Driving Advocacy for Technology Investmenttools such as hammers, and hand-saws. Given enough time,...

Driving Advocacy for Technology Investment

Driving Advocacy for Technology Investment ................................................................................................................................. 1

Aligning to Organizational Goals ..................................................................................................................................................... 2

Increase in revenue and profitability ............................................................................................................................................. 3

Growth of Market Share ................................................................................................................................................................. 3

What does leadership want from a technology investment? ...................................................................................................... 3

Connecting compliance and risk to organizational goals ........................................................................................................... 4

Determing Impact to the Organization ............................................................................................................................................ 4

Loss Avoidance .............................................................................................................................................................................. 4

Increasing Operational Efficiency and Effectiveness .................................................................................................................. 5

Organizational Agility ..................................................................................................................................................................... 5

Defining the Current State vs. Ideal State ....................................................................................................................................... 5

Measuring the Current State ......................................................................................................................................................... 5

Projecting the Achievable Ideal State ........................................................................................................................................... 6

Presenting Value within the Organization ...................................................................................................................................... 6

Step One: Identifying Stakeholders ............................................................................................................................................... 7

Step Two: Communicate Current Problems and Impact with Key Influencers .......................................................................... 7

Step Three: Setting the Vision ....................................................................................................................................................... 6

Conclusion ........................................................................................................................................................................................ 7

Contents

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1

Driving Advocacy for TechnologyInvestment How often do you feel overwhelmed at work simply from executing your day to day responsibilities? Do you ever feel like no matter how much you are accomplishing each day that you always seem to fall further and further behind progressing to your overall goals?

According to a recent survey by Deloitte, up to 75% of companies are dealing with overwhelmed employees leading to the negative business consequences of declining productivity [1]. This decline is primarily attributed to wasted time spent on context switching between tasks and tools along with execution of low value, repetitive tasks. At the same time employees are wasting time completing frustrating activities, quality expectations and workloads of each individual seem to increase each year while budgets continue to tighten, leaving employees always feeling like they need to do more with less, but not seeing any impact for this effort. Additionally, 54% of compliance professionals expect increased liability and responsibility associated with this increased workload, leading to additional stress and frustration [2].

Imagine running a construction site in your current city for a company that needs you to build a state-of-the-art high-rise that adheres to the quality and timeline standards of the construction industry leaders, however, instead of investing in all of the latest construction power tools and machinery, you are expected to perform this feat with simple, rudimentary tools such as hammers, and hand-saws. Given enough time, the feat may be accomplished, but the building will never

Personal liability continues to be a key concern for compliance professionals, with 54% expecting personal liability to increase in the next 12 months.

be as well constructed as a job done with the proper tools. While not performing the same type of manual labor that is necessary at a construction site, many professionals in the banking industry experience similar challenges of increased expectations without the investment in the latest tools and technology to increase operational efficiency and effectiveness.

As part of the organization not typically considered profit generating centers, compliance and risk professionals are still only being provided only “hammers and hand-saws” while being asked to protect the organization from emerging risks and changing regulations, and additionally build a culture of risk and compliance throughout the business. Managing compliance and risk with off-the-shelf software like Word and Excel is possible, just like how building a high-rise with hand tools is possible, but it is extremely inefficient and has a higher risk of quality concerns due to assembly limitations. However, only 44% of employees use the latest technology available for their domain, while the rest must make do with outdated solutions. [3]

So if employees understand the need for better tools, why not just ask for these tools to increase individual and departmental performance? The short answer is that they usually do, but they seldom succeed in getting the additional technology budget. While they know how inadequate the current organizational risk and compliance framework may be and how risk and compliance technology will improve their work, the leadership of the organization may not have the same insight into the day to day needs of the team and how that supports the business’s strategic initiatives.

