Why it’s critical that compliance managers now say ‘yes’ to tech

This article was contributed by Robert Cruz, VP of information governance at Smarsh

For decades, compliance efforts have been inextricably linked to the word “no.” 

Consider the financial and banking space, where new channels of communication with customers have emerged at an accelerated pace. Historically, compliance managers have been hesitant to explore these new methods or downright opposed to adoption. But in 2022, as brokers try to reach the growing number of millennials and Gen-Zers curious about investing, a genuine shift has occurred. 

The last couple of years stress-tested the ways we communicate and strategize with customers and potential clients. The result? Collaboration, conferencing and chat platforms went from supplementing the workplace to replacing it, and we’re at a point of no return with our reliance on Slack, Zoom and Microsoft Teams. A little further down the road, the ability to collaborate within a virtual, augmented or fully digital metaverse present even bigger opportunities — but also new challenges for compliance managers. 

At this critical moment, we need to move forward with an open mind and strategic thinking when it comes to the changing communication and technology landscape. Too many opportunities to reach new audiences exist — along with technology partners to support these efforts — to continue being overcautious in the face of risk. Additionally, compliance managers need to make sure they’re equipped to better capture and aggregate their communications to prevent new and unexpected problems that could become public. 

Why 2022 is a turning point for compliance and compliance managers

The financial services and banking industry is at an inflection point when it comes to compliance. From multiple fronts, exciting opportunities and new threats are emerging. Where do we stand? 

• Demographic shifts: Digital natives who learned to use a smartphone before grade school are coming of age. They’re showing signs of great interest in new and innovative modes of investing — even if they don’t entirely understand it yet — and are finding new influences in how they think about money on platforms like TikTok and Reddit. 
  • Immediate challenge: Reaching and educating this untapped market, and finding ways of engaging them that are comfortable for both parties. 

• Industrial shifts: Firms are transforming how they organize and operate in a hybrid environment, but gaps still remain. Can an internal team located across the globe, for example, capture all of the valuable notes, strategies, documents and data that were virtually shared during a large Zoom meeting?
  • Immediate challenge: With the addition of new communication modes, compliance managers need to identify where information silos exist and how to capture and store all the data created by these new ways of collaborating. 

• Cybersecurity and risk shifts: Disruption often means new ways in or weakened defenses, and financial services carry some of the biggest dollar signs for hackers. One only has to look at what’s occurring in the much less regulated space of cryptocurrency to see how eager cybercriminals are to exploit new technology.
  • Immediate challenge: Compliance managers need to stay ahead of trends and be proactive about security while regulation catches up. 

• Regulatory shifts: The last few years have disrupted the rules of the road for doing business in many ways, and even regulators acknowledge the need for better and more modernized guidelines. Meme stocks, gamification, the sale of non-physical items, conducting multi-million dollar transactions virtually — none of these concepts were truly reality until recently, and the rules simply have not caught up. 
  • Immediate challenge: Ensuring every part of the operation is prepared when new regulation inevitably happens. 

The high stakes of modern compliance 

Compliance managers are naturally risk-averse, and our caution only increases when we see how devastating high-profile examples of improper data archiving, oversight and planning can be. Especially with a push toward collaboration in the metaverse, compliance managers face new territory and need a better understanding to make sure these interactions won’t expose the company to risk or penalty. 

On the other hand, strong compliance efforts can deliver nine-digit savings. Here are some notable examples of where compliance has been a difference-maker:

• Human resources and conduct: When McDonald’s fired its CEO over allegations of improper relationships in the workplace, the company was able to recover $105 million worth of severance, thanks to comprehensive compliance policies that captured video and text where the improper exchanges were said to have occurred. 
• Data leaks: Increasingly, companies are seeing information shared with journalists via Twitter, LinkedIn and other mediums. Apple famously scolded employees on leaks, and one employee has even faced criminal charges. Tesla has struggled with its team sharing the internal workings of the company with journalists on Twitter (even though its CEO has trouble with that concept himself) and frequently sees internal information go viral. 
• Intellectual property (IP) loss: “Gigaleaks” — or massive data dumps that comprise source code, prototypes and other IP — have hit Nintendo and other companies lately. Often, it happens through the weakest link or because of one employee caught off guard. 

In 2022, the most seismic shift of all for compliance professionals in finance and banking is that technology is finally mature enough to mitigate risks that historically have been too high. With the right partner and tools, new channels and communications methods can be seen as opportunities, not simply new risks. 

Robert Cruz is VP of information governance at Smarsh