News Roundup: Ethical Culture Alone Doesn’t Guarantee Compliance

Gartner: Strong ethical culture can’t stop noncompliance on its own

Uncertainty is driving noncompliance, according to a new Gartner survey that found despite compliance officers’ focus on building an ethical culture, employees still aren’t always sure how to handle tricky situations.

The survey outlined three main pathways to noncompliance: uncertainty (not understanding how to comply), rationalization (thinking that noncompliance is OK in a certain context) or malice (not complying despite knowing a behavior is wrong). The most commonly cited situation, Gartner says, is uncertainty, with 87% of respondents saying they faced a situation in the past year in which they didn’t know how to comply.

“Compliance culture is a valuable part of mitigating misconduct, but it isn’t the best way to address the most common situation leading to employee noncompliance: uncertainty,” said Chris Audet, chief of research in Gartner’s legal, risk and compliance leaders practice. “Quality standards also have a strong positive influence on compliance culture. Therefore, a focus on quality standards should yield improvements in all situations that cause noncompliance, not just uncertainty.”

PwC: 92% of executives call for some board turnover

A majority of C-suite executives (84%) say their board of directors doesn’t overstep its bounds, according to a new PwC survey, but only 30% rate their boards’ performance as excellent or good and 92% say at least one member of the board should be replaced.

The fourth annual survey, conducted with The Conference Board, sheds light on the evolving dynamics between corporate management and board members, indicating a perceived gap in the board’s ability to pivot and adapt to the rapidly changing business landscape. For example, while most executives said their company’s board members have a strong understanding of corporate strategy (80%), risks and opportunities (71%) and executive compensation (70%), fewer than one in three (30%) rate the board’s performance as either excellent or good.

Dissonance is also clear between the board and executives regarding board composition, with a record-high 92% saying at least one director should be replaced.

SteelEye: Despite continued crackdown on messaging apps, 2 in 5 firms aren’t investing in comms surveillance

Only 56% of financial services firms in the U.S., UK, Europe and Asia-Pacific, are investing in communications surveillance despite an ongoing regulatory crackdown over recordkeeping violations, according to new research from SteelEye, a surveillance tool provider.

Investment in surveillance tools has declined from 2023, the report says, which could signal that compliance investment is moving to the back-burner as issues like inflation and geopolitics come to the fore.

“As regulatory scrutiny intensifies and macroeconomic challenges persist, it’s no secret that the ‘unsung hero’ compliance teams are under unprecedented pressure to meet increasing regulatory demands. With investment in technology solutions not keeping pace with the need for compliance support, senior leadership should be on the lookout for evidence of burnout in their ranks,” said Matt Smith, SteelEye’s CEO.

Alveo: AI will increase cost of data, say 63% of finserv decision-makers

Nearly two-thirds (63%) of decision-makers employed by financial services firms said that AI would be likely to result in an increase in the cost of data within their organization, according to new research commissioned by financial data management software provider Alveo. 

Additionally, IT spending in data management for hardware and licenses will be on the rise, according to 81% of survey respondents, though the majority of people say AI will lower operations headcounts.

“The onward march of AI will bring enhanced operational efficiencies and improved decision-making capabilities to organizations across the world,” said Martijn Groot, Alveo’s vice president of marketing and strategy. “Goals stated for AI adoption differ somewhat regionally with the U.S. scoring higher on innovation in developing new services/products and “enhancing operational efficiency and Europe scoring higher on improving data quality and improving customer service. Every role in financial services involves data management to some degree.”

GC study: 87% fear legal teams won’t be able to invest in talent & resources in 2024

The vice is tightening on in-house legal departments as they grapple with a perfect storm of challenges that have plagued general counsels for years, turning up the heat on under-resourced, overworked teams that were already fighting the scourge of burnout, according to a new Axiom/Wakefield Research survey:

• 87% of general counsels are concerned their legal departments won’t be able to invest in necessary talent and resources this year.
• 81% don’t have the in-house staffing to do their jobs effectively.
• 97% engaged outside firms last year, and all agreed that some of the work they sent to outside firms could have been done in-house if staffing bandwidth allowed.

“GCs and CFOs are increasingly challenged by declining budgets, rising operational costs and new technology and compliance challenges,” said Ashlin Quirk, Axiom senior vice president and general counsel. “Wakefield’s study underscores the need for GCs, CFO and legal ops to rethink resourcing and embrace a more modern, flexible approach that lets them variabilize more of their spend, and respond dynamically to the ebb and flow of work — including projects they would normally send to their law firms.”