As risk and compliance management teams are also perceived as purely cost centers, organizational leadership wants to ensure that these departments are run as efficiently as possible and costs are kept low – which is antithetical to a new risk or compliance technology implementation. According to a report from Thompson Reuters, 66% of firms in financial services industry slowly and begrudgingly add headcount and throw more people at the same problem rather than investing in better infrastructure to manage risk and compliance effectively.


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As leadership in an organization is responsible for outlining strategic initiatives to achieve specific business results such as revenue and profitability, the connection from the from the compliance and risk department to these initiatives can get lost in translation as individuals several levels down in the hierarchy are setting their individual performance goals. The value of enterprise technology throughout an organization can be viewed differently based on each individual’s role and objectives, so a natural disconnect can occur as different users describe their individual needs and challenges. This disconnect can result in substandard communication when roles are not aligned, and many risk and compliance professionals could be unable to communicate the importance of the risk and technology solution they are advocating for to the decision makers that control the budget.

41% of compliance professionals expected to spend more time assessing fintech and regtech solutions over the next 12 months. [2]

What is the solution? How do we overcome this disconnect to ensure that employees have the right tools to augment their productivity and drive the organization’s performance?

For risk and compliance professionals, the first step is to understand the mindset of leadership and the criteria used by leadership to make strategic decisions and measure the results of those decisions. Next, they need to understand how to align their personal and departmental goals with those of leadership and quantify the impact of the technology to the organization. Finally, they need to present their business need using the leadership’s perspective as a frame of reference.

Aligning to the goals of leadership in your organization has numerous advantages such as receiving budgetary funding for tools, accelerating the process to get the tools in place, and driving innovation and business results for the company. Let’s examine the motivators that govern the thinking of leadership and how risk and compliance professionals can synchronize and align their own needs to that of the organization. In following this process, we can make a strong business case that has higher chances of


Compliance and risk practitioners from nearly 800 financial services firms across the world, including banks, brokers, asset managers and insurers, have taken part in our ninth annual Cost of Compliance survey, where we found that 66% of firms expect the cost of senior compliance staff to increase, up from 60% in 2017. Nearly two thirds (61%) of firms expect the total compliance budget to be slightly or significantly more over the next 12 months, another increase from last year (53%) [2].

Every organization has its own unique set of strategies and goals defined by its business, location, market, and its leaders,but the overall goals of commercial enterprises can be categorized into two general areas:

Leadership in every organization acts as a steward of the business and should strive to maintain the health of the organization. To do this, they want the company to grow but also grow relative to their competition so that the long-term outlook of the company is secure.

Aligning to Organizational Goals

Increase in revenue and profitability to insure growth of the business

Growth of market share as compared to competitors

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81% of CEO’s rank keeping up with new technologies as their main concern [4]

The path to gaining advocacy for technology investment from leadership begins with understanding their motivations and connecting them to your departmental and individual needs.

In a recent survey [4] conducted by KPMG, 81% of CEO’s rank keeping up with new technologies as their main concern making this the top area of concern above every other factor. At the same time, under 20% intended to invest in regulatory solutions making it the least area of investment concern. The appetite for technology investment is present, however, leadership in the organization does not necessarily under-stand how investing in areas of risk and compliance will benefit the company. This misperception largely stems from a lack of clarity about how vital risk and compliance technology can be to meet the organization’s overall goals.

These results show that while risk and compliance departments and leadership may have similar goals at some level, they are not always aligned. The focus then should not be to convince leadership to understand your day to day activity, but rather phrase our own needs in a way that aligns with their perspective and goals.

