Nasdaq study says compliance officers concerned about technology

COMPLIANCE OFFICERS have a tough job to do in the digital age — ask Mark Zuckerberg who served as his company’s “designated compliance officer” earlier this year.

With technology integrating into the fabric of commerce and becoming a part of the DNA of today’s businesses, compliance officers must work harder to evaluate, identify, understand, and adhere to the letter of the law when it comes to using technology.

Companies — especially in the financial services industry — may be in a hurry to accelerate their journey to digital and climb the digital maturity curve but legal requirements, especially in terms of data privacy, data protection, and artificial intelligence (AI) model risk and AI model bias, must all be taken into account.

According to the 2019 Nasdaq Global Compliance Survey, businesses understand this.

Respondents told Nasdaq’s team that compliance professionals play a bigger role in the executive conversations about the strategic direction of companies today than they did in any of the previous years.

Currently, 84 percent either strongly agree or agree with that statement, while in 2016, when the study was first conducted, that number aggregated to 76 percent.

Interestingly, the report also points towards the fact that while in 2016, the compliance function was largely the responsibility of the CEO, there’s an increasing trend towards that responsibility shifting towards the board of directors.

Further, there’s even an indication that a larger risk function — with the chief compliance officer reporting to the chief risk officer — is being created within organizations, to look after the compliance, governance, and management of risks arising from the use of technology (including data).

This year’s survey also shows that concerns over regulatory enforcement actions (such as regulatory fines) have increased significantly.

Nearly a quarter of respondents to Nasdaq’s survey said that this is the modern compliance professionals’ most important function, representing a shift from previous years’ surveys and a statistically significant increase during the past two years.

Back in 2017, Nasdaq’s report cited that firms seemed to be caught up in their preparations for specific regulatory mandates which went into effect last year. Now that the grace period is over, regulatory scrutiny and enforcement actions are causing greater concern, and more compliance departments are feeling compelled to respond proactively.

Recent regulatory action in the US and the UK which saw fines of US$700 million and US$229 million respectively imposed on companies such as Equifax and British Airways has sent a message to the community of professionals and board members everywhere.

Another interesting takeaway from the study this year is the fact that for the first time in four years, compliance professionals said that they expect understanding technology capabilities and implementing them at their firm to be the biggest compliance challenge over the next 12 months.

However, technology isn’t just an area of concern for companies. The Nasdaq survey found that compliance officers are also looking at “specialized technology” solutions including automations, in order to transform how they deal with the increasing volume of work and the growing number of risks they have to deal with.

Firms clearly recognize the importance of technology solutions in managing regulatory enforcement concerns as well as their shortfalls in this area, Nasdaq’s 2019 report highlighted.

Despite the push on digital, more than half of the respondents still find that current automation levels are insufficient.

Overall, in the financial services industry — compliance officers are rising to the challenge and looking for new ways to protect their organization in the digital age.

In 2020, things might get more difficult (with new technologies being implemented at lightning speed), but with a voice at the discussion table, it is likely that they’ll be able to make the decisions needed to drive the changes they need.

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