Technology, Transparency, and Stakeholders

The root of this change is (as always), new technology. In the last decade we’ve seen breathtaking leaps in social, mobile and collaborative communication, and the digital transformation of historically manual business processes.

Taken together, those two forces allow a corporation’s stakeholders — employees, business partners, customers, the public, regulators and investors — to exert much more power against a company.

We’ve all seen this in practice: selective leaks of damaging information, hashtag campaigns on social media, demands for more data from regulators evaluating a compliance program or corporate leadership’s potential liability in misconduct. As different as all those actions are, they all spring from an ability to discover information about a company and then to hold the company accountable in new, more forceful ways.

Boards and the C-suite want to avoid that. They want to get ahead of it. They want better ability to identify potential regulatory, legal, or reputation risks before they strike, so the company can respond accordingly.

Which brings us back to those corporate records, and the warnings they contain if a company can find and understand that information in a timely manner. That’s how record-keeping and data management have gone from a compliance obligation to a risk management necessity.

Better Risk Identification in Practice

This need goes beyond storing all data into one repository and hitting “Control F.” The ability to classify and retrieve information is important, sure, but the most insidious risks don’t declare themselves plainly. Companies need to get better at understanding the significance of information — an offhand remark in an email, a strange emoji tacked onto a text message, a sudden change in tone or flow of an email chain.

That requires strong capability in data analytics as much as it does in recordkeeping and data management. Businesses will need technology that can analyze large swaths of records (perhaps from multiple sources, in multiple formats) and then help managers draw conclusions about what risks are suggested by the information, and how severe the risk is.

Call that sentiment analysis, artificial intelligence, record-keeping on steroids — whatever the solution itself is, that’s only a smaller detail in the bigger picture that compliance and risk professionals need to paint for senior management.

The bigger picture is that the calculus of holding companies accountable is changing. More groups can press their complaints about corporate conduct more assertively, and they will. To prevent that, companies need a better ability to extract understanding about risk from the information they have.

And really, the information you need is out there on a record somewhere. It’s just about understanding the significance of that information before others do.