Compliance Conference Part 2 v20090818

8/14/2019 Compliance Conference Part 2 v20090818

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People Risks, Compliance Motivationand Culture

PART 2: Solutions

Keryl EganStormont Consulting

Presented at the 6th Annual Financial Services and ComplianceConference, Sydney, February 9-11, 2009


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Copyright 2009 Keryl Egan and Stormont Consulting

Applying Influencer to Compliance

Motivation and Culture

Influencer is a Vitalsmarts programme which provides amethodology for bringing about behavioural and cultural change. In

this presentation Influencer is applied to culture change at the

hypothetical Blue Sky Bank.

Keryl Egan is a Vitalsmarts certified trainer and consultant forInfluencer and Crucial

Conversations.


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Navigating

Change

withInfluencer

Influencer

The Power to Change Anything


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Problems with Compliance Motivation

Measures of the current culture on the trading floor at

Blue Sky Bank indicate that 55% of traders regard

compliance as obstructing their trading objectives and

therefore seek ways of circumventing or ignoring

regulations.

Blue Sky Bank is seeking to develop effective internal self

regulation and to preserve its reputation as a sociallyresponsible corporate citizen.

Setting the Sails for ChangeBlue Sky Bank Clarifies its Current

Position


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Setting the Sails for Change withInfluencer


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Applying the Influencer Model Clarify Blue Sky Banks outcomes:

Why does compliance matter and what has to change? Research the context and problem.

Find Vital Behaviours: What would people have to do to obtain the Banks desired

compliance outcomes? Who does it well and what can be learned from them?

Crucial Moments: When do the vital behaviours matter themost?

Use Influencer Six Sources of influence to promoteselected vital behaviours


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Clarifying Outcomes: Moreexternal regulation or more

internal motivation National Australia Bank solution:

Excessive focus on process,documentation and procedure

manuals rather than onunderstanding the substance ofissues, taking responsibility andresolving matters.

Carapace: Measures external to

human motivation do not have theflexibility, judgment and balancenecessary for human systems.


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DESIRABLE OUTCOMESInternal Values and Grace in

Execution Personal and Social Values

Develop core strength in thecompany through shared andstated values

A Framework provides Safety

Regulations and compliance areused the backbone or frameworkfor good judgment, initiative andinformed risk taking

Compliance and FreedomA solid backbone and core

strength produce an agile,motivated culture which providessecurity and strength but alsoallows for boldness, skill anddegrees of freedom.


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Blue Sky Bank Develops a

Desirable OutcomeOutcome Statement

Within 12 months, by July 1st 2010, there will be a

70% measurable improvement in traders ability to

reach their trading goals whilst working withincurrent

regulatory requirements.


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Design a Setting for Pro-social

GrowthBlue Sky seeks to achieve the desired outcome by influencing behavioural

and cultural changes which harmonise external regulations with internal

values , business goals and public values or expectations.

Arrange a hierarchy of experiences

Start with single, small acts of responsibility or acknowledgement ofthose behaviours which are key to the goal

Gradually escalate these acts of responsibility or acknowledgement


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INFLUENCER: Find the first Vital

behavioursFind the specific and measurablebehaviours which

demonstrate

that traders are actively pursuing their trading

objectives and

observing current regulatory requirements.

What would you see the person actually do

which shows this?

What would be the impact if they did this?

How can you measure it and its impact?


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Derive Vital Behaviours fromGeneral Principles

for Pro-social Growth (Zimbardo) Encourage admission of mistakes

Encourage personal responsibility - prevent diffused responsibility

Reduce anonymity by acknowledgment of self worth

Support critical thinking - discourage blind conformity to the norm Discourage small transgressions which can escalate

Reward behaviour based on values consistent with law andregulations


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Examples of Vital Behaviours at

Blue Sky Bank

Speak up about violations of compliance rulesand challenge each other on the spot

Admit to mistakes without fear of reprisal

Encourage challenge, problem-solving anddiscovery of innovative solutions


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INFLUENCER MODEL: Define

Crucial Moments

When are these behaviours critical tosuccess?

At what time of day, month, year does itmatter most?

Which conditions make it a crucialmoment?


