How should a Board of Directors think about the digital transformation of compliance? What are the questions a Board should ask a Chief Compliance Officer (CCO) regarding the use of data analytics in compliance? How does a Board ensure that value is created through using data in compliance and make compliance more efficient in the area of risk management? Many Boards are struggling with these questions and others when it comes to a digital transformation. I was therefore intrigued by a recent HBR.org article, entitled “5 Questions Boards Should Be Asking About Digital Transformation” by Celia Huber, Alex Sukharevsky, and Rodney Zemmel. I found it to provide an excellent framework for Board’s to think through the data analytics now required in any best practices compliance program. I have adapted their work for the compliance perspective.
Most CCOs understood the need for a digital transformation to data analytics prior to Covid-19. Afterall, the Securities and Exchange Commission (SEC) have been talking about it since at least 2016 in the context of a Foreign Corrupt Practices Act (FCPA) enforcement action. After the Covid lockdown hit, the Department of Justice (DOJ), in the 2020 Update to the Evaluation of Corporate Compliance Programs, mandated that CCOs have access to company data and use it to monitor and enhance a compliance program. But Covid-19 has only accelerated that timeline, moving use forward three to five years. Digital transformation has become a matter of compliance survival and a top priority for Boards. While many Board members understand the need for a digital transformation in compliance, “they struggle to see how they can best add value. The complexity of technology and the speed of digital can make board members feel like they’re always playing catchup.”
This digital mandate also impacts the Board’s oversight role in compliance. As the authors note, it “is increasing the scope of the board’s mandate, opening up new fronts for risk and competition. Rising to the challenge doesn’t mean completely reinventing the board model, but it does require a thoughtful recalibration of where to focus directors’ energies. Asking the following five questions will ensure that boards are focused on the most important digital challenges. While some of these questions are more strategic, and others more operational, boards that address all of them can help push companies to achieve the digital transformations essential to today’s competitive advantage.” This is even more true for a compliance program.
Even keeping track of competitive threats poses challenges. “On the one hand, there is the sheer volume of new businesses and technologies that burst onto the scene, often seemingly from nowhere. On the other hand, there’s the threat potential of established businesses operating in brand-new sectors: Think about e-commerce businesses getting into data management, tech companies moving into banking, or retailers into logistics.”
The authors conclude, ““Digital is what we’re going to be doing for the rest of our lives.” This is even more true from the compliance perspective. This mandates Boards supporting a successful digital transformation of compliance imperative. As the pressures and complexities of digital increase, Boards have a key role to play in guiding their compliance functions through successful, long-term digital transformations.