The trouble is that in the early stages of responding to widespread societal changes, various jurisdictions and regulatory bodies tend to act in isolation. Thus, their mandates are often out of alignment, creating confusion for the already overworked compliance teams in heavily regulated industries.
Even so, legislators and regulators tend to ignore compliance stresses, believing that businesses can easily meet higher standards, largely due to the perception that technology can plug the gaps. This is true, but only to a point.
Technology can indeed help businesses stay ahead of the regulatory curve, but to consolidate the gains that technology can drive, businesses must also train their employees to embrace the novel, streamlined workflows to keep up with the accelerating pace of regulatory change.
Can agile methods work in heavily regulated industries?
Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan
At first glance, these core values seem to be a poor fit for heavily regulated industries. Valuing “working software over comprehensive documentation,” could roll you behind the eight-ball come audit time. Auditors will want to see “comprehensive documentation,” after all. Similarly, auditors value “following a plan,” regardless of the amount of change in your industry.
While agile methodologies may help businesses stay aligned with rapidly changing market conditions, the perception has been that those same methods, if applied to compliance, will leave your organization exposed to heightened risks.
Agile versus compliance creates some obvious contradictions. Agile is intended as a method to prioritize customer needs and streamline development. To oversimplify, agile requires a “ready, fire, aim” mentality. “Working software” that is good enough, but no better (ready), is released into the market (fire), so customer feedback can guide the next stages of development (aim).
In heavily-regulated industries, on the other hand, “ready, fire, aim” is a recipe for disaster. Auditors expect a thought-out compliance plan and documentation that shows how well your organization has stuck to that plan.
Will the high cost of noncompliance drive heavily regulated businesses to agile?
What gets lost in discussions of business tactics and compliance is the fact that regulatory frameworks function as the infrastructure of free markets. It’s not just supply and demand that move markets. As regulatory frameworks change, markets change with them. In recent years, three major changes have occured that enable businesses to bridge the agile-compliance disconnect.
First, according to a 2018 study by the Ponemon Institute (commissioned by data-integration company Globalscape), noncompliance is now nearly three times more costly than complying with industry mandates. Ponemon found that the average cost of compliance for companies with 5,000 – 25,000 employees is $5.5 million, while the cost of noncompliance averages an eye-popping $15 million, and this figure doesn’t factor in penalties from not complying with new consumer privacy laws, such as the GDPR and CCPA.
On average, companies that don’t invest in the tools and people necessary to meet regulatory requirements spend more than $9 million annually than their compliant peers. That’s a massive competitive disadvantage.
Second, modern compliance software has evolved away from separate, monolithic platforms that lock data into silos to modern, cloud-based RegTech software that leverages AI, Big Data, and Machine Learning to create a “ready” state that is leagues beyond the “aimed” state arrived at through legacy tools and tactics. Thus, switching from siloed suites to on-demand services gives businesses the ability to measure time to value in hours, not days or weeks.
Third, while Compliance Officers may still be wary of agile methods, other business units have seen their compliance obligations rise. In fact, a 2016 study by the Project Management Institute found that 62% of agile teams must now cope with compliance issues. For teams that already embrace agile, such as DevOps and cybersecurity, agile then becomes the default method to tackle new challenges. When these teams successfully execute agile compliance on a small scale, their efforts create a proof of concept that can guide other business units as they adopt agile processes.
How heavily regulated industries can leverage agile for continuous compliance: 5 steps
If your business is struggling to keep up with regulatory mandates, the first step towards clawing back that $9 million cost for noncompliance is to formulate a plan. If you follow the five steps listed below, you’ll be able to leverage agile workflows to scale up your compliance efforts quickly:
Create a compliance lifecycle that incorporates agile-based continuous improvement methodologies
Clearly define roles, so you know who is responsible for what
Establish clear KPIs and auditable goals. Should auditors knock on your door, the data that serves as the foundation of those performance indicators and helps you define (and redefine) goals will also demonstrate your ongoing compliance efforts.
