How Advanced Technologies and AI Are Helping to Achieve Compliance, Improve Operations and Meet ESG Goals
Demonstrating the linkage between leading-edge capabilities and business value
Friday, April 29, 2022
By Amanda Sabates
Historically, compliance and risk management have been viewed as critical functions, but not functions that proactively generate business value.
Honeywell’s Amanda Sabates: Visualizing risks and reacting in real time is a game-changer.
Thanks to new technologies and artificial intelligence, companies can not only strengthen compliance and reduce risks, but they can also experience new operational efficiencies that increase the bottom line and help deliver on strategic goals and long-term initiatives.
What’s inspiring this shift? How can companies simultaneously invest in compliance and generate better dividends?
Trends Reshaping Compliance and Risk Management
Soon after “company” was legally defined, the need for compliance arose. The same may be said of technology, which has long been considered a compliance enabler.
Yet, looking at the studies longitudinally, it is easy to question compliance program effectiveness when examining the rates of non-compliance and the operational, financial and reputational impacts of non-compliance on companies.
Too often – particularly in industrial sectors – companies use manual, isolated, costly, and complex systems and processes for compliance to keep pace with the volume of regulation. These systems are hard to maintain on the best day without taking into account regulatory changes and the immense pressure and scrutiny from regulators for diligent detection.
Even when compliance processes and systems are working at peak performance, they are often designed to identify compliance and risk failure after an incident has occurred. This means, practically speaking, compliance and risk management is often reactive.
Three major trends are converging to upend this old reality and reframe risk and compliance as both a forward-looking function and a proactive generator of business value. Understanding the intersects and meaning in these trends is critical for any risk and compliance professional and business leader seeking advantage in a large, data-centric enterprise.
The Era of Big Data
As data volume rises, so too does the desire of companies to understand the existence of anomalies in their data in order to provide just-in-time solutions to problems and avoid in-the-moment quality or compliance failures which have the potential to escalate into significant financial or reputational liabilities.
The Rise of ESG
Environmental, social and governance isn’t just the latest corporate compliance trend. ESG has become an “industry,” with countless business consultants and advisors trying to help companies address corporate social responsibility, a concept now at the forefront of our collective global business conscience.
In response, many industrial companies have established environmental sustainability targets over the past decade and have invested in controls enhancements (to varying degrees) to help ensure compliance. For instance, a large number of companies have committed to becoming carbon neutral in a set timeframe.
This effort, under the “E” in ESG, remains ever important alongside, in equal parts, worker safety, health, well-being; diversity, equity and inclusion; and the willingness of companies to take stands on social issues and live up to public commitments of stakeholders.
And stakeholders are demanding the receipts for staying on track.
It’s not a company’s ESG strategy that has become a critical differentiator with employees, customers, investors, partners, and other stakeholders, but the ability to prove how they are living up to their commitments that is directing how these stakeholders wish to spend their time and dollars with organizations.
The Emergence of AI and Advanced Technologies
Laws and regulations have their benefits and obstacles.
Regulators now examine the extent of compliance, 24/7, across the enterprise, including the systems of measurement to ensure it. Having insight into real activity has always been key to detection. The sooner you know of an issue and work to resolve it, the better. This is particularly true for regulators who are obligated to consider the environment of compliance as much as the specific aspects of programs.
The use of data to visualize and react to real problems (e.g., non-compliance, data breaches, etc.) in real time is not only a game changer in risk management, but also offers significant operational benefits to any enterprise.
Technological advancements, including data analytics and AI, are now enabling organizations to not only identify and address issues of non-compliance immediately, but to get proactive alerts of any irregular activity on a more consistent basis, making the company more nimble and able to pivot in a moment.
Previously, issues identified were guaranteed to impact people’s time and mental state. Now, people and teams get alerts on outliers within the flow of normal operations, freeing time to focus on matters of strategy and growth.
The compliance benefits of using technology and AI are clear. But adopting these new technologies also accelerates realization of business value. Indeed, use of technology and AI for compliance and risk management is helping to transform the leadership paradigm – the insights that technology and AI are able to generate, at scale, allowing leaders to address mission-critical issues in the moment and respond to demands for operational transparency without sacrificing the time and energy manual analyses often demand.
Amanda Sabatesis vice president, corporate audit at Honeywell, leading a global internal audit organization consisting of IT and cyber security, integrated supply chain, finance and business services and fraud and forensics audit, as well as managing the Enterprise Risk Management practice. She joined Honeywell in 2017 as chief financial officer, integrated supply chain, Performance Materials and Technologies (PMT). Previously, at General Motors, she was chief financial officer, Global Crossover Utility Vehicles, the company’s largest global product segment.