Compliance is a daily focus for institutions in the finance sector today, which faces an ever-growing body of regulations in many jurisdictions around the world. Faced with the potential for fines or public shaming – which today could lead to a corporate reputational crisis – compliance is at the top of many risk managers’ agendas.
The challenge of keeping up with and on top of regulation can be time-consuming to say the least. So as the landscape becomes increasingly complex, how can financial institutions respond efficiently?
According to Tales Lopes, Accenture’s finance and compliance services lead for Australian and New Zealand, the answer is in harnessing new technologies such as artificial intelligence (AI) and virtual reality (VR).
Lopes spoke to Corporate Risk and Insurance about the rising tide of regulation in his region, and how AI and VR will revolutionize compliance in the future.
Where are we now?
An unprecedented volume of regulatory change is coming. Every aspect of this oncoming change is required to be undertaken by Australian Banks over the next few years. From the Banking Executive Accountability Regime (BEAR), Basel III to General Data Protection Regulation (GDPR), it’s a challenging time for compliance executives. On top of this, The Royal Commission is adding even more layers of complexity to the compliance agenda, demanding that financial institutions dedicate a significant pool of resources towards investigations and remediation actions.
The volume of change heralded will demand a lot from financial institutions. For example, Accenture’s research has found that over the last four years, many Australian financial institutions have spent an estimated 3% of their net operating income within risk and compliance and, over the next three years, its believed that spend will reach 4.5%-5% of Banks’ Net Operating Income. But this change won’t just impact dollars. The research has also found that, over the next three years, many financial institutions will look to hire over 10,000 people for remediation services.
Why technology is the future
Accenture believes that risk and compliance functions should move towards a self-learning, intelligent and optimized framework, through adoption of new tools and technologies, such as artificial intelligence (AI) and virtual reality (VR). Accenture’s research supports this, with executives identifying compliance technology transformation will be the top spending priority over the next 12 months (57%) and the next three years (51%).
Many risk and compliance departments are already experimenting with AI-powered technologies to streamline functions, while others are considering VR for different purposes such as a training tool. The Commonwealth Bank of Australia, for example, revealed that its RegTech pilot, which uses natural language processing and artificial intelligence to convert regulatory texts into compliance obligations, achieved 95% accuracy. Accenture’s Chatbot for Code of Conduct uses virtual reality and gamification to train employees to understand the required policies and highlight the ramifications of not being compliant. It also saves giving employees a lengthy document or forcing them to search for answers. However, few risk and compliance departments have effectively paired AI and VR together. Partnering VR and specific forms of AI creates an extended reality where participants become part of a virtual landscape.
Extended reality can help risk and compliance departments address the current challenges of regulatory compliance and risk management in Australia. For example, compliance agents can click through a 3-D environment which represents the results of augmented surveillance of employee emails, chats via instant messaging and calls. Rather than having to dig through data in more traditional ways to possible violations, the extended reality technology assists in highlighting potential problems.
As the tide of regulatory change approaches, risk and compliance functions should look to technologies to provide game-changing strategies to deal with recurring challenges. Taking a proactive attitude toward emerging digital solutions and creating an agile model for an adaptive workforce will ensure that financial institutions are ready for what’s next. After all, it’s not about the change that’s coming, it’s about how you can efficiently manage that change.