The misbehavior of company executives endanger their companies and are inflicting billions of damages on the public. Almost all of it is preventable if a new breed of ethics and compliance software, emerging thanks to machine learning, is used, which can also scrutinize the enormous vaults of data held by the world’s large companies.
Lapses like Caterpillar’s alleged $2-billion tax fraud exposed by a whistle-blower in 2013. Or Volkswagen’s decision to cheat on diesel-emission tests for 11 million cars (its settlement tab is $14.7 billion and growing/its reputation is badly affected). And Wells Fargo’s ploy to open as many as 3.5 million potentially fake bank and credit-card accounts in customers’ names since 2002, incurring a $142-million national class action settlement.
Ethics and compliance software can plug into corporate digital infrastructure, from e-mail to contact management, ingesting gigabytes of data about employees and company transactions. Machine-learning algorithms are turned loose to look for suspicious patterns of behavior. Software can hand companies a self-portrait, fair or foul, painted with their own data. Given the data-privacy legislation in many parts of the world, including the
Philippines, complying by using software is walking away from a bad decision, walking toward doing the right thing, preventing data breaches.
One ethics software developer is a company called Convercent which has raised $78 million, according to Pitchbook. It is joined by other start-ups, such as AI-powered chat bot Spot, aimed at pointing powerful algorithms at company’s data to clean up their corporate messes, or help companies to do gap analysis and risk assessment, and recommend appropriate solutions like the software developed by Straits Interactive Pte. Ltd. of Singapore.
For decades, compliance was not taken that seriously, but that’s yesterday. Market pressure and legal pressures are increasing and forcing companies to create ethical corporate cultures that attract talent and shade out rivals. Studies suggest that more ethical companies that create ethical supply chains outperform the market with higher returns, faster growth and lower volatility. Some companies I have visited recently have created substantial compliance departments and are ahead of regulators’ standards.
Many companies are attempting to catch bribery, corruption and fraud by using rules-based tests pulling on spreadsheets. But these are easily evaded. In response, the companies mentioned above, but also competitors like Naves and Metricstream, have moved their reporting systems online, automating the processes. Predictive analysis will eventually head off ethical issues. The new software solutions are ingesting data from the whole organizational structure of companies, their national or international affiliates, and are supervising their supply-chain management. Data alerts can go directly to board members ensuring that suspicious reports are not hidden.
However, new data integrations have to stick to using data that was legally collected. Companies will have to tread cautiously in new territories to ensure privacy while allowing them to root out malfeasance. Defining what that will look like as new data streams come online is less certain. But this will certainly evolve over time, with hopefully one clear objective in mind: no ethical breaches.
What makes data protection with the use of software truly unique is that it helps organizations manage organizational data-privacy compliance, with the enhanced automation, collaboration and productivity. As Straits Interactive says: “Our platform contains intelligence to generate policies and recommendations tailored to your organization.”
Comments are welcome/assistance is available—contact me at Schumacher@eitsc.com.
Image credits: Kypixel | Dreamstime.com