Innovation in Compliance: Compliance Ecosystem – Part 2 | Thomas Fox

This week, we’re exploring the topic of innovation as required, a week later reviewing some of the latest business strategies that can be applied by compliance professionals in corporate compliance programs. My inspiration comes from the MIT Sloan Management Review Winter Edition. У Establishing Traffic Rules, authors Ulrich Pidun, Martin Reeves and Niklas Knust argue that introducing the right rules to organize a platform that creates value for all stakeholders is crucial to help in the overall approach to risk management. I used their article as a starting point to look at enhancing ecosystem compliance. Yesterday we looked at what an compliance ecosystem is and the framework for considering it. Today, we conclude this topic by using the elements of the platform to deploy four key recommendations that can guide the Director of Oversight Control (CCO) in developing and managing a management model for ecosystem compliance.

  1. Align your ecosystem management model with its strategic priorities.

As with all compliance programs, the strategic priorities of your compliance ecosystem will vary depending on the risks, the risk management protocol, and the maturity of the compliance program. The authors note that your growth ecosystem compliance “can help reduce barriers to entry, weaken behavioral controls, and / or offer more generous distribution. [compliance] value ”. However, “the governance model can help orchestrators maintain the quality of the ecosystem’s offerings”.

If your overall strategic focus is on improving interactions between compliance ecosystem stakeholders, “different dimensions of governance can help”. This may include “the use of multiple dimensions of governance: overall mission, rigorous technical guidance and behavioral processes, and administrative decision-making rights that are assigned to specific users”. The authors conclude: “Bold choices regarding management dimensions can help orchestrators simultaneously achieve conflicting goals,” clarifying that there may be a low barrier to access to the compliance ecosystem, “while ensuring a high level of quality and consistency. the cost of centralized law solutions and the use of extensive quality testing before approving newly developed platform applications ”.

  1. Use your control model to stand out.

Ecosystem governance is a source of competitive advantage. As a CCO, you can develop different management profiles to differentiate your compliance ecosystem. If your compliance ecosystem is relatively new, you can “adopt an open management model to counter the network effects enjoyed by current executives”. The authors warn that this may be an iterative process, as your first attempt may not be fully accepted by all stakeholders.

Moreover, when competing ecosystems first experiment with diverse management models and use them for competitive differentiation, over time more successful models eradicate weaker ones. CCOs will learn which management is best for their organization, but then such models may begin to converge. The authors noted, “If one ecosystem gains a competitive advantage by adapting its management model, others may be forced to do the same to keep up.”

  1. Use governance to ensure public recognition.

Interestingly, the authors in their study of business ecosystem management noted that good governance can lead to greater public recognition. As a rule, in the field of compliance, it is the opposite; that is, social recognition by employees and other stakeholders leads to good governance. This dichotomy should be studied for CCO.

Perhaps unsurprisingly, the ecosystem approach to compliance has not yet been fully adopted by the Department of Justice (DOJ) or the Securities and Exchange Commission (SEC), most likely because it is still so advanced. However, as with all requirements, the most important thing when regulators are knocking is that you have documented, documented and documented your efforts in this area. But even beyond regulatory review and enforcement, a lack of trust between the conservation function and stakeholders can lead to ecosystem compliance failures.

Moreover, good governance is a prerequisite for creating social capital and ensuring the social legitimacy needed for ecosystem compliance. The authors state that “the governance model should be designed to evoke and sustain public recognition as well as law enforcement in the long run and in the face of changing requirements. Top governance, understood in this way, must be consistent and fair. ” This sounds exactly like what the Department of Justice prescribed in the Update to Assess Corporate Compliance Programs as a CCO, and the compliance function is now the guardian of institutional justice and institutional justice. The authors go a step further, arguing, “Consistency means that governance mechanisms are transparent and easy to understand, comprehensive, internally consistent, and stable over time.” Finally, the authors believe: “Fairness means that governance is in line with corporate policy and legal requirements, avoids bias and builds trust among employees and other stakeholders.”

  1. Over time, adapt the management model.

The authors state: “Adaptability is a key strength of a successful ecosystem. Typically, such adaptability is associated with a modular installation that has a stable core (or platform) and interfaces with highly variable components that can be easily added or subtracted. This allows ecosystems to evolve along with changes in the competitive environment, the needs of orchestra members and participants, social morals and technology. The same adaptability should be reflected in the ecosystem management model. ” I quote this statement entirely because it is a longer way of saying that continuous monitoring leads to continuous improvement. Your compliance program needs to evolve, as does each of its components. This will also include managing your compliance ecosystem.

As compliance ecosystems become more widespread and evolving, the quality of their management is becoming an increasingly important success factor. The authors emphasize that all compliance practices understand: “there is no single best way to develop a governance model: it will depend on strategic priorities, the dynamics of competition, the needs of society and the stage of the ecosystem’s life cycle.” In other words, assess your own risks in making your ecosystem compliant and then manage your risks through it.

The CCO should not view management as a “delay, but should instead consider and actively develop a management model”. You need to understand the benefits and risks of reconciling “governance and strategy, and resolving strategic trade-offs by balancing different dimensions of governance”. You need to put yourself in the place of stakeholders and ecosystem employees to understand the impact of your management decisions on their incentives to participate and contribute. Over time, you will have to adapt your management model to respond to changes in user preferences, technology, competition, and strategy. Finally, remember: “Good governance is an important key to the success of both ecosystem orchestrators and their partners.”

Please join us tomorrow where we will look at how to go beyond trust in your conservation mode.

[View source.]

Leave a Comment