Increase in revenue and profitability

Revenues and profitability are the primary goal of the leader-ship of the organization as they strive to maximize the return on investment of the owners and stakeholders while maintain-ing integrity and social responsibility. There are many factors which directly affect revenue and need to be considered when formulating a successful plan, such as:

Keeping existing customers and gaining new customers

Controlling costs by operating the business efficiently

Avoiding unnecessary costs and penalties while doing business

Managing financial risks to maximize profits and avoid losses

Growth of Market Share

Revenues are only one half of the solution – staying competitive relative to competition is also of critical importance. If an organization grows at 5% over several years, but all their competitors are outpacing them by doubling that growth, the health of the organization could soon be in jeopardy. With regards to market share, several factors which business are concerned include:

The leadership of the organization concentrates organizational needs on these factors. We often forget that while the c-suite and boardroom are the most powerful group of people within the organization, they are also employees that need to deliver results to succeed in their careers. Risk and compliance department employees can turn these leaders into advocates of risk and compliance technology by showing how the solutions support them in achieving their own goals

What does leadership want from a technology investment?

Technology investments can be major expenses and leadership needs to be able to make a business justification for the investment. If they are allocating a portion of their IT budget for a new implementation, they must explain to shareholders and stakeholders why the investment is important.

Reputation in the industry and market

Effectively executing to strategic business initiatives

Developing agility to recognize and mange change when necessary

Delivering innovative products and services


Recent CEO surveys led by KPMG and PWC led to some interesting insights about top themes among leadership of an organization – all of which are directly tied to the top goals of driving revenue & profitability and growing market share:

Transforming the business59% of CEOs said that transforming the operational and business model of the organization is their top priority when they make an investment in technology [5] Disrupting the competition61% of CEOs consider disruptive technology an opportunity they need to take advantage of and leave the competition behind [5]

Increasing innovation64% of CEOs are concerned that they are not able to innovate as much as they need to stay ahead of the competition [6]

Employee retention and hiring80% of Banking and Capital Market CEOs are concerned that the lack of available skilled and trained banking industry personnel limits their growth [6]

Managing regulations35% of CEOs think over regulation is the biggest threat of 2019, a higher percentage than any other threat [6]

Connecting compliance and risk to organizational goals

Understanding how the leadership thinks is the first step in making a successful case for a technology implementation. The next step is to connect these criteria to compliance and risk. To frame our problems and needs in terms of the needs of the leadership, we must demonstrate the impact of the idea on meeting their goals. For example, here is a benefit of risk and compliance solutions from the perspective of risk and compliance professionals:

An automated solution will help us improve regulatory compliance adherence by reducing the chances of

human error

An automated solution reducing human error will prevent non-compliance consequences of profit-draining fines and

revenue-reducing loss of customers

Here is the same benefit being framed to connect with organizational goals:

The second statement indicates leadership why the solution will be beneficial for the organization and how it affects their goals of increasing revenue and profitability. While alignment to the goals is an important fist step, this isn’t the only focus needed – we also need to provide a quantifiable business justifications for the risk and compliance solution.

Loss Avoidance

Increasing Operational Efficiency and Effectiveness

Organizational Agility

Determing Impact to the Organization

Making a business justification to demonstrate the impact of a risk and compliance technology solution is critical. Remem-ber – many available technologies exist which can be purchased to improve service and product quality to some degree. Businesses do not implement most because the cost/benefit ratio doesn’t justify the expense. For risk and compliance tehcnologies, the value and benefits typically fall into the following three categories:

Loss Avoidance

Every bank wants to avoid the many types of losses which can

befall an organization. The most obvious loss includes

financial losses and penalties, such as sanctions and fines

related to both risk and compliance infractions. According to a

report by the London School of Economics, 10 of the world’s

biggest banks have accrued fines and penalties of more than

$194 billion in just 5 years [7]. For 2018, data privacy and the

global ramifications of the implementation of the European

General Data Protection Regulation (GDPR) have been

specifically highlighted as a key concern as the biggest

challenges for compliance officers and the board. Increased

scrutiny and regulations is becoming a costly challenge for

the banking and financial services industry. The majority of

firms (58%) are expecting to spend more time in the next 12

months liaising and communicating with regulators and

exchanges, with 16% expecting significantly more contact [8].

