Session Summary - Beat the Rising Tide - Innovative Technologies to Manage Conduct Risk

On May 1st, The Canadian Regulatory Technology Association (CRTA) (Association canadienne de la technologie réglementaire (ACTR)) held a short event on the opportunities and challenges of emerging technologies to support sound conduct risk management. Jay McMahon, a partner in Deloitte’s Risk Advisory Group, led a discussion with Jody von Colditz, AVP – Wealth Conduct Risk & Sales Practices, TD Wealth and Greg Keeling, Director – Ethics and Conduct Office, BMO Financial Group.
Jay set the scene by highlighting several recent misconduct events such as: LIBOR (UK); Royal Commission (Australia); and Wells Fargo (U.S), which have led to legislative and regulatory changes across the globe to strengthen safeguards to protect against different forms of misconduct by market participants. Here in Canada, new consumer protection rules have been proposed through legislative proposals in Bill C-86, Budget Implementation Act, 2018, No. 2. The Canadian Securities Administrators have proposed enhanced rules for business conduct for derivative participants and Investment Industry Regulatory Organization of Canada (IIROC) emphasized in their 2018/19 Compliance Priorities Report that business conduct will remain a top priority in their supervisory oversight.
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Jay opened the discussion by asking the panelists how their banks have responded to the heightened regulatory focus on conduct risk. Both panelists said that they have fine-tuned their governance structures and are primarily focusing their efforts on enhancing processes and adding more rigor and transparency to their monitoring capabilities. Jody explained that in the last year, TD has moved its data from disparate systems to one data lake or ‘one source of the truth’.  This has resulted in better confidence in the data and allowed TD to develop curated dashboards and push the needle forward from a governance perspective.

When Jay questioned how the panelists were approaching board reporting, Greg answered that their challenge is to produce information that provides ‘narrative insights.’ Insights that are useful, unique and demonstrate that behaviour is changing and that explain the context behind the numbers (e.g. change in trends due to root cause analysis and remediation efforts).

Jay asked what the panelists have ‘discovered’ as they have been transforming their oversight approach.  Greg replied that through enhanced monitoring, they have been able to uncover unique, systemic patterns allowing then to conduct more thorough root-cause analysis, enabling faster remediation and continuous tracking.

When asked how technology will enable stronger conduct risk management, Jody explained that TD Wealth has built a strong foundation and is in a good position to explore new technologies. Ideally, she would like to move towards predictive technologies so they can be more proactive. However, she cautioned that progress is challenged due to the lack of use cases. Greg added that few of their legacy systems were designed for the type of monitoring or analysis currently required; but now that their data is centralized, consistent, and normalized, they can easily extract data and get additional insight and value from it.

The industry perspective was followed by four case studies from the following firms and presenters:

RSA/Archer/Deloitte
Alyssa Lokits, PhD, GRC Pre-sales Consultant and Viktor Vikebski, Governance, Risk and Compliance Specialist; RSA/Archer, Luiz Dias, Partner Risk Advisory, Deloitte

• Luiz provided some additional background on some of the challenges his clients faced and shared some results from a survey that Deloitte conducted with a tier one Canadian bank. Viktor and Alyssa presented a demo of a reporting tool that RSA/Archer had built to address a client’s reporting requirements.

Corlytics
Tim Sweeney, SVP, North America, Corlytics 

• Tim walked through how they have worked with a global bank to implement a new conduct risk program. Their tool provides conduct risk data structures, as well as risk indicators and metrics to inform risk processes and controls management.

VilgiantCS
Robert Kirwin, CEO and Co-founder, VigilantCS

• VigilantCS products focus on staff compliance; VCSOpen digitizes staff regulatory compliance processes, and VCSPro builds staff reporting and analytics using behavioural and machine-learning algorithms. Rob demonstrated the flexibility of the tool and displayed several ways the data could be consolidated, analyzed, and reported.

Coalesce AI
Greg Woolf, CEO and Co-founder, Coalesce AI

• Coalesce AI has been working with a global asset manager to scale e-communications monitoring. Greg demonstrated how they used Coalesce AI to learn from business users to interpret e-communication based on their knowledge and domain expertise, improving efficiency by 10x or more.

For more information on these firms, please contact: info@regtech.ca
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Author

Written by: Donna Bales, Co-founder and Member of the Board, CRTA