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Deloitte Ireland Conduct Risk, Culture and Reg-tech Breakfast Briefing 2018 26 June 2018

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Agenda

Topic Presenter Timing

Introduction Sean Smith 8:00 a.m. – 8:10 a.m.

Keynote speech - Regulatory Expectations Colm Kincaid, CBI 8:10 a.m. – 8:35 a.m.

Session 2 Peter Engering 8:35 a.m. – 8:55 a.m.

Session 3 Nicola Vincent 8:55 a.m. – 9:15 a.m.

Session 4 Rose-Marie Kennedy 9:15 a.m. – 9:35 a.m.

Panel Discussion All 9:35 a.m. – 9:50 a.m.

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Keynote speech

Colm KincaidDirector of Securities and Markets Supervision at Central Bank of Ireland

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Session 2

Peter EngeringSenior Manager, Deloitte Netherlands

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Session 3

Nicola Vincent Director, Deloitte UK

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Session 4

Rose-Marie KennedySenior Manager, Regulatory Risk, Deloitte Ireland

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• Regulatory expectations – Consideration of the regulatory expectations in Ireland in respectof conduct risk and culture as it relates to conduct;

• Reflection on other jurisdictions – Reflecting on the learnings from other jurisdictionsincluding the UK and Netherlands to understand how the expectations of their RegulatoryAuthorities have been sufficiently addressed;

• Reg-tech – Reflecting on the impact and use of technology in the regulatory environment andthe different solutions that are emerging within financial services. Specific focus on the use oftechnology to assist and support financial services organisations in complying with theirregulatory obligations in respect of conduct risk;

• Practical steps – Sharing of insights into some of the practical steps organisations can taketo manage conduct risk and address the challenges in relation to culture.

Reflection on the key objectives for this event

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Reflection on the impact and use of technology in the regulatory environment and the different solutions that are emerging within financial services.

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Innovative disruptive technologies are creating a better case for change in credit, lending and Decisioning due to the ability to make achieve significant cost reductions and step-change in the customer experience

Robotics Process

Automation (RPA)

Advanced text analytics and

unstructured processing

Natural Language

Processing & Generation

(NLP & NLG)

Machine Learning

/ AI

Intelligent

‘Chatbots’

Intelligent

Assistance

Cap

ab

ilit

y

Robotics Process Automation

(RPA)

Machine Intelligence &

Reasoning

Machine Learning & Cognitive

Analytics

Time

“Mimics Action” “Mimics Thoughts”“Interacts and Thinks”

The Evolution of RegTech.

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Impact on the Risk Operating Model

Disruptive technologies can be deployed across all of the key capabilities of a risk function

Operational

Services

Reference Data Sourcing

Account On-Boarding

Collateral Management

Other Op. Services

Portfolio Operations

Reporting

Modelling and Methodology

Model Management

Capital ModellingAnalytical

Services

Risk Analysis

Credit Risk Control

Assessment, Analysis, Approval

Underwriting Quality Assurance

Portfolio Management

Policy and

Control

Robotic process

automation

Artificial intelligence

Risk Sensing

Process

Re-engineering

Natural Language

Processing/

Generation

Intelligent

Automation

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How does ‘RegTech’ help us now and what does the future hold?

Today - 2018 2019/20 Beyond

Cognitive & machine learning and advanced

analytics

The early exploration of ‘cognitive’ and ‘AI’ technologies interpret regulation.

Some initial automation of compliance processes.

‘Codifying’ control self-assessment and policy screening.

Advanced analytics and reporting starting to emerge.

Early integration of horizon scanning solutions

‘Codified knowledge’ - effective cognitive engines to digest and interpret regulation automatically.

Automated horizon scanning and ingestion / assessment of emerging regulation.

Automated links to risk appetite and control performance.

Enterprise-wide view of regulatory impact across the organisation.

Regulation managed through end-to-end RegTech platform, (beyond GRC…)

Emergence of data sharing.

Distributed and trusted network assessing regulatory compliance in real-time, identifying and alerting explicit, as well as implicit requirements.

Significant reduction in back-office monitoring and assessment of regulation.

Proactive alerting and impact assessment on change in regulations.

Integrated reporting between the enterprise and the regulator.

Predictive alerting highlighting impact of external events on the regulatory standing of the organisation, integration of ‘big-data’.

Industry utility for firms and the ability to data share.

Maturing solutions assessing

regulation and automating

compliance management.

Enterprise solutions managing and assessing

regulation. Push button, intelligent and

automated reporting

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What is out there now, and how will ‘RegTech’ land into the business?

