Welcome back to Sherlock Holmes week. It does look like I will got carried away and it will become 10 days of Holmes and compliance as I am rereading the first volume of Holmes, The Adventures of Sherlock Holmes, and I find them as great ways to introduce compliance topics. I have been using a Holmes story each day to illustrate a compliance lesson or issue. Today we use the Sherlock Holmes short story, The Adventure of the Blue Carbuncle. It is the only Holmes tale set during the holiday season. There are some brilliant deductions by Holmes during the tale, starting off with his tour-de-force analysis of Henry Baker’s hat right through deducing the plan to get the stone to the fence for sale. But the highlight for most of us is the clear affection between Holmes and Watson at the holiday season.
As Christmas approaches, there are reports of the theft of the “Blue Carbuncle” gemstone from Countess of Morcar’s hotel suite. John Horner, a hotel plumber and a previously convicted felon, is soon arrested for the theft. Watson visits Holmes and finds him contemplating a battered old hat belonging to one Henry Baker, as well as a goose. It turns out the goose holds the Blue Carbuncle. In a brilliant bit of Holmesian deduction, he determines Baker’s age, social standing, intellect and domestic status. However, when Baker appears to reclaim his hat, it is clear he did not know the jewel was in the bird. It sets Holmes and Watson out on chase through London for the provenance of the goose.
Their investigation reveals that the stone was stolen by James Ryder, head attendant at the hotel, and his accomplice Catherine Cusack, the Countess’s maid. Together they framed Horner, knowing his criminal past would make him an easy scapegoat. However, in the spirit of the season, Holmes does not have Ryder arrested as he concludes that arresting him will only make him into a more hardened criminal. Ryder flees to the continent, and Horner is freed.
I thought about this story when I considered a recent Harvard Business Review (HBR) article, entitled Use Data to Accelerate Your Business Strategy, by John Ladley and Thomas C. Redman. The authors report on the sad state of data usage by companies in 2020. This is some 35 years after Robert Waterman’s observation in In Search of Excellence that companies were “data rich and information poor.” Of course, this situation is only exasperated by law school trained Chief Compliance Officers (CCOs) and compliance professionals where there has traditionally been little to no educational emphasis on the use or interpretation of data.
Most CCOs struggle to build data into their compliance risk management strategies. They then compound this problem by failing to associate their own internal data efforts with the needs of the business units and operations throughout the organization. While there are usually a variety of reasons for failing to do so, it is incumbent that compliance professionals overcome their professional background shortcomings and unleash the power of data to more efficiently manage risk throughout their companies.
It should come as no surprise that data is not yet strategic for CCOs and compliance professionals. The work of compliance is already complex and many ideas around risk management competes for resources and attention. Many successful technological compliance solutions confirm that data makes business processes more efficient but often a CCO does not know where data fits.
The corporate compliance function is uniquely situated to use internal corporate data to make a company run more efficiently because compliance touches so many corporate functions. This lets the corporate compliance function to move towards more strategic alignment of corporate data, where many other corporate functions would not see the holistic picture involving the entire organization. Allowing the combination of disparate corporate initiatives into company-wide strategic initiatives that are more determined on business stratagem and also allows a more rigorous management going forward.
To do so, the authors posit data scenarios — ways that companies can derive value from data, which they moniker “value modes”. I have adapted these for the compliance professional.
- Improved processes. For the CCO, how can you improve compliance processes so that they can be run more efficiently? For instance, can you automate your basic onboarding through robotic process automation (RPA)? What about your mergers and acquisition (M&A) work in the compliance arena?
- Improved competitive position. Giving the business unit more information more quickly allows the business folks to not only move faster but puts your organization on better competitive footing.
- New and improved business processes. Here new business processes in compliance can actually reduce areas such as sales cycles by giving information to the business development personnel about when customers might be more or less likely to sign contracts.
- Improved human capabilities. It is well known that a company’s greatest capital is its human capital. But if you can put information in the hands of your operations teams which not only guides a more robust compliance solution but also allows them to move transactions to palatably it can facilitate increased growth.
- Improved risk management. The improvement of risk management is always the goal because it is through the overcoming of risk that company’s obtain greater profitability.
Together each of these points help a CCO or compliance professional to demonstrate both “the potential and limitations in the full range of data options, and businesspeople to see how each option adds value. And both can collaborate to identify areas where data provides the best returns for the organization.” It also allows the compliance professional to separate the wheat from the chaff and remove the noise in data. The authors conclude by stating, “Complexity and abstraction are the enemies of a good strategy. Aligning your data efforts and strategy can seem daunting but focusing on these six value modes allows leaders to fit powerful data concepts into the dynamic business picture, and vice versa. But the resulting forward motion of business and data teams finally working together is powerful indeed.” The same is even more true for the compliance professional.
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