Eric Morehead, Founder and Principal Consultant at Morehead Consulting, and host of the Compliance Beat interviewed Jean-Marc Levy, CEO of leading RegTech firm ComplySci. Below you can find edited highlights of Eric and Jean-Marc’s conversation:
Jean-Marc: I spent most of my career in the Financial Services Information and Technology space. In that context, a few years ago, I was offered the opportunity to run and expand NYSE’s corporate services business. One of the interesting things about NYSE that the general public doesn’t know is that in addition to its main role, which is to provide liquidity to listed companies, NYSE also plays a quasi-regulatory role by imposing certain standards on these publicly listed companies. I started to learn more about the regulatory burdens placed upon these companies not just by NYSE, but by regulators and other stakeholders, and I came to realize that CCOs operated in an increasingly complex and fast changing environment. They didn’t have many tools and processes. What they did have was highly inefficient. That was very similar to the challenges that Financial Services firms had been facing 10 or 15 years earlier, which gave rise to the FinTech revolution. The logical conclusion was that people who were willing to understand compliance and the ways in which tools, data and technology could make it more efficient, would have a blank slate, which was very exciting. I’ve been in the space ever since.
Eric: I have heard some alarmists talk about automation, concerned that humans will be taken out of the compliance process in the near future. What are your thoughts on this?
Jean-Marc: I think the rumors of their demise are greatly exaggerated. The reason these tools are so valuable is they are handling many low value-add processes and allowing the compliance professionals and CCOs to focus on the more strategic aspects of their roles.
That frees up time and attention to focus on more important things that CCOs should be concerned about, like culture and understanding the impact of changes in the regulatory environment. You will never replace that with automation, but automation creates space and room that allows compliance professionals and CCOs to become much greater strategic partners for their organizations.
Eric: If you could go back in time when you were first introduced to this industry and compliance as a practice and the tools around compliance, and give yourself one piece of advice before you started, what would that one piece of advice be?
Jean-Marc: It would be to tell my younger self much sooner that compliance is not a boring back office function performed by green eye-shade folks locked down in a basement. It would be to really understand that the companies that think about all of the facets of compliance, from the most technical aspects all the way to the cultural and behavioral aspects, can use compliance as a strategic advantage and can really be strategic partners to their businesses. I do think that it is slowly starting to change and that fewer and fewer people are thinking about the green eye-shade folks locked in the basement when they think of compliance. But I actually think compliance is sexy!
Eric: Do you think that because of the traditional, maybe stereotypical, adversarial relationship between the trading desk and compliance that the perspective of collaboration in the financial sector between compliance and the rest of the organization is a harder nut to crack?
Jean-Marc: I think it will always be to some extent. But again, at the risk of sounding like a broken record that is also one of the areas where automation and streamlining of processes are making things easier not just for compliance professionals, but for the traders and financial professionals who traditionally looked at compliance as the department that slowed them down and kept them from doing what they needed to do. If you can make it easier for these professionals and show them that compliance is not just the place that slows you down and says no, but can actually provide you with the tools to do some of the things that are mandatory, and do them faster, and more efficiently, and on your mobile device, so that it does not interfere with your business or your core objective, then that is one way to bridge this gap. But that being said, by definition, I think there will always be some tension.
Eric: If you can look into your compliance and ethics program crystal ball over the next few years, what are some of the trends or issues that you think are going to be important for compliance officers or compliance organizations?
Jean-Marc: There are three key trends in my mind: data, data and data. Seriously, I think CCOs are being increasingly asked not to simply be reactive, or to just be monitors of compliance after the fact, but to proactively identify and anticipate risk. And one of the things that is starting to happen, and is going to accelerate very quickly, is the increasing access to vast amounts of datasets that can be combined and made to work together in order to extract insights about patterns and behaviors. And one of the key trends that we are going to be seeing is companies, and vendors, and compliance departments becoming very good at using data not only to monitor and watch, but to provide insights and have some predictive power on risk issues and risk management in their organization. And these folks will be the winners in the next generation of compliance technology and compliance services. I think we are going to see that accelerate dramatically over the coming years.
Eric: I totally agree about the notion of organizations needing to figure out a way to use predictive data. I think there are two kinds of things that are pushing this. Number 1 is that is has been hard for compliance organizations for a long time to justify their existence as a revenue negative aspect of the organization and to have the predictive capability to say, “look, this is what the weather ahead looks like and this is why we need budget to address it” is key. Secondly, is just to be able to adapt the resources that you do have, never mind the resources that you wish you had, to prepare for the things that are coming down the line as obstacles for the organization.
Jean-Marc: You are absolutely right. And let’s not forget that the regulators, who themselves had been pretty slow in adopting technology and using data, have really caught up. They have invested a great deal in tools and data analytics. When the SEC conducts an examination of your business, they now have access to tools, databases and analytical resources that you could never have imagined just five years ago. So, if your own business cannot at least meet that bar, then you are exposed as a CCO.
Eric: It’s a new world, and if you are going to have a risk-based approach, which we now know as it has been ringing in ours ears for the last few years from our friends down in D.C., you have to approach it as any other risk professional would and use data to identify what those risks are.
About the Speakers:
Eric has over 15 years’ experience working with organizations seeking to address compliance issues and build effective programs. From representing companies facing criminal or regulatory sanctions to leading Advisory Services for NYSE Governance Services, Eric has counseled organizations through difficult transitions as well as proactive program development.
Jean-Marc is a recognized leader in the Ethics & Compliance industry and prior to joining ComplySci, he was President of LRN, a global leading provider of ethics and compliance solutions. Previously, he served as Senior Vice President and Head of Global Issuer Services with Intercontinental Exchange NYSE (NYSE: ICE), where he led NYSE Governance Services, a provider of corporate governance, risk, and ethics and compliance tools and services, to boards of directors and governance and compliance professionals.