Trust is a Competitive Advantage | Inc Magazine

Starling Team

In one of the larger studies we’ve seen on this subject, Accenture has published an analysis of over 7,000 firms on the factors that drive revenue and profitability. The study focused on key dimensions related to agility, the ability of the firm to respond to external challenges and adapt to new markets and challenges. AFter analyzing over 4 million data points, the study found that metrics related to Trust impacted the outcomes disproportionately.

In this review by Greg Satell, author of the book Mapping Innovation, Satell points to a number of interesting nuances in the report’s findings. Above all, events leading to a loss of trust can be devastating to a firm. The author points out that these impacts extend well beyond the firm’s customers to include other stakeholders such as employees, investors, and regulators – a point we’ve made ourselves here.

This damage impacts firms differently depending on their industry but at least as important is how a firm responds. The difference comes down to having a well planned and disciplined response as well as a strong foundation of trust built up ahead of time.

Read the article: New Accenture Strategy Report Shows How Trust Can be a Competitive Advantage

Read the Accenture Report: The Bottom Line on Trust


Risk Governance and the Politics of Rage | Starling

Starling Team

A renewed focus on effective governance is gaining traction. Whether in the form of initiatives such as French President Macron’s Paris Peace Forum or BlackRock CEO Larry Fink’s challenge regarding a new model of corporate governance. In each of these instances, the solution proposed to respond to caustic politics and public discord is to restore trust in the core institutions of government, civic society, and business.

Firms demonstrate good governance when they balance the profit motive with responsible management and a customer-centric ethic. This is particularly acute for the banking sector, where misconduct, self-dealing, and financial crime have damaged the reputations not only for individual banks, but for the sector as a whole.

In this article by Starling’s Stephen Scott and Karen Cook, the co-authors argue that effective governance is not only a social good – but it is in fact critical to profitability and perhaps even long-term survival. “Where a firm is seen to ‘cheat’ or to engage in bad-acts, faith in such a firm will weaken. Though typically spoken of in anodyne terms such as brand impairment, reputational or ‘headline’ risk, and loss of ‘good will’ (in accounting-speak), bottom-line impact is demonstrable.” When failures impact a number of firms, the loss of trust can impact entire industries. Even ten years after the Great Financial Crisis, the follow-on effects continue to be felt around the globe.

Leveraging the metaphor of the Four Horsemen of the Apocalypse, the authors describe how failures in governance and a loss of trust impact each of the four key stakeholders of the firm, regulators, investors, customers, and employees. The impact of such failures involve real costs in the form of loss of increased regulatory scrutiny, loss of investment, declining sales, or a failure to attract and retain high-value employees.

The authors conclude by calling for a new trust infrastructure that relies on new standards of governance.

Read the article: Risk Governance and the Politics of Rage

Stephen Scott is the Founder & CEO of Starling. Karen Cook is Professor of Sociology and Director of the Institute for Research in the Social Sciences at Stanford and an Academic Advisor to Starling.


Absorbing the Lessons Learned from Lehman | Financial Times

Starling Team

The 10th anniversary of the failure of Lehman Brothers has inspired a lot of soul searching as to what went wrong and, more importantly, whehter we’ve done enough to prevent such a crisis from happening again.

In this article Michelle Scrimgeour, CEO of EMEA for Columbia Threadneedle Investments, argues that unless firms have addressed their culture, they can’t really be confident that they’ve addressed the fundamental problems that led up to the crisis in the first place. Regulators have taken some initial steps in this direction through initiatives like the UK Financial Conduct Authority’s conduct regime which applies personal liability to all employee for bank misconduct.

However, regulation, particularly top-down rules-based approaches, are not ideally suited to improving culture. Management must be committed to encouraging the right behaviors and to setting the correct priorities.

Read the article here (paywall): Lessons since Lehman about corporate culture


Starling’s Global Trust Initiative to be Featured at Paris Peace Forum

Starling Team

Starling, an applied behavioral sciences ‘RegTech’ company, announced that it has been selected to present its Global Trust Initiative at the inaugural Paris Peace Forum to be held November 11th to 13th, 2018 at La Grande halle de La Villette in Paris, France.

Convened by French President Emanuel Macron to commemorate the 100th anniversary of the Armistice at the close of WWI, the Paris Peace Forum is organized to showcase various governance solutions presented by project leaders hailing from 116 countries and all walks of civil society: foundations, academia, NGOs, religious organizations, and – most notably – private business. “Peace is linked with global governance,” the organizers contend, with reference to corporate as well as civic governance.

Starling launched its Global Trust Initiative to demonstrate how its pioneering Predictive Behavioral Analytics software platform supports more timely, efficient and effective management of culture and conduct risk within banks. Misconduct in the financial sector is not limited to direct financial costs; it also drives an erosion of trust in banking and extends a decline in faith in ‘the system.’

The Global Trust Initiative will see a cross-border trial of Starling’s platform across banks headquartered in the world’s major financial centers, including the UK, EU, US, Canada and Australia. Working with one bank and one primary regulator in each of those jurisdictions, the Initiative will further industry best practices and ensure that lessons learned are shared among regulators and firms.

Starling approaches the problem of managing misconduct in a novel way, combining machine learning with the latest advances in behavioral science and organizational network analysis to identify where problematic behaviors are likely to emerge and how they may spread, contagion-like, to permeate a firm. Starling’s solution does not rely on expensive and time-consuming culture surveys. And unlike traditional surveillance and monitoring tools that are intrusive and backward looking, Starling guides managers to identify the root behavioral causes of misconduct and to monitor changes in real-time.

The Paris Peace Forum received some 900 applications from governance project leaders around the world hoping to be featured at the event. Starling’s Global Trust Initiative was selected as one of 21 projects to be represented in the New Technologies category, alongside projects sponsored by companies like Microsoft, Google and Facebook. Heads of State and government representatives from over 80 countries are expected to attend the Forum. Participants will meet with project leaders, participate in debates and open discussions, and network with other global governance leaders.

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.


Banks Must Focus More on Culture to Mitigate Conduct Risk | Irish Central Bank

Starling Team

Derville Rowland, the Director General of the Irish Central Bank gave a speech recently at the Conference on Culture, Diversity and the Way Forward for Corporate Governance, held at Trinity College in Dublin. In the speech Ms Rowland described how traditional regulation has failed to fully address or mitigate ongoing scandals in the banking industry.

As she points out, the traditional approach of seeking out ‘bad apples’ is flawed. As she points out, studies have shown that approximately 7% of US financial advisors had some form of misconduct on their records, and yet, the distribution of these advisors across the industry is not even. Clearly, some firms are better at managing misconduct so as to root out such behavior. The difference, Ms Rowland points out, is culture.

Given this challenge, it is critically important for bank leadership to set the appropriate tone and for Boards to take full responsibility for establishing the right culture. Firms must establish accountability for misconduct and look beyond general indicators like ‘Net Promoter Scores’ to identify behavioral problems that ultimately lead to misconduct.

Read the full speech: Bad Apples or Bad Barrels? How Effective Culture Mitigates Conduct Risk