OPINION: Culture, values and technology – the world of compliance is changing

Rob Haden, Forensic & Integrity Services, EY
Rob Haden, Forensic & Integrity Services, EY

The current compliance landscape is one of rapidly changing regulatory requirements, continuous advances in technologies, and declining consumer trust. Energy companies’ compliance functions are being asked to deliver more in a constrained cost environment, facing increasing regulation and responding to the demands of multiple regulators. Luckily technology changes in the form of Automated Compliance are now able to really help.

The compliance landscape

The landscape is already dispersed with domestic and international bribery legislation, stringent health and safety regulations, and a wide array of region-specific matters including sanctions and local content. Failure to adapt compliance to existing and new regulations could have a serious reputational and financial impact for Oil & Gas companies as recent newspaper headlines, scandals and eye-watering penalties have demonstrated. Recent additions such as the UK Criminal Finances Act, GDPR, and the Network and Information Security Directive (NISD) will only intensify the pressure to comply and many Company boards are asking compliance functions how automation and machine learning can help. So how do firms redefine their compliance functions to respond to, or even pre-empt, emerging challenges?

What is Automated Compliance?…

In a nutshell, Automated Compliance is preventing the occurrence (or recurrence) of incidents or breaches through data-driven monitoring.

Embracing technology to manage compliance risks may take many forms. In moving towards automated compliance, businesses may make a number of interventions aligned to their risk appetite. In taking any step, we suggest that clients ask, and answer, several key questions when seeking to realise benefits from any intervention.

  • What could be the early warning signs of a behaviour or incident?
  • Can those warning signs be converted into a signals from data?
  • Can sensors placed in the systems generate those signals?
  • How frequently do you need to review those signals for genuine insight?
  • How will you review (and refine) those signals?

The answers to these questions will help inform the design and implementation of individual components of automated compliance. The more areas it is applied to the further down the automation journey an organisation will be.

The human factor…

A well-built compliance programme minimises the time and cost of response, and mitigates damages from a breach. To be truly effective though, compliance and ethics needs to be embedded in an organisation’s culture. Having the right culture and values in place within an organisation will always be vital, and developing and harnessing automation can give a board useful tools and indicators to focus effort and prompt action.

Businesses need to be aware that monitoring data points could be perceived by employees and stakeholders as a form of ’big brother‘ supervision, particularly where these questions are asked and forms of automation are implemented across a broadening scope of organisational activities. It is important to acknowledge this challenge in order to balance it against a legitimate need to leverage the tools available and manage potential breaches or inappropriate behaviour.

Automation should not be at the expense of human insight, and red flags from automated monitoring must be addressed by the right people, showing the appropriate levels of care, and with collaboration from all multiple areas of the organisation. As regulatory and compliance risks evolve there will be an increasing need for this multi-disciplinary approach to ensure the right organisational knowledge is around the table. This will involve more than just compliance professionals as the sphere of regulation widens.

As the quantity and complexity of data captured by regulation increases exponentially, proactive data-driven compliance supervision systems are likely to become the only practical way to address compliance risks, meaning that a purely people-driven compliance strategy becomes more strained and unsustainable as a long term solution.

The rewards can be significant, as transparency of compliance is emerging as a competitive edge, particularly in fields such as data privacy and data utilities.  Effective compliance monitoring can surface issues and insights of value to the business including acting as a gauge on culture and can be central to strategic objectives.