2023 COMMENTS, CONTRIBUTIONS & CONCLUSIONS | Achieving Foresight

“Commonly, regulators and firms learn of compliance problems too late,” Jonas Heese observes in another interview in The Academy featuring here.  [See the Academy Article An Interview with Professor Jonas Heese]  “How do the leaders of these organizations know where the problems are before they become unavoidably evident?” asks the professor of Business Administration at Harvard Business School’s Accounting & Management Unit. Leaving aside debate about legislative changes and budgetary constraints, “If you think through what regulators can do now, within the context of their current constraints and mandates, the focus should be on identifying cheap but powerful tools that can help to prevent and detect problems,” Hesse argues.

“After every crisis,” Hesse continues, “policymakers require additional compliance systems — typically without a good understanding of whether these systems actually work.” AI tools can help here but we’re not yet doing a good enough job of assessing which AI applications offer greatest promise and deliver thereupon. “It is now possible to observe compliance problems as they are unfolding and to study questions that managers and regulators have long been grappling with,” Hesse offers with some enthusiasm. “With the right empirical strategies and innovative use of now commonly available data, researchers can hopefully bring more robust evidence of the efficacy of different tools to the debate.” If the goal is assuring improved outcomes for all interested parties, “it might be useful to consider alternative data and alternative tools,” Hesse encourages. “Supervisors should consider doing likewise to achieve more successful supervision.”