Survey: Growing evidence of maturity in compliance tech

A smaller percentage of respondents to CW’s “How are you choosing and using new GRC technology?” survey—conducted in partnership with Refinitiv—indicated they were shopping around for new tools, and a larger segment was in the process of implementing those tools compared to the results of the 2018 survey.

Specifically, 46 percent of 128 compliance practitioners polled who play a role in their organization’s technology decisions said they’re currently choosing a new or upgraded product, a 4 percent decrease over last year, and 21 percent said they were implementing technology that had been greenlighted, a 3 percent year-over-year increase.

“The pace at which technology is changing has almost forced [companies] to move through that maturity curve,” said Holly Sais Phillippi, Rifinitiv’s head of risk market development for the Americas. “Companies are starting to see their peers moving quickly and adopting technology faster.”

While these year-over-year statistical changes seem small in isolation, other survey results echo the theme that compliance functions are maturing technologically. A year ago, nearly a third of polled practitioners (31 percent) said their organizations were “late to the party” in terms of technology investments. That proportion dwindled to 22 percent in 2019.

This finding may be partially explained by the fact companies are able to evaluate and make decisions about investing in new technologies faster and more efficiently than they were previously.

“In the past, companies were seeing big, heavy-lift systems that required many months—sometimes years—to get adopted and configured; if you were going to go through an evaluation period, it would take quite a bit of time. You’d have to do some testing, go through a proof of concept, and look at project plans that could take 24 months,” Phillippi said. “Now, companies can take four different technology providers and evaluate them at the same time and at a fairly significant pace.”   

And it’s not that proponents of compliance technology are just paying lip service–they are also putting their organization’s money to work. Companies are willing to spend more in 2019 than they were even a few years ago to build a more robust technology-enabled compliance function, according to survey results. Nearly a quarter (23 percent) of compliance practitioners said their technology budget is much larger today than it was three years ago, an increase of 8 percent over last year’s survey. While this budgetary shift may not be seismic, it is corroborated by corresponding declines in other responses to the same question. For instance, 5 percent fewer respondents to this year’s survey said their technology budgets are about the same as they were three years ago (25 percent in 2019 versus 30 percent in 2018); in addition, 4 percent fewer respondents said their budgets were only a bit larger (30 percent in 2019 versus 34 percent in 2018).

Quantifiable metrics like bigger budget size are tangible evidence the winds of change are blowing. But there are also subtler indicators of change, derived from respondents’ answers to other, more subjective questions. One survey question asked compliance practitioners, for instance, “When making a case for investing in technology, what’s the most effective argument?” The more popular answers of 2018 were conceptual or general in nature: Process efficiency (31 percent) and compliance with a regulatory requirement (21 percent). In 2019, practitioners’ responses to the same question showed more of an applied reasoning than theoretical: Improved results and better data/analytics rose 5 percent and 6 percent respectively, year over year, while process efficiency dropped 6 percentage points and compliance with a regulatory requirement declined 11 percent. While cost/staff savings was a common answer choice both years, its popularity increased by 5 percentage points in 2019. This growth could be an indicator that companies’ cost-benefit analyses for making a technology investment are panning out favorably.

“Absolutely yes,” Phillippi agrees. “The fact that you can see an immediate ROI by investing in these technologies and have an immediate reduction in cost internally is a big driver. I only see that trend continuing to rise.”

Indeed, a year ago, demonstrating return on investment rated 4 percentage points higher in 2018 (31 percent) than it did in the 2019 survey as an answer to a question about the most difficult thing about implementing a new software solution. This year, challenges with the implementation process was the top answer to that question (37 percent), rising 11 percentage points year over year.

This year’s greater emphasis placed on implementation suggests more organizations are already putting a technology investment into effect. Instead of combing through issues that arise during the planning process, they are grappling with those that emerge during the execution phase.  

“A lot of organizations struggle because they have been on certain systems for a long period of time. There’s a lot of compliance risk to moving systems because companies have to make sure they’re not going to miss anything from an audit perspective. So, it’s not that [new technologies pose] a harder implementation—it’s just taking a little more time to get a level of comfort that the changes being made are not missing anything,” Phillippi explained.

Advanced technologies like artificial intelligence (AI) also got more attention in the 2019 survey, not only in reported usage but also in confidence. Thirty percent of practitioners polled said they are evaluating AI at their organizations, up 3 percent from 2018. More convincingly, 17 percent of respondents said their companies are currently using AI-powered tools, a 7-point gain, year over year.

“Everybody is interested in AI,” Phillippi said. “There’s no question AI is going to have significant impact within the compliance space. … It will, however, take some time for full AI solutions to be implemented. Companies that are currently able to say ‘yes, I use AI,’ can do so not because they’ve incorporated AI into all of their programs or directly into their own systems, but because they’ve adopted a piece of technology that has an AI component.”

Indisputably, there is still some resistance to the sea change. Forty-two percent of 2019 respondents remain resistant to cutting-edge technologies like AI, with 20 percent saying they are unsure about harnessing AI and another 22 percent stating they have no plans to implement it. By comparison exactly half of last year’s respondents expressed unease or opposition to AI, an overall 8 percentage-point decline in skeptics year over year.

“I think you’re seeing people back off because there has been a reset of what AI is exactly. What is the definition of AI within the compliance world? How do you start to train it? How do you gain a level of comfort [with the prospect of removing] that visual human touch associated with the things AI is being incorporated for, and how do you get the regulatory bodies comfortable with the AI output?” Phillippi asked.

So, what is the current application of AI within the compliance world?

“From a compliance outlook, AI can help identify some of that low-risk work that an analyst does and take it off of their plates … I don’t think anyone is worried about AI taking over their jobs; the value is providing analysts the opportunity to focus on the higher-value items versus false positive volumes, as an example,” Phillippi said.