Increasing Risk and Compliance Performance Sustainably with Technology

Managing risk and compliance is a continuous function in any financial institution or organization. It is easy to temporarily increase the performance levels of the risk and compliance teams within the organization by adding work for existing personnel. However, both teams cannot be expected to put in more work for an extended period without experiencing burnout. The better approach for businesses regarding risk and compliance is to focus on changing the strategy and the framework guiding the risk and compliance teams across the organization.

Lack of Performance Feedback

When an organization wishes to enhance something, the simplest method is to continuously monitor performance to ascertain the impacts of the organization’s efforts. This type of A/B testing is common in sales and marketing organizations. Businesses examine sales and marketing data from various periods to ascertain which marketing and sales strategies are the most effective for the firm. If management observes a fall in sales following the implementation of a new sales strategy, it will immediately investigate why the new strategy is failing and make necessary course corrections.

It is possible to test different strategies in sales and marketing because sales and marketing data are present in real-time. Businesses look at real-time data on the number of sales, number of leads, number of new customers, and other such data points. The problem with using a similar approach in risk and compliance management is the lack of real-time feedback. Most businesses only learn about risk and compliance performance from reports created periodically by the risk and compliance teams. The reports produced by the risk and compliance teams take a considerable amount of time and effort to create because they must gather all the relevant data.

Risk and compliance technology make it possible for organizations to look at risk & compliance data in real-time & test risks & compliance strategies. Click To Tweet

There is a significant delay between risk and compliance activities and reporting. An organization cannot monitor and improve its risk and compliance frameworks if it does not understand how the changes being implemented affect the risk and compliance performance levels. The new risk and compliance strategy may be significantly inefficient compared to the previous strategy. Still, management will only detect the decrease in performance when reported to them a few weeks or even months later.

Lack of performance feedback is just one of the difficulties firms encounter when attempting to enhance risk and compliance performance sustainably. The absence of a functional and codified risk and compliance framework also complicates the task of firms seeking to improve their risk and compliance management.

On Paper Versus Actual Risk and Compliance Frameworks

While risk and compliance technology deliver many benefits in different risk and compliance processes, a much more profound change occurs when risk and compliance technology is implemented that is not often discussed. All financial organizations and institutions already have a risk and compliance framework in place. It is simply impossible for a financial institution to operate without complying with the existing regulations and managing the risks of working in the financial sector. However, the risk and compliance framework exists as a set of instructions that need to be followed and not much more.

Most organizations will have many written procedures and rules for the whole organization to ensure that risks are managed, and regulations are complied with. Still, it is up to the employees to follow those rules and regulations. The risk and compliance framework is theoretical in a way; each employee knows what they’re supposed to do and how they’re supposed to interact with different processes and documents, but there is no existing system that is implementing the rules or even monitoring procedures to ensure that all the required rules and regulations are being followed.

When risk and compliance technology are implemented in any organization, this theoretical framework becomes an actual functioning framework that connects the whole organization. Instead of relying on the employees to follow all the workflows and notify all the required stakeholders, the risk and compliance technology platform automatically handles these tasks ensuring that the entire organization has access to the risk and compliance data it needs and has fulfilled all the steps required in different risk and compliance processes.

Sustainable Improvements in Risk and Compliance

Risk and compliance technology make it possible for organizations to look at risk and compliance data in real-time and test different risks and compliance strategies to determine the one that will be the most effective for the organization. Businesses also get a functioning and codified risk and compliance framework which drastically reduces the chances of human error, leading to substantial compliance fines or risk-related failures.