Identify repetitive, labor-intensive workflows and offload them to modern tools that can automate those error-prone processes, such as modern RegTech software
Measure results, incorporate feedback from all stakeholders (data owners, developers, business leaders, auditors, etc.), and adjust your process over time to ensure continuous compliance
In a regulatory environment characterized by constant change and increasing complexity, compliance is an ongoing process. With new far-reaching consumer privacy regulations, such as the GDPR and CCPA, impacting businesses of all sizes, the time to modernize compliance programs is now. After all, waiting could cost you. . . millions.
Asif Alam is the Chief Executive Officer at Compliance.ai. A leader in shaping disruptive technology, his experience includes building products using AI and natural language processing for GRC, payments, lending, risk, trading, and new solutions, from Fortune 500 companies to startups.
In his most recent role, he served as the Chief Strategy Officer of ThoughtTrace, unlocking new revenue streams and markets, and reignite portfolio growth. ThoughTrace was then acquired by Thomson Reuters in 2021.
He brings more than 20 years of management and business experience; increasing profitability, unlocking new revenue streams and markets, and reignite portfolio growth for companies like Thomson Reuters, Crux Informatics, and Finastra. Asif is a forward-thinking expert driving engagement via client forums, public presentations, and white papers.
Cesar Lee is a Principal at WRV, a venture capital fund focused on early-stage investments in hardware, semiconductor, and other technology-related companies. Previously, he was an investment professional at Riverwood Capital, a technology-focused, late-stage venture capital, and private equity fund. He began his career at RBC Capital Markets, where he was part of the Mergers & Acquisitions group for two years and the Equity-linked & Derivatives group for one year. While at RBC, Cesar spent a majority of his time working on M&A advisory transactions for technology companies.
Cesar’s investment experience includes buyouts, later stage, early stage and seed rounds. Cesar has completed transaction in the U.S., Latin America, and Asia, and in technology sectors including data centers, software, semiconductors, consumer electronics, robotics, big data, and internet.
Maria Devassy is a RegTech, Content, and Technology leader with over 20 years of experience helping companies bridge the gap between technology, product, and business. Maria has held leadership positions with MetricStream, KPMG, Oracle Corporation, and other technology companies. She has launched several successful RegTech products, business partnerships, and advised Fortune 100 clients on risk management, audit, advisory, and compliance business across Industries.
Hugh Cadden is a recognized expert in derivative financial and trading markets including futures, options, and swaps. Hugh is currently a senior consultant and expert with OnPoint Analytics, Inc. an economic, finance and statistical consultancy specializing in expert testimony for complex litigation. He has been specializing in the organization, operation, and regulation of financial and trading markets for over 40 years. Hugh’s experience includes both the public and private sectors and he has held senior level positions with the U.S. Commodity Futures Trading Commission including serving as Director of the Division of Trading and Markets and Deputy Director of Enforcement. He has been qualified as an expert on financial and trading market matters before the Commodity Futures Trading Commission, the Securities and Exchange Commission, the U.S. Tax Court, Financial Industry Regulatory Authority, National Futures Association, American Arbitration Association and federal courts.
Drake Ross is a former bank regulator who specialized in compliance with consumer protection regulations while at the OCC, FDIC, and OTS. While at these agencies, he provided extensive training and guidance and developed materials to ensure full comprehension and proper application of rules, laws, policies, and guidance, and served as a Subject Matter Expert in numerous areas. Because of his expertise, he often presented at agency and industry events. He also played a significant role in successful windup of the 2008 IndyMac Bank failure, where because of his extensive knowledge of the FDIC deposit insurance regulations, he was called upon to administer highly-complex insurance determinations.
Carliss Chatman is an Assistant Professor of Law teaching Contracts, Agency and Unincorporated Entities, Corporations, and Transactional Skills. Her work is influenced by over two decades of service on non-profit boards and involvement with community organizations. Through leadership positions, she has developed expertise in corporate governance and non-profit regulation. She has also been instrumental in strategic planning and fundraising efforts. Prior to law teaching, Professor Chatman was a commercial litigation attorney in Houston, Texas. In practice, she focused on trial law, appeals and arbitration in pharmaceutical, health care, mass torts, product liability, as well as oil, gas, and mineral law. In addition to negotiating settlements and obtaining successful verdicts, Professor Chatman has also analyzed and drafted position statements regarding the constitutionality of statutes and the impact of statutory revisions for presentation to the Texas Legislature.