Source: http://bestthenews.com/article/100-regtech-startups-follow-fri-06172016-1424.html

Blockchain

AI/CognitiveRobotics

Advanced data management and analytics

RegTech

A view across the RegTech suppliers.

• Heavy focus on surveillance and analytics.

• Collaborations and partnerships emerging : Legal & Banking, Compliance and Technology.

• The growth in AI and cognitive offerings – training the technology is critical. Blockchain in its infancy.

• Next steps for GRC providers – a watching brief.

• Early stage development of industry utility approaches.

Defining a RegTech Roadmap

• Focus on the enterprise-wide view of how regulation impacts the business –joining the dots.

• Consider how you ‘codify’ the extensive knowledge that will already exist in your business.

• ‘Hearts and minds’. There is often a cultural journey to go on across the range of stakeholders.

• Partner with the right people.

• Engage the regulator. The earlier you can be work in parallel the better.

Our initial research estimates that there are c.160 established RegTech firms globally, providing technology based solutions to deliver regulatory projects and help businesses comply with current and future regulatory obligations.

Services include regulatory reporting, risk management, identity management & control, compliance and transaction monitoring.

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How can technology be used to assistand support organisations in complyingwith their regulatory obligations inrespect of conduct risk?

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WHAT IS BEAT?

Behaviour and Emotion Analytics Tool (BEAT) is Deloitte’s voice analytics platform that uses cognitive technology and risk algorithms to monitor and produce a risk score for voice interactions based on speech, behavioural and human emotional tendencies.

Why did we develop BEAT?

Increasing regulatory pressure and scrutiny on

customer interactions and outcomes

Current review processes are resource intensive and not

data driven

Reviewing interactions is time consuming (e.g. longer

than the call itself)

Identified an opportunity to develop a solution to

address these issues

Initial development was for retrospective assessment,

but has a much broader use

Have a detailed roadmap and currently being running a

number of PoCs across FS organisations

What can it do?

BEAT is a platform that uses cognitive

technology to analyse and monitor voice

interactions

It has three core functions:

1. Monitors all customer voice interactions

2. Identifies high risk interactions through

analysis of customer language and

behaviour

3. Maps interactions to outcomes and

provides details why

It has been developed to analyse over 30

different languages, and 30 different

behavioural indicators

Why is it different?

BEAT is proven in the market and we believe it is unique

because:

• It is the only platform that combines both language

and behaviour to assess risk

• It maps interactions to specific outcomes

• It utilises machine learning technology to constantly

evolve and enhance the algorithms that analyse the

interactions – the greater the volume the more

accurate the risk assessment will be

• It can be tailored to meet your specific risk

requirements and user needs

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HOW DOES BEAT WORK?

BEAT ingests audio data in a variety of formats, and performs a number of analytical processes to produce three outputs which can then be assessed by a user to determine the appropriate next action.

Audio data

Meta data

Phonetic algorithm

- Phonemes

- Phonetic searching

BEAT Language

- Transcription based

- Fuzzy searching

Search Packs

- Significant

- OMO

- Enhanced

BEAT Behaviours

- Vulnerability

- Undermining

- Call Dominance

- No Talk

- Cross Talk

- Hesitation

LANGUAGE ANALYSIS BEHAVIOURIAL ANALYSIS

BEAT Outcomes

- Anger

- Sadness

- Happy

- Neutral

….

Transcription

Risk Score

Outcome Alert

Machine Learning

Customer Segmentation

INPUTS BEAT PLATFORM OUTUTS

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BEAT provides multiple benefits over traditional approaches, and has been designed to support multiple use-cases within an operational call centre environment

HOW CAN BEAT HELP YOUR BUSINESS?

1. Increased coverage of call monitoring

2. Reduced manual effort and cost, enabling resources to focus on

high risk interactions

3. Improved customer service and outcomes through pro-active

identification of high risk calls and detailed visibility over

interactions

4. Increased processing efficiency

5. Enhanced risk identification

6. Can be deployed with minimal integration to existing architecture

enabling rapid benefit realisation

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2

3

4

5

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BEAT

PLATFORM

CALL

CENTRE

USE-CASES

COLLECTIONS CALLS

ADVICE CALLS

COMPLAINT CALLS

NON-ADVICE CALLS

PRESSURE CALLS

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Summary of the insights into some ofthe practical steps that can be taken tomanage conduct risk and address thechallenges in relation to culture.

