looking, Starling guides managers to identify root behavioral causes of misconduct and to monitor changes in near real-time.

“We’re pleased to be included in this year’s RegTech 100 List,” said Starling founder and CEO Stephen Scott. “Our predictive behavioral analytics platform positions management for proactive engagement where culture and conduct related challenges impair firm performance or result in operational risks. We expect the RegTech market to expand in the years ahead, as customers experience how tools like ours permit for the more timely, efficient, and effective application of scare management resources.”

A full list of the RegTech 100 is available at More detailed information on all companies as well as in-depth industry analysis is available in the Global RegTech Review.

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. Based on this data, Starling’s proprietary algorithms generate 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 are permitted to cascade into crises

The REGTECH 100 is an annual list of 100 of the world’s most innovative RegTech companies. These are the companies every financial institution needs to know about as they consider and develop their mission critical RegTech and digital transformation strategies. The list has been updated for 2019 in the face of the new regulatory challenges financial institutions are facing. It will help senior management at compliance, technology and innovation divisions sort through all the suppliers and identify companies who are most likely to have a lasting impact on the industry.


Australian Royal Commission Signals Changes to Come in Australian Regulatory Oversight

Starling Team

The Australian Royal Commission into the financial services industry is entering its final phase but it is already having a profound impact on the Australian financial sector – and not just in how banks manage misconduct, but in how they are regulated as well.

To this point, following on the Interim Report from the commission, the Australian Financial Review offered an editorial on how the Commission will potentially change how regulation is handled in Australia. The report, published this past September, had an implicit message that “…trust in the banks won’t be restored unless the public trusts their watchdogs to enforce the laws of the land.” Initiatives such as the Royal Commission are finally recognizing that misconduct is not a problem of lone wolf actors. Rather, it is a systemic problem that requires both banks and regulators to adopt new strategies to manage.

The final report is due in February and whatever that report says, it’s clear that banks should expect greater enforcement efforts from ASIC and APRA and that “more legal cases, especially criminal matters, will sharpen the focus of boards and management on risk culture, and send a strong message to the public that misbehaviour is not tolerated, while acting as a deterrence.” In fact, the new Bank Executive Accountability Regime (BEAR) will hold individual executives liable for failures to provide adequate oversight.

The G30 adopts a similar philosophy to the Hayne interim report. They suggest in their most recent whitepaper titled Banking Conduct and Culture Change: A Permanent Mindset Change that stamping out misconduct doesn’t require extensive new regulation. Instead, the regulators will be looking to the banks to come up with better measures for and means (i.e. technology and tools) of managing such risks.

Read the article (paywall): Banking royal commission: How Hayne will change the regulation of banks


HKMA Seminar Led by Starling Focuses on Applications for Behavioral Science in Bank Supervision

Starling Team

Starling led a seminar for over 100 senior bank executives in an event sponsored by the Hong Kong Institute of Bankers (HKIB) on behalf of the Hong Kong Monetary Authority (HKMA). The HKIB has been a leader in education and professional training for the Hong Kong banking industry for over 50 years. A critical part of this mandate is collaboration with the HKMA to expose bank leaders to cutting edge developments in compliance and regulatory supervision. In this context, Starling was invited to deliver a two-part seminar on new applications of behavioral science and technology to the challenge of managing behavioral risk.

The first session was led by Dr. Mirea Raaijmakers, Global Head of Behavioural Risk at ING and former Director of Culture and Conduct Supervision for the Dutch National Bank (DNB). Dr. Raaijmakers drew on her experience in esupervision at the DNB as well as in management at ING to discuss both the opportunities and challenges in managing behavioural risk.

For the second part, Stephen Scott, Starling’s Founder and CEO spoke about how new advances in technology mean that RegTech solutions are now available that bring scale and depth to these efforts to improve the management of behavioural risk.


Elevating Risk Management Beyond the 2nd Line

Starling Team

As the risk management function matures, firms are looking to evolve beyond a focus on high-profile risk mitigation towards a more cost-efficient and strategic business function. This transformation comes as many banks are incorporating artificial intelligence into their 1st line of defence operations to increase efficiencies and to reduce opportunities for misconduct to affect bank activities. As these authors from Grant Thornton discuss in this article on the Risk Management website, bank leaders are increasingly looking to the risk management function to take on a more strategic role.

There are a number of forces driving this trend. First, banks are realizing that effective risk management must be tightly integrated into business strategy and receive strong support from leadership. Second, management is looking to streamline costs even as they also feel pressure to justify the effectiveness of that spend. Finally the scope of risk management is expanding as it must accommodate new innovations being introduced in the largely unregulated fintech sector. Going forward, risk management will not be viewed as merely a “second-line activity”, but will be viewed as having a prominent role in improving business performance.

The authors go on to recommend that, “Institutions need to establish a framework for measuring risk effectiveness as a first action.” At Starling we are working with executives across the globe to apply Starling’s predictive behavioral analytics platform to measure the key behaviors that support effective risk management and to predict how those behaviors drive critical risk outcomes.

Read the article: Transforming the Risk Function to Increase its Effectiveness