Contributions to the Supervisors on Supervision Stocktake
What tools, metrics, and data collection capabilities are currently available to support culture risk governance and supervision? What is working and what does this hold for the future?
“There remains a crying need for better data analytic tools that allow firms to focus in on exposures more quickly — before damage to clients has occurred.
If a number of firms stepped forward and proposed employing one or more culture diagnostic tools to determine better how to incorporate that into control environments, I think regulators would likely view that quite positively.”
What have we learned from past approaches to culture risk governance and supervision?
“Many firms have striven mightily to improve the clarity of ‘tone at the top’ and have deployed countless employee engagement surveys in an effort to measure their staff’s commitment to the firm’s stated values and to identify troubling subcultures. The frustration, however, has been that these activities haven’t really moved the needle very far.”
What are the informal challenges with integrating culture supervision into regulatory bodies?
“I also wouldn’t underestimate the frustration felt by regulators, who are increasingly open to seeing RegTech solutions trialed, and especially where we have seen repeated risk management failures. Institutions need to move past this frustration and work on improving risk management through investing in innovative solutions to reduce the reputational and financial costs of noncompliance.”
What systems and structures are needed to help supervisors and firms alike to find, evaluate, and easily adopt new technologies and methods as they come available?
“Financial regulators will also be looking to technology to enhance their oversight programs, increasingly so. Artificial intelligence and machine learning tools adopted by financial institutions and regulators could radically change, and hopefully improve, financial regulation.”