“The enforcement actions we are issuing today make clear that the OCC will take forceful action, not only when the institutions

we supervise engage in wrongdoing, but when management fails to exercise the oversight necessary to ensure that

employees follow laws and regulations intended to protect customers and maintain the integrity of markets.”

Thomas J. Curry, Comptroller of the Currency


Mapping strategic initiatives to executable activities in a way that provides insight into the real-time progress of the organization to their goals allows leadership to become agile. Without being connected to the day to day execution of the business tasks, many decisions are subjected to a lack of context in where the organization sits today.

Defining the Current State vs. Ideal State

Simply specifying that a value or benefit exists in relative terms isn’t enough. Yes, risk and compliance technology results in better management of risk, compliance, and all related processes, but by what percentage do they improve the management? To truly determine if the benefits outweigh the cost of the solution along with the risk of change, we need to examine both the current and (achievable) ideal state and quantify the difference between them to calculate the impact to the organization.

Measuring the Current State

To determine the impact of a technology, we begin by nderstanding the current processes (or lack thereof) pertaining to managing compliance and risk within the organization. Taking an example of a compliance depart and the activity in the following areas:

Defining a compliance plan to ensure ongoing compliance throughout the year

Monitoring and managing regulatory change from identification to implementation

Updating and distributing appropriate policies and procedures along with training

Handling complaints and incidents through investigation and corrective actions

Preparing, participating and completing follow-up actions for audits and examinations

Gathering all compliance related reporting for leadershipin the organization

Analytics around progress of compliance and risk activity along with trending of early indicators can provide a bank with a significant edge over competitors in determining how best to grow and compete in a dynamic and cut-throat market. The result is the capability to drive both revenue and profitability at a higher rate than your competitors by being able to both execute your business strategy and pivot quickly when market dynamics change.

For each one of these processes, an examination of how the department is executing the process today will indicate the potential for improvement. For some processes, a tool may not provide much benefit, however, other areas may see significant benefit which can be calculated by understanding the existing inefficiencies that could be addressed.

Thomas J. Curry, Comptroller of the Currency

These fines can have a significant effect on the company’s profitability, which in turn limits forward looking investment in innovation. Additionally, enforcement actions and additional exams and remediations can add to secondary costs in the on-going process to fix the avoidable issues. Lastly, the reputational damage that public exposure of non-compliance causes has a material consequence on revenue of the organization as customers will leave when they do not trust a banking and financial services institution, as shown with recent survey from Bain & Company indicating that 54% of respondents trust a tech company more than banks and would move to the financial platform provided by the tech company over a traditional bank [9].

Increasing Operational Efficiency and Effectiveness

Risk and compliance technology is designed to increase the efficiency and effectiveness of risk and compliance processes. A survey by Thompson Reuters found that 40% of banks have their compliance managers spend almost half of their workday manually updating and tracking documentation, policies, and other administrative tasks without including complaint handling, monitoring regulatory change and compliance testing and assessments [2]. These types of tasks could be almost completely automated by risk and compliance management technology giving back significant time to apply subject matter expertise that benefits decision making in the organization. In other words, risk and compliance technology has the potential to lower the labor hours required for compliance by at least 40% which trans-lates to significant increase in compliance and risk coverage [10]. As a company continues to scale and grow, this 40% increase allows for effectively managing increased workloads and keeping moral high, which in a highly competitive industry such as the banking industry, this becomes a competitive advantage that can be a gamechanger.

Organizational Agility

Every boardroom and leadership committee desires the capability to understand what is happening throughout the organization in order to make better decision moving forward.


How many times does this process occur in a given year if redundancy is removed?

How many hours does this process take if automationis applied?

How much time is manually spent in preparation and conclusion/follow-up for the process?

How many employees are part of the process once it is streamlined?

Which employees are no longer involved and how much time is saved in transition through better collaboration and accountability?

What challenges are being solved with timely and accurate execution of this process?

Projecting the Achievable Ideal State

Next, we want to examine the which parts of this process include redundant, repetitive, and manual tasks in these current processes could be eliminated with a given tool.