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Examples of Crucial Moments When someone has just ignored or by-

passed a regulation

When business is brisk and time is short

You have made a mistake and you aretempted to hide this


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Putting It All Together Research and Diagnosis: The reason for by-passing regulations

No time

Poor systems and access to daily changes in regulations

Pressure from clients or upper management

Inexperienced back office staff Compliance regulations dont make sense or have no real meaning

Vital Behaviours: Start small and add more behaviours over time.Blue Sky Bank starts with Traders speak up and say no to clients even when they may lose

the client for doing so Middle and back office say no to traders who ignore compliance All check regulatory changes consistently and often


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Sources of Influence to PromoteCompliance & Achieve Desired

Outcomes Research shows

most people apply only one source ofinfluence at a time when they want to change

behaviour

People who use multiple sources of influenceachieve better results X 10

Designing an influence strategy takes time, skilland courage BUT..it makes success inevitable!!


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BehavioursSpeaking Up, Admitting Mistakes, VolunteeringIdeas

Motivation Ability

PersonalConnect the person to their own values bycreating a

dialogue about self regulation, selfresponsibility and

values. Define individual responsibilities for

regulation at every Level and create a crisisof

conscience by expecting people to speak upand

working to get buy-in.

Provide training to enable the vital behaviours e.g.Crucial

Conversations training for speaking up in high stakessituations

Social Define responsibilities for self regulation ateveryLevel. Find Opinion leaders to model the

behaviours

and help others to speak up, admit mistakesand

Volunteer ideas.

Seek support of senior management who are willing to provideresources or knowledge and problem-solving

Structural

Design incentives and rewards for

speaking up, admitting mistakesand innovating.

Use office design, data and cues plus IT tools to keep the vital

behaviours in mind


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Creating an Influencing Strategy

Source of Influence 1: Managers describe socially responsible reasons forcompliance and speaking up & admitting mistakes: give stories andexamples

Source of Influence 2 : Training in communication provides skills for

speaking up

Source of Influence 3: Engage opinion leaders to lead the way

Source of Influence 4: Upper management provides resources andremoves technical obstructions to compliance and problem-solving

Source of Influence 5: Public acknowledgements and rewards for speakingup, admitting mistakes and finding solutions.

Source of Influence 6: Place reminders, data and cues in easy to seeplaces


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Measuring Success Measure compliance incidents, reporting and handling

over the year to July 1st 2010.

Criteria for team performance and productivity includesbehavioural measurements and ratings

Measure pro-social engagement, collaboration and jobsatisfaction over one year from base measure

Analyse and evaluate results to determine next steps


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Continuous Improvement

Define the next set of desirable outcomes

Develop the next set of vital behaviours

Construct the next influencing strategy


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P.O. Box 327, LeichhardtNSW 2040Ph: 02 9564 0425

Mobile: 0414 734 840Email:[email protected]:www.stormontconsulting.com

Thank

you
mailto:[email protected]:[email protected]


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References

APRA, March 2004: Report into Irregular Currency Options Trading at the National Australia Bank Bullen, D: Fake : My Life as a Rogue Trader. Publ. by Wiley 2004 Calavita, K and Pontell, H: Heads I win, Tails you lose: Deregulation, Crime and Crisis in the Savings and

Loan Industry 1990 Enron: The Smartest Guys in the Room HDNet Films 2005, Dendy DVD Heimer, C. Thinking About How to Avoid Thought: Deep Norms, Shallow Rules, and the Structure of

Attention in Regulation & Governance (2008) 2, 3047

Miller, A. The Sociology of Good and Evil, Guildford Press, NY, 2004 Parker, C. The Open Corporation: Effective Self Regulation and Democracy, Cambridge University Press,2002.

Patterson K, Grenny, J, McMillan, R, Switzler,A Crucial Conversations: Tools for Talking when Stakes areHigh NY 2002

Patterson K, Grenny, J, McMillan, R, Switzler,A. Influencer McGraw Hill, NY 2008 Price Waterhouse Coopers. Investigation into foreign exchange losses at the National Australia Bank 12

March 2004 Sheedy, E Applying an Agency Framework to Operational Risk Management CMBF Papers No.22

Applied Finance Centre, Macquarie University, August 1999 Steare, R Whats wrong with business: Integrating Profitability, Responsibility and Ethicability Price

Waterhouse Coopers Stevens, Glen: Education, Integrity and Common Sense. MAFC Issues Paper, 2003 Thompson, Dianne: Accountability and Board Functionality: National Australia Banks Experience.

Paper for presentation at the 11th Finsia - Melbourne Centre for Financial Studies Banking and FinanceConference, Banking and Securities Markets: Convergence, Innovation and Regulation 2006

Zimbardo. P: A Situationist Perspective on the Psychology of Evil: Understanding How Good People AreTransformed into Perpetrators in A. Miller, The Social Psychology of Good and Evil. Guildford Press, NY,2004

Compliance Conference Part 2 v20090818

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