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Mariam is an Operating Principal at Cota Capital. Mariam has experience providing guidance on strategic and operational planning to Venture and Growth stage companies. Prior to Cota Capital, Mariam spent her career in management consulting as a Director at KPMG. She has experience leading global transformation programs and developing innovative service offerings for Fortune 500 companies in the Technology sector. Mariam has an MBA from UCLA’s Anderson school of management with an emphasis in Finance and Entrepreneurship. She has a Bachelors in Science in Finance and a Bachelors in Science in Economics from Santa Clara University.
Chris Callison-Burch is an Associate Professor in Computer and Information Science Department at the University of Pennsylvania. His research interests include natural language understanding and crowdsourcing. He has served the Association for Computational Linguistics as the General Chair for the ACL 2017 conference, as an action editor for the Transactions of the ACL, as an editorial board member for the Computational Linguistics journal, and an officer for NAACL (the North American chapter of the ACL) and for SIGDAT (the special interest group for linguistic data and corpus-based approaches to natural language processing)
Tom Ladt is an experienced executive and investor. Tom has lead and served on the boards of several public and private companies serving highly regulated industries such as technology, healthcare, real estate, and food processing. Tom has also served in key governmental roles and on numerous community boards.
Jeroen Plink is a global executive with a proven track record of developing and growing businesses, teams, and technologies with innovation and passion. Jeroen was CEO of Practical Law US during its acquisition by Thomson Reuters. He now serves on numerous boards and acts as a strategic consultants for start-ups.
Global Legal and Compliance executive with 15+ years of success in the SaaS technology and financial services industries. Partner to the CEO and executive team in corporate transactions, business development, product expansion, and regulatory navigation during periods of intense growth and organizational change. An advocate of effective risk management that starts with sound business practices and putting the customer first.
Richard Dupree has held multiple Risk, Compliance and Operations positions at regional, national, and global financial services firms including Wells Fargo, Silicon Valley Bank, Bank of the West and BNP Paribas. Rick currently advises FinTechs and RegTechs and sits on industry panels, contributes to industry whitepapers, thought leadership efforts, and speaks at industry seminars on Risk and Compliance challenges faced by banks and FinTechs.
Brian advises clients on legal and regulatory compliance in the financial, tech, and procurement sectors. His passion is helping businesses succeed in heavily regulated environments. As counsel and trusted advisor to businesses of all sizes, and as a former regulator, policymaker, and federal official, Brian acutely understands the unintended burdens that even well-intentioned government requirements can put on innovation and business growth, as well as how to create policies that strike the right balance.
Brian served as National Ombudsman in the Obama Administration, leading the federal Office of Regulatory Enforcement Fairness in assisting hundreds of startups, entrepreneurs, and small business owners in every industry and every state.
Dr. Marsha Ershaghi Hames is Managing Director of Strategy & Development at LRN, a leader in advising and educating organizations about ethics and regulatory compliance, as well as corporate culture, governance and leadership. With the focus of inspired behavior versus required behavior, LRN is a leading voice in the industry for companies to build ethical cultures instead of “check-the-box” compliance approaches. She’s advised Department of Justice corporate monitors on successful program transformation under CIAs (Corporate Integrity Agreements. With over 20 years of experience in leading multinational ethics and compliance strategies, Marsha has become a highly sought-after thought leader on leading Corporate Compliance and Ethics practices.
Carla Carriveau is currently the Senior Managing Counsel at Wealthfront, an automatic investment service firm in Redwood City, California. Carla was previously Senior Counsel, Division of Trading and Markets, at the United States Securities and Exchange Commission. As a former regulator with over 15 years of experience in helping small businesses navigate legal and regulatory needs in the financial services sector, Carla advises Compliance.ai on financial services regulation, the regulatory landscape and industry practices.