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Central Bank Expectations of Boards & INED’s

Consumer

Culture

Confidence

Compliance

Challenge

The board taking responsibility for the culture of the firm and understanding the behaviours that culture drives – for example through the establishment of an ethics subcommittee to the Board; or a measurement or monitoring by the board of the firm’s culture through engagement with management, employee surveys or employee focus groups.

Driving consistent communication of the desired culture from the Board, recognising the importance of ‘tone from the top’, to all staff levels of an institution.

Deputy Governor Ed Sibley

At the Central Bank of Ireland we think of culture as the assumptions, values, expectations and beliefs, which drive the behaviours of staff.

The question of how firms can effect real cultural change for the better is not one to which there are always simple answers, though much of the current thinking focuses on the importance of a firm’s purpose, leadership and governance in influencing the culture.

We will engage with the firms’ boards and senior management to ensure there is a clear focus from the top on embedding and measuring firms’ own cultural change programmes.

Director General, Financial Conduct Derville Rowland

From both an INED’s as well as the Central Bank’s perspective, joining a board as an INED is a serious commitment and carries considerable responsibility. The INED must act in the best interests of the Company as a whole, not only for shareholders but considering all stakeholders.

One of the most important attributes of an independent board member is their ability to bring fresh, unencumbered and independent perspective to ensure that the interests of the firm as well as consumers are protected. The importance of a truly independent thought process cannot be overstated.

Sylvia Cronin, Director of Insurance Supervision

It is important to stress that the culture of a firm is the responsibility of that firm.

Culture and attitudes can be changed for the better when strong leadership is provided.

Director General, Financial Conduct Derville Rowland

Effective’ culture is still rooted in old fashioned values of ‘doing the right thing’ and creating an environment where people can speak up and are comfortable in expressing their views. A truly independent non-executive director helps foster a good culture within a firm and can help challenge aspects of culture which may not be best practice. INEDs, therefore, can be a positive influence, shaping the values, behaviours and standards the firm aspire to achieve.

Sylvia Cronin, Director of Insurance Supervision

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Culture

Culture in financial services firmsKey areas of focus for the CBI

The “tone from the top”The role of the leadership in setting, communicating and challenging the firm’s culture

Purpose and strategyA clear sense of purpose and alignment between strategy, culture and values.

Individual accountabilityEnhanced individual accountability for specific roles and responsibilities

Remuneration and incentivesRemuneration and incentives that promote good outcomes for the firm, customers and the market

Governance and controlsA culture that reinforces good

governance and controls

Mindsets and behaviourMindsets and behaviours that reflect the

firm’s target culture and values

CultureCulture

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A change of culture

Embedding a more Customer-Centric Culture – What is needed?

Make it personal

• Metrics linked to objectives,

performance ratings, pay and incentives

• Celebrate success stories

• Identify conduct champions within the 1st line

• Hold regular training and communication events

• Assurance reviews

Conduct risk appetite

• A clear statement of

conduct risk appetite with supporting policies and procedures will help

employees understand acceptable behaviours.

Lead from the top

• Senior management and

executives need to demonstrate the values through their decision

making

Responsibility & Accountability

• Clear responsibilities and

ultimate accountability throughout the organisation

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What next? Practical considerations

Establishment of a Management

Information (“MI”) Dashboard for the

Board & Risk Committee, reflecting

on the quality, relevance and

frequency of receipt.

Articulate very clearly the culture of the organisation

Clear communication of

the roles, responsibilities and

ultimate accountabilities/ ownership for

culture

Request a culture Health-check to identify potential

vulnerabilities and areas of concern

Consider the use of external

benchmarking and independent

challenge

Consideration of the optimum governance

required to support and provide

oversight for the organisation’s

culture

Reflect on the reward structures in place to support

the cultural objectives of the organisation and how these are

incorporated into Performance Management

25© 2017 Deloitte. All rights reserved

“Compliance is not simply about ticking a box, it is ensuring regulated firms are doing the right thing in the right way, and considering the spirit as well as the letter of the requirements”.

Ed Sibley, Director of Credit Institutions SupervisionAddress to the Association of Compliance Officers of Ireland – 14 March 2017

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Feel free to contact us

Sean SmithPartner, Regulatory Risk, Risk Advisory - Ireland

Email: [email protected]

Phone: +353 (0) 1 417 2306

Rose-Marie KennedySenior Manager, Regulatory Risk, Risk Advisory - Ireland

Email: [email protected]

Phone: +353 (0)1 417 8933

mailto:[email protected]

mailto:[email protected]

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deloitte ireland conduct risk, culture and reg-tech ... › content › dam › deloitte › ie ›...

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