Marios Skandalis will be participating as a panellist at C5’s 6th Annual Conference on Economic Sanctions and Financial Crime to take place in London on 15-16 of November 2017. This is the largest Anti-Financial Crime event in London and Marios will take part in a discussion of large financial institutions on integrated approaches and other cultural measures to develop a strong governance, risk and compliance system. Bank of Cyprus was selected as a benchmark and success story of introducing a cultural transformation. In the framework of this event, the below interview on the essential strategies for a cultural compliance change was distributed to all participants to the event.
Q1. What tactics or strategies would you recommend when creating a cultural transformation?
Initiating and concluding a cultural transformation is not simply the devising of an action plan or a corporate project. It requires a blend of capabilities and virtues and involves absolutely all members in a corporation.
What differentiates a cultural transformation project from any other corporate project is its complexity, its multi-layered and enterprise-wide effect, its pluralism and the interdependence involved with the various stakeholders of the corporation.
The only effective way in successfully addressing this cultural transformation need, is to shift our focus and attention from the project management in implementing all relevant regulatory compliance frameworks, to effectively introduce ETHICS and VALUES in the everyday operation of a corporation.
Ethics is not a science but simply the branch of philosophy that studies the difference between what is behaviourally right and what is wrong. In other words it aims to sculpt attitudes and behaviours rather than applying traditional project management techniques.
Q2. How should internal teams work together to create a culture of compliance and how are all members of a corporation engaged to this respect?
As mentioned before, a cultural transformation project involves absolutely all members in a corporation. A key tactic of such a mega project is that the owner should be nobody else but the key leader of the corporation, the CEO. Modern CEOs bring together all of the varying personalities and disciplines needed to make a corporation operate successfully and efficiently.
A visible and empowering CEO should take the tone of the Board and infuse it in the action plans of his management. By strengthening and engaging each of his managers, he can then create the relevant mood to trigger the necessary buzz at the bottom levels through the presence of staff with the necessary capacity and capability. In this way all members of the staff fully engage in this enterprise-wide project.
The responsible internal control function which will be key support to the CEO will be the Compliance which will coordinate and implement the required actions to achieve the value objectives set. The two other internal control functions, Risk and Internal Audit, should also align their objectives transforming them to more value-driven rather than task-driven.
Q3. How can a strong compliance system help the company anticipate and mitigate potential legal, regulatory and operational risks and support the leader of the cultural transformation?
As mentioned before, the Compliance function is the key supporter and driver of a value-driven management strategy set by the CEO. It takes only such a charismatic compliance professional to inspire all players in a corporation and achieve this cultural transformation. A culture which is often misconceived at our times by most compliance professionals, and in their attempt to follow that path they simply miss it because they lack this charisma, finding themselves at the end pursuing a culture of fear. Inspiring is a simple word to comprehend but a highly complex term to actually apply. It takes:
- Deep technical knowledge, not only of what needs to be implemented but of the real value and outcome expected to be derived from such an implementation. Unless the outcome is of real value and appealing to a corporation’s customers, employees, shareholders, investors and other stakeholders and unless the compliance officer manages to create awareness that these values can actually crystallize, there is no inspiration.
- To inspire it also takes a high level of critical thinking and decision making. Confidence in undertaking and implementing the right decision earns the desired credibility of and reliability by the various stakeholders.
- Finally, inspiration comes from the demonstration of a high degree of ethos and other values which will allow integrity and transparency to flourish through our attitude and actions.
It is therefore important first of all for the Compliance Officer to identify and support all members of the corporation to understand and accept the real value of the pursued corporate values. Unless this real value is clear by all members in a corporation, then its members will not be persuaded that these corporate values are worth the effort of pursuing.
This is the true distinction of a regulatory framework Vs a cultural one. In the former, risk mitigation is administered through a strict adherence to checklists and obligations. In the latter, the “obligations” are embedded in the inherent conduct framework of each individual, who mitigate risk through the sculpting of their attitude and behavior.