A similar set of questions can be applied in this potential ideal state:

Adding an additional column in your original spreadsheet analysis and scoring the difference will now give you an idea of the types of monetary benefits that can be achieved. In this example, we are only focusing on opera-tional efficiencies gained, however, similar questions across the areas of loss avoidance, operational efficiency and effectiveness, and organizational agility can be applied to understand the business implications of improvement in each area.

When the benefits of a technology investment are vague, management will have no easy way of weighing and measuring different investments for the organization. Not having this information may make them assume that the implementation is high risk and may simply end up increasing costs. Having the ability to articulate the difference between the current and ideal state makes it easy for them to understand the value and impact as well as decide whether the investment will be worth the expense.

Understanding the following types of questions (either through personal knowledge or internal interviews) will help determine impact:

How many times does this process occur in a given year?

How many hours does this process take?

How much time is spent in preparation and conclusion/follow-up for the process?

How many employees are part of the process?

Which employees are involved and how much time is spent in transition?

What challenges are associated with timely and accurate execution of this process?

Putting this type of analysis together within a spreadsheet and applying a cost of labor can give a relatively accurate idea of the existing costs associated with a specific task or process.

Presenting Value within the OrganizationOnce we have understood the motivators that drive executive decision making and the impact of the risk and compliance solution, we must turn our focus to presenting this value within the organization.

One challenge that many risk and compliance professionals face in getting buy-in from leadership is a lack of experience or expertise in the domain of sales. However, we will use the basic process used by sales experts to ensure that we can make a convincing internal sale.


Most big ideas are not accepted when they are only presented, but rather in the conversation that lead up to the presentation. Instead of waiting until you can present the fully formed idea to the c-suite or board, go talk to the key stakeholders and garner their ideas and feedback on the best approach. Give them a brief situation overview about why the solution is needed, and then ask them for their perspective on the best way to proceed. Make sure they tell you any objec-tions they may have with your idea as involving them early will gain their advocacy and make them feel bought into the solution.

By learning about their objections in this step, we can then use those objections when formulating our proposal and make sure that those problems are managed in the final proposal. By communicating with the key stakeholders beforehand, we accomplish two major goals.

We prepare the influencer for our eventual proposal, so they are familiar and have been instrumental in its development, and we prepare ourselves with insight and alternative perspectives on ways to approach the current challenges in the organization.

Step Two: Communicate Current Problems and Impact with Key Influencers

Once you have identified the key players, go talk to them.

There is no magic technique we can use to give the perfect presentation which will make the boardroom instantly sign-off on purchasing the risk and compliance solution. The process requires preparation and inclusion of the right individuals so that the audience listening will be receptive to the ideas presented and have the ability to make decision to move forward.

Step One: Identifying Stakeholders

The first step is to identify the key stakeholders that will be vital in getting your proposal approved. Note that this does not only mean the final decision makers– while only they may have the authority to sign-off on a major implementation, their thinking is influenced by multiple people within the organization who provide advice and consultation.

Step Three: Setting the Vision

Setting the vision is a technique where the end goal or possible future state is the focus of the discussion. What this means is that your goal should be to make the audience envision the scenario where your proposal has already been accepted. This is used everywhere – from corporate sales to used car sales. Ever imagine why the used car salespeople want you to take a drive in the car? Notice how they talk to you – ‘’You’ll love picking your kids up in this car everyday’’ – they want you to think about how it would feel to already have that car. They want you to create a positive image in your head about the object so you will want to purchase it.

The key is to show not just the benefit in theory, but the functional benefits that the solution will bring to the organization. Highlight the business processes that will be automated and show how tasks that take hours today will be done in seconds tomorrow. Talk about better risk management, increased compliance levels, and lower turnaround times on almost every risk and compliance process. Talk about the increased visibility and decision-making insight that leadership will now have at its fingertips to steer the organization into the future.

