It is vital to rethink the performance standards that are considered acceptable in light of new information and tools. Businesses understand that achieving perfection is impossible, but it is important that the business achieves or exceeds the industry standard. Something is considered to be a problem only if it fails to meet these standards, because these standards represent a realistic and achievable level of performance.

The etymology of the word standard provides the context; it comes from the Old French language word estandart. An estandart was a battle flag that was used to rally troops to a gathering point. If you were in a field of war and you saw the flag, it meant you were needed there. What is important to note is that the estandart was not a static point in the field – it would be moved as the battle progressed and the needs and objectives of the army changed.

It is normal to think of standards in the business world because they can last for decades, only to be upended by disruptive technology. It was standard at a point to communicate vie letters that would take weeks to reach the recipient; email destroyed that standard and made communications instantaneous. Computers and the internet have exponentially increased the performance standards we expect from business processes.

The risk and compliance performance standards, particularly the standards being used in mid-sized and smaller banks, need to be increased as well. There are now technologies available that not only significantly increase the speed and efficiency of risk and compliance management, but also redefine the risk and compliance capabilities of smaller institutions. These developments warrant another look at our current acceptable standards.

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Standards Have Always Been Dynamic

The technology that has become available over the past decade seems to be disrupting performance standards across the financial industry. However, it is important to remember that standards are always dynamic; they only appear static because of their longevity. The currently accepted practices and standards are not set in stone, but they have lasted for multiple decades. This means that for most risk and compliance professionals, aside from the highly experienced professionals who have been working in this domain for more than three decades, the standards have been the same since they joined the industry.

The last time these standards were disrupted was when computers and the internet became commonplace in the business world, which happened at the end of the 80s. Note that these standards began to be formed so much earlier in the finance industry because the financial sector was one of the first industries to adapt computers and networking. Some of the first commercial computers made were designed specifically for accountants and financial analysts and the industry has always been a pioneer in using technology. Here are some of the reasons that the standards were upended around three decades ago:

Digital Records

Imagine how difficult it would be to analyze data written down on paper. Most of the analysis and monitoring that occurs in risk and compliance now was simply not possible when the records were not digital. Digital records made the data malleable and useful; it could be extracted and used in any way the risk and compliance experts needed to.

Analytic Tools

Having the data in digital form was only the start. Computers also made it possible to quickly perform in-depth analysis and complex calculation on large databases. Most risk and compliance departments these days are full of Excel wizards who use formulas and macros to create spreadsheets that offer excellent functionality for risk and compliance data analysis. The analysis which can be completed in seconds with computers would take multiple days to accomplish without computers.

Real-Time Data

The internet also allowed businesses to quickly transmit data across the enterprise and make it a part of the risk and compliance framework. Again, imagine how difficult this would be without information technology. Businesses would have to either fax the data or transmit it over a phone call, which would take multiple days. Businesses could suddenly transmit thousands of records in a second without worrying about data loss of any kind.

These three major factors meant that risk and compliance processes could not be faster and more efficient than it was ever possible before. This led to the industry redefining risk and compliance standards. The level of reporting and analytics that is considered the bare minimum now wasn’t even possible three decades ago.

The Next Paradigm Shift

We do not have to predict or suppose what the next paradigm shift will be – we only need to look at the major banks and enterprises to see how the industry will operate from now on. Larger banks had the budget to spend millions of dollars on risk and compliance technology early. This allowed them to reap the benefits of new technologies before the rest of the industry. However, the costs of technology have decreased – becoming affordable for mid-size banks.

The next change in standards is being spearheaded by Artificial Intelligence powered automation. New risk and compliance management solutions are automating risk and compliance processes and reporting. This exponentially increases the speed of many processes; some go from taking days to complete to become almost instantaneous. A.I. also enables predictive analytics, real-time data analytics, continuous monitoring, and many other similar processes that were simply not possible before.

Want to experience what this paradigm shift will look like for your organization? Get in touch with our risk and compliance experts for a demo of our A.I. powered Predict360 risk and compliance solution.