In this multi-part blog post series, I am exploring the increased use of technology to continue to drive the performance of corporate compliance programs. I am considering the use of Artificial Intelligence (AI) in a best practices compliance program and its collaboration with the compliance professional. Previously, we reviewed what the compliance practitioner can add to an AI system and what AI can bring to the compliance professional. I want to end this exploration by bringing it together to demonstrate how this technological innovation can improve the business process of compliance. It is through this business process improvement that AI will help to drive greater business efficiency and, at the end of the day, greater corporate profitability.
In a Harvard Business Review (HBR) article, entitled “Collaborative Intelligence: Human and AI Are Joining Forces”, H. James Wilson and Paul R. Daugherty explored how companies are seeing and using not simply the intersection of AI and business but the collaboration of AI and business to “reimagine their business processes, focusing on using AI to achieve more operational flexibility or speed, greater scale, better decision making, or increased personalization of products and services.” However it will require commitment, vision and development of both project and most importantly skills on behalf of the compliance professional to achieve this vision. The authors note that employees will need “fusion skills” which enable them to work effectively with AI. That sounds quite a bit like what compliance practitioners need to do now and unfortunately is not something which is taught in today’s law schools.
The next step will be the vision required to reimagine the compliance business process. Obviously a large data project such as an entire Supply Chain review from the compliance perspective is an excellent candidate but processes that are more manual now and run more slowly are also good candidates. The next step could be to consider how compliance could work with an AI solution to co-create a new solution. While the third-party risk management process still has flaws, witness the Foreign Corrupt Practices Act (FCPA) enforcement action involving Panasonic Avionics and the failures of its third party due diligence programs to engage in ongoing monitoring, AI could recognize when there are changes in both the nature and character of third parties which are an indicia of corruption.
There are five characteristics of a business process which companies should want to improve, including the compliance function. The authors identified “flexibility, speed, scale, decision making and personalization.” When reimagining compliance as a business process, a Chief Compliance Officer (CCO) or compliance practitioner should determine which of these characteristics “is central to the desired transformation, how intelligent collaboration could be harnessed to address it, and what alignments and trade-offs with other process characteristics will be necessary.”
Flexibility can provide the compliance practitioner with a more nimble response when a company wants to move to a new high risk area, sell to a high risk customer or offer a product or service which puts them at risk for corruption such as beginning to sell to foreign governments or state-owned enterprises. One can envision AI helping to not only analyze the parameters of the project but also take into account the widest range of information to make a more efficient risk assessment.
Speed is not often a by-word of compliance but it is a by-word of every Business Development (BD) person I have known. AI can supplement fraud detection in both high volume and high-risk transactions to give the business folks more information. AI can bring together data from disparate systems and even siloed data for a more focused review. From this point, the compliance function can design a more effective risk management solution more quickly and more efficiently.
Scale is something which usually bedevils compliance professionals. Simply the quantity of data available can be overwhelming. When you couple this with the need to put out continuous communications around compliance it can all seem overwhelming at times. Here AI can assist in scaling up such activities as the review of hiring candidates from the compliance perspective to providing bots to answer basic compliance inquiries from employees.
Good compliance decision making requires tailored and effective training and ongoing compliance communications. Both requirements are enshrined in the Department of Justice’s 2017 Evaluation of Corporate Compliance Programs. This is particularly true for employees out on the front lines, who may be required to make decisions which could eventually set a company up for FCPA exposure. Yesterday I wrote about the digital twin concept developed by Ernest & Young for General Electric and how it can look at potential compliance failures. That knowledge will allow a more robust compliance solution.
Finally is personalization, consider the benefits when a company pairs the digital twin with GE’s profit and loss of one concept to bring more tailored and effective compliance information to individual employees. As more information is made available down to the individual employee level, it can bring a level of precision of a compliance solution previously unimaginable.
All of this means the opportunity is out there. Companies and compliance professionals will have to grasp it and take advantage of the opportunities. The authors end by stating, “Tomorrow’s leaders will instead be those that embrace collaborative intelligence, transforming their operations, their markets, their industries, and—no less important—their workforces.” The same could be said for the compliance profession.
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