Lastly, explain how the solution will help the organization achieve its goals. Walk through the current pains that will disappear once the solution is in place. Manual management of risk and compli-ance results in many frustrating menial processes and workarounds. Talk about how the solution will eliminate and minimize these pains, boosting moral of the organization and increasing collaboration and accountability through all levels of the business.


Having the right tools for the job can transform risk and compliance management by automating the most menial parts of the job, leaving the employees the ability to focus on subject matter expertise that maximizes their impact to the organization.

Going back to the construction site analogy– if a foreman goes to their management and requests power tools and machinery because the tools allow the construction team to build better and faster, the management may say no, citing the high costs of the power tools and machinery compared to manual construction tools.

However, if the foreman articulates that by giving his team power tools, they will be able to build twice as fast while making fewer mistakes and saving the company 300% on time and labor costs, there is a much higher chance of approval, because then it will be clear that the cost of the new tools is dwarfed by the benefits, monetary and otherwise, provided by the new tools.

Getting approval for a technology investment will be difficult when simply promoting the technology and its features - the approach should instead be to explain how the technology helps the organization achieve its vision and goals. This can be accomplished with the following steps:

Understand the motivators that drive executive decision-making process

Align benefits of the technology with organizational goals

Quantify the benefits of the solution wherever possible

Assess the benefits that will outweigh the investment

Connect with the decision makers beforehand

Bring visibility to the problems that currently exist which the technology can solve

Communicate the vision

Conclusion

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Deloitte, "The overwhelmed employee," [Online]. Available: https://www2.deloitte.com/insights/us/en/focus/human-capital-trends/2014/hc-trends-2014-overwhelmed-employee.html.

Thomson Reuters, "Costs of Compliance," 2018. [Online]. Available: https://legal.thomsonreuters.com/en/insights/articles/cost-of-compliance-2018-report-your-biggest-challenges-revealed.

Oracle, "Employee Engagement in Action," [Online]. Available: http://www.oracle.com/us/oracle-hcm-ge-infographics-v05-kr-3235890.pdf.

KPMG, "CEO Survey," [Online]. Available: https://assets.kpmg/content/dam/kpmg/pdf/2016/07/2016-ceo-survey.pdf.

KPMG, "Preparing to Disrupt," [Online]. Available: https://assets.kpmg/content/dam/kpmg/ch/pdf/preparing-to-disrupt.pdf.

PWC, "Ceo Survey," [Online]. Available: https://www.pwc.com/gx/en/ceo-survey/2019/Theme-assets/reports/banking-capital-markets-trends-2019-report.pdf.

London School of Economics, "£150 billion in five years – new league table throws new light on cost of banking misconduct," [Online]. Available: http://www.lse.ac.uk/website-archive/newsAndMedia/newsArchives/2013/11/ConductCostsProject.aspx.

Deloitte, "Bank Enforcement Actions and Trends in Banking Industry," [Online]. Available: https://www2.deloitte.com/content/dam/insights/us/arti-cles/bank-enforcement-actions-trends-in-banking-industry/DUP1372_EnforcementActionsBanking_120815.pdf.

Bain & Company, "Many Consumers Trust Technology Companies More than Banks," [Online]. Available: https://www.bain.com/insights/many-consumers-trust-technology-companies-more-than-banks-snap-chart.

Oracle, "A Strategic Approach to Cost Efficiency," [Online]. Available: http://www.oracle.com/us/industries/financial-services/strategic-approach-efficiency-wp-3886143.pdf.

Thomson Reuters, "Costs of Compliance 2018," [Online]. Available: https://legal.thomsonreuters.com/en/insights/articles/cost-of-compliance-2018-report-your-biggest-challenges-revealed.

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References

Driving Advocacy for Technology Investmenttools such as hammers, and hand-saws. Given enough time,...

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Transcript of Driving Advocacy for Technology Investmenttools such as hammers, and hand-saws. Given enough time,...