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Compliance: A Preventive Model in Transformation

By Sergio Hernández - CIAL Dun & Bradstreet
President and CEO Mexico


By Sergio Hernández | President - Thu, 11/04/2021 - 08:57

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We live in a world where change is the only constant. The generational replacement and the adoption of new technologies are part of the impulse that leads us to progress. However, regulations and laws are necessary for companies to strengthen their “social license to operate” and align their interests with those of the communities and societies in which they operate.

One process that outlines best practices and anticipates a wide range of risks is regulatory compliance. Companies must comply with measures ranging from labor to fiscal, financial, environmental, and urban management regulations, among many others. Each regulation, in turn, has different challenges.

Labor alone touches on issues such as hiring, outsourcing, insourcing, layoffs, harassment prevention measures, or combating corruption within organizations.

It is not unreasonable to think of a company that has maliciously or carelessly decided to engage the services of a vendor involved in corruption, money laundering, and bribery scandals. Although we are talking about an external supplier, judicial investigations, subpoenas from authorities, and damage to reputation are bound to occur.

Even in Mexico, the risks of a company's legal non-compliance may not only trigger sanctions or fines but also the possibility of criminal liability due to the issuance of the National Code of Criminal Procedures since 2014.

The responsibilities of compliance professionals are crucial for the optimal management of third-party risks. Undoubtedly, dedicated human capital is a good place to start but it is not everything.

Accelerating Change

Just as technology is revolutionizing industries, such as automotive or pharmaceuticals, artificial intelligence (AI) is innovating compliance. In a “world” of information, AI allows sophisticated analysis to detect anomalies and contribute to the construction of a company’s “risk map.”

The risk map is like a tailor-made suit. Each company has different needs and levels of exposure to regulations. A transnational finance company, such as a bank or a brokerage firm, will have to face different regulatory frameworks than a midsize company focused on construction.

AI brings implicit benefits to compliance, just as it does in other sectors. The best feature is the automated process that minimizes human errors in repetitive and tedious tasks, such as data capture, in the analyses performed. Additionally, it has the ability to make sense and detect inconsistencies of information such as emails, calls, and contracts.

At the same time, it generates an ecosystem of innovation that will optimize time, effort, and creativity. Not only to comply with current regulations but to prepare for new challenges and contexts, thanks to accurate and precise data, along with information available in real time.

One myth about AI implementation is that it will be the responsibility of compliance professionals. The reality is that AI will perfectly complement compliance professionals by focusing on administrative tasks, such as automated processes, while people will devote all their attention to more complex and risky cases that require expertise and human logic.

If the technology implementation is successful, companies will see a drop in costs, an increase in risk management efficiency in the relationship with third parties, greater integration for teams to solve problems and a better distribution of activities as AI will give employees the freedom to carry out their activities more effectively.

Changing World

A changing world means evolving technology, practices that can be improved, and constant changes in rules and regulations, which updates risk maps. Business leaders must remain at the forefront, informed and with integrated teams to meet social and legal demands.

Compliance goes beyond complying with regulations and laws. It’s monitoring a changing legal environment, taking preventive measures, and maintaining and increasing a good reputation with its customers and with society.

Reputation is one of the most valuable intangibles for companies, contributing between 70 percent and 80 percent of their value, according to multiple studies, including Harvard Business Review.

Having a compliance department with technological tools will provide good results in the short, medium, and long term, with benefits that will permeate different areas of the companies, such as marketing, customer service, and production.

The reason lies in the preventive measures taken to comply with the best practices within the company, which go beyond generating and protecting income and are as specific and focused as required. For example, achieving a work environment based on respect and eradicating behaviors such as workplace harassment.

Technology and innovation are the connecting pieces of the company that feed into multi-sourced databases and powerful digital platforms. These are the tools to take advantage of the compliance opportunity area in Mexico and Latin America.

Photo by:   Sergio Hernández

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