Disrupting Compliance with Technology
Leaders today face tough business climate with high expectations of ethical conduct and increasing regulations, enforcement and large fines. Like it or not, managing compliance as part of good governance can no longer be ignored by senior management.
Most SMEs, however, have stayed on the sidelines when it comes to investing in ethics and compliance programs. Our experience suggests that most SMEs fail to offer employees any formal guidance on how to conduct business. Leaders give two reasons for the hesitation:
they lack required expertise in-house, and
they worry about expensive and time-consuming solutions from law firms and consultancies
However, not doing anything and then hoping to have a legal defense when things turn sour is not only naive but also falls short of legal requirements. But what can SME leaders learn from larger peers with years of experience in this area? Well, very little. Most large companies spend millions every year on old-fashioned rules and control-based compliance approach that requires lots of resources, makes employees risk averse and doesn’t really work, as evidenced by the continuous string of ethical scandals despite significant investments. Today’s approach is begging for technology: old-fashioned, legalistic, costly and unsuitable for a fast-pace, technology-driven business climate.
Fresh thinking is needed
We believe that fresh thinking is needed to address a major societal problem like unethical practices. SMEs that have not yet invested in old-fashioned, traditional compliance programs like those deployed by large companies, do not need to now. Moreover, not having to unravel legacy compliance systems focused on control and sanctions, SMEs can leapfrog with modern technology solutions that embed behavioral economics to impact conduct and comply with legal requirements, while saving significant money, time and pain.
Employees would get principles-based guidance on mobile devices, which can be applied to changing situations and over time. Their judgments would be continuously strengthened by crowdsourcing insights from peers and experts, with machine learning to derive patterns and recommend meaningful options, similar to how artificial intelligence provides traffic predictions or early warnings for healthcare risks. A moral compass (figure) would nudge people for ethical reflection at the very moment they make critical judgments, such as during meetings; in the afternoon when morals are known to decline; in risky geographies; or when under pressure – triggered by calendar reads, time of day, geolocation and pulse deviations, respectively. But why? Because behavioral economics research has shown that moral reminders delivered at the right time lead to far more ethical behavior: people don’t cheat on tests and people report more honestly on insurance claims.
We enjoy seeing ambitious FinTech startup peers disrupt the financial industry by making services simpler, cheaper and better in the wake of the financial crisis. Our aim is to address the root cause of the crisis – human behavior. In parallel, we help underserved SMEs meet increasing legal requirements in an instant, affordable and impactful way.
About The PolicyStore
The PolicyStore is a Swiss-based tech startup disrupting how companies guide ethical behavior to nudge people for responsible decisions, using technology and behavioral economics. www.policystore.ch