Every Chief Compliance Officer (CCO) and compliance practitioner who thinks about their compliance program one, three or five years down the road is a budding futurist. The Compliance Week 2017 Annual Conference opened this year with a Futurist, Dr. Brian David Johnson, who talked to the assembled group about where the compliance profession might be heading down the road. I thought about Dr. Johnson’s talk when I read an article in the most recent issue of the MIT Sloan Management Review by Amy Webb, entitled “The Flare and Focus of Successful Futurists”. One of the things that struck me was her opening line which reads, “Futurists are skilled at listening to and interpreting signals, which are harbingers of what’s to come. They look for early patterns — pre-trends, if you will — as the scattered points on the fringe converge and begin moving toward the mainstream.”

While futures forecaster may sound exotic, Webb cited to one theoretical physicist for about the most down to earth explanation I have read. She quoted Joseph Voros who related that forecasting “informs strategy making by enhancing the “context within which strategy is developed, planned, and executed.”” That is about as straight-forward a description of a CCO as one can find.

Webb believes the greatest problem for futures forecasting is the variance of logic based forecasting and creative based forecasting. She calls this the “duality dilemma” as “the creative people felt as though their contributions were being discounted, while the logical thinkers — whose natural talents lie in managing processes, projecting budgets, or mitigating risk — felt undervalued because they weren’t coming up with bold new ideas. Your team undoubtedly had a difficult time staying on track, or worse, you might have spent hours meeting about how to have your next meeting.” She goes on to say that one can “harness both strengths in equal measure by alternately broadening (“flaring”) and narrowing (“focusing”) its thinking.”

To overcome this duality and help move forecasting forward, Webb has developed a six-step approach for forecasting methodology. I found it useful for any CCO or compliance practitioner to use when forecasting where your compliance program will be one, three or five years out.

  1. Flare at the fringe. Here you should “cast a wide enough net and gather information without judgment. This involves creating a map of what you observe at the fringe.” In this part of the process you are “brainstorming, making a fringe map, forcing yourself to think outside the box and consider radically different points of view.” These scenarios from the fringe will give you ideas of where your compliance program may need to go years down the road as you consider where your company may well go, where technology may take your company and the compliance profession.
  2. Focus to spot patterns. From your observations on the fringes, narrow down your research. This will allow you to spot hidden trends not immediately apparent. Webb said to “Look for surprising contradictions; inflection points that signal an acceleration of some change in progress; new practices that upset established norms.” Here your big picture of the data will be important yet you must step back to uncover hidden patterns that are not obvious straightaway.
  3. Flare to ask the right questions. Here you may well be tempted to stop when you determine a pattern but this is where rigor most come into play and you must “poke holes into every single assumption and assertion they make. But you will soon learn that creating counterarguments is an essential part of the forecasting process.” Lawyers are trained to argue both sides of a position and ssking questions is something required of a compliance professional so counter-posing factors should come naturally.
  4. Focus to calculate timing. Even if you can identify a new, internal trend going forward that is only one-half of the equation as “external developments within the government, adjacent businesses, and the like — and both must be considered.” In the compliance world, this is most directly demonstrated by the explosion in the international enforcement against bribery and corruption. Companies doing business in multiple countries must ensure compliance with a wider variety of domestic and international anti-corruption regimes and legislation.
  5. Flare to create scenarios and strategies. This begins the phase where you “build scenarios to create probable, plausible, and possible futures; then create strategies to accompany them.” From this point, you consider the ways your organization might well respond and “Score each scenario with an estimated likelihood of occurrence and, on the basis of your analysis, create a corresponding strategy for action. A score of less than 40% suggests either you haven’t analyzed enough data or it is too early in the timeline to act; a score of more than 70% indicates that you’ve likely waited too long and should respond quickly.” This will allow you to create the steps required to act on this trend. This is essentially a forced ranking and once again compliance professionals should be well familiar with this tactic.
  6. Focus to test your plans. In this step, you will “test whether the strategy you create to address a trend will deliver the desired outcome, and that requires asking difficult questions about both the present and the future.” The answers should give your company the confidence in your compliance strategy going forward and provide a basis for management to support it by providing a solid value proposition. It will act as your roadmap for your one, three and five-year strategy. Finally, you should have planned the resources to accomplish the strategy and allow you to pivot if circumstances so require.

What I found most interesting about Webb’s process is that it allows you to consider compliance innovations looking at outliers and seeing where technologies and services might take you. Obviously, the use of data beyond simply numbers of training sessions or calls to the hotline can inform a wide variety of business processes. This will further allow the operationalization of compliance. Webb ended by noting you can create the future in the present tense.

And what of the Futurist, Dr. Johnson at Compliance Week 2017? He related the importance of compliance would grow, together with the increasing importance around ethics and corporate governance. He believes that Artificial Intelligence (AI) will increase the speed at which business decisions could be made will make a robust compliance program, operationalized into the fabric of an organization more critical. AI will first allow more and quicker business decisions. It will be the compliance program which is most closely integrated into the DNA of an organization so it can respond to ever-shifting market conditions. Not simply in sales but moving seamlessly between third party sales representatives and those from the Supply Chain. A robust compliance program does not slow down a business but, properly functioning, allows it to move more quickly and more nimbly.

Dr. Johnson sees the necessity for compliance to be integrated into an organization. The Department of Justice (DOJ) says compliance should be operationalized into a company. It seems that the legal side of things is pointing the direction in which you should be moving your compliance regime. I think both Webb and Dr. Johnson would agree.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

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