Saturday, July 31, 2021

 MIND READING AT WORK

EDF: How Can Employee-Centric AI Support Financial Firms To Meet Their Future Expectations?

Most financial organisations are by now aware of the financial benefits of deploying Artificial Intelligence (AI) to improve process efficiency and reduce fraud; but are they aware of the benefits it can have on their employees and governance practices too?

Artificial Intelligence (AI), often cited as the foundation of the 4th Industrial Revolution, has transformed, at pace, entire systems of management, productivity, governance, and consumer engagement within the financial sector.

The regulator is committed to improving the culture of firms in the sector and, with the launch of the Conduct Rules fast on the heels of SM&CR, it is clear the regulator expects higher standards from both employees and management. 

Firms should look to Artificial Intelligence (AI) to assist them in improving their focus on employee-centric competence and governance provisions. After all, the Financial Conduct Authority (FCA) has been “hoovering” up all the top maths graduates as they themselves step away from a traditional face-to-face approach and instead embrace a data-driven, policing and enforcement strategy explains Adrian Harvey, CEO of Elephants Don’t Forget

“Employee engagement and continual evidential assessment that staff on the frontline are understanding key regulatory and consumer themes for the future is absolutely paramount for financial firms.Harvey stated:

Whilst some publications have expressed that the themes in the Financial Conduct Authority’s (FCA) latest Business Plan 2021/22 can be viewed as extensions of the previous year. The activities that the regulator is looking to implement in the future remain inherently linked to meeting the objectives of embedding purposeful culture and providing evidence of positive consumer outcomes.

There is also more of a direct relationship to evidential employee competence and governance application too. How will firms ensure that they meet consumer priorities and demonstrate that they are helping their customers make informed choices? How will firms improve customer service levels? Employee competency has a primary role to play in meeting these objectives.

The rhetoric of the Business Plan – especially the new Consumer Duty – reiterates that firms need to put their customers’ interests at the centre of their business models.

Firms now need to look at how they make these regulatory priorities a reality and bring them to life within their organisations through their training provisions.

When you look at ‘vulnerability’ as an escalating issue due to covid-19 for example, it has tested the foundations of culture and governance practices across the sector. It has also directly impacted frontline advisors, as their respective firms rely on their ability to recognise and act on their own knowledge to navigate the myriad of policies and primary key drivers of vulnerability to ensure positive outcomes.

‘Purposeful cultures’ was championed as a way for firms to demonstrate to the regulator how they are helping to respond to the challenging circumstances faced by their customers.

Increased support and training provisions, accountability, encouraging long-term behavioural change, and maintaining a wider appreciation of new consumer frailties in a covid-19 world are likely to be the key indicators of how positive cultural change will be assessed by the FCA.

Increasing positive consumer outcomes is a primary focus then, and firms will also need to learn from their previous mistakes during the pandemic – especially if they are going to meet the requirement of ensuring robust operational resilience in the new normal too.”

Artificial Intelligence provider, Elephants Don’t Forget, who commissioned a three-year study to assess the baseline competency of employees within the financial sector, analysed the responses to over 72 million competency assessment interactions between 2017-19. The study found that the average level of tenured employee competency within many firms stood at just 52%, pre-pandemic.

The provider also conducted several polls throughout the pandemic, directly questioning firms on their covid-19 response practices. The findings indicated that some financial organisations did not make any updates to their competence and governance practices until as late on as February 2021.

Further analysis of the responses also suggested that there could be a potentially concerning misalignment issue between some Risk and Compliance professionals and Senior Management bodies regarding the efficacy of assessing and evidencing competency within some firms.

Harvey explained:

“As we entered the first lockdown on the 23rd of March 2020, 47% of senior management individuals polled stated that they had not implemented or provided any new Training and Competence (T&C) provisions to upskill their employees and protect against work from home (WFH) governance risks.

Then, in our February 2021 poll, 40% of respondents stated that they were still yet to make any updates. 66% of Compliance and Risk professionals also asserted they were not entirely confident that their Senior Managers could demonstrate a consistent approach and application to T&C, with attaining, maintaining, and evidencing employee competence being recorded as the primary issues.

Finally, in our latest poll – conducted in April 2021 – 64% of Senior Managers stated they would be confident in evidencing employee competency to the regulator if required.

The disparity in the responses between the Risk and Compliance and Senior Managers polled at this juncture was surprising, calling into question what Senior Management individuals deem to be appropriate and satisfactory evidence of employee competency, as over half of the Risk and Compliance professionals polled the previous month had stated that evidencing this successfully was still a major issue for their firms.”

Harvey stresses that evidence-based AI solutions should be advocated to resolve any subjective opinions regarding employee competence and compliance.

“The common obstacles shared by most financial firms to embed a purposeful culture – one that is underpinned by competence and compliance – are being solved, at pace, by technology advances in the Fintech space; chiefly through employee-focused AI.

Where there was once an inability to attribute improved business performance to competency and compliance, AI is providing financial firms with the Management Information (MI) they need to produce a forward-facing risk radar that highlights – and automatically repairs – critical employee knowledge gaps, replicate star performer behaviours, and improve critical customer service metrics.

It is cost-effectively revolutionising the way employees engage and retain critical subject matter like compliance – which can often be codified as boring – by providing tailored assessments at an individualised level, based upon the unique requirements of every employee.”

Harvey contends that firms which continue to rely exclusively on traditional training methods, often characterised by annual refresher training, e-learning and ‘classroom-style’ presentations, cannot evidence objective, real-time competency and compliance of their employees, as these models often only demonstrate competency levels at a single point in time.

He also asserts that these modalities of training can indirectly fuel negative improvement of culture within firms, as they can propagate training resentment and inadequate knowledge retention, as employees are subjected to alienating, ‘one-size-fits-all’ training approaches that fosters disenfranchisement with critical subject matter.

Instead, Harvey urges that more financial firms should understand the behavioural science behind employee learning and assess the benefits that space learning, repetition, and individual regular micro-assessments can bring to their organisations through AI.

Harvey concluded:

“The most effective cultural change initiatives in 2021 will not be tick-box exercises, but long-term, continual change programs that are supported by regular assessment and committed Senior Managers.

Employee-centric AI – like our very own Clever Nelly – is habitually considered by the leading financial organisations we support to play an integral role in helping their firms to meet and evidence their purposeful culture objectives. These organisations recognise that employee competence and capability is inherently linked to positive culture change, and it plays a primary role in their culture framework.

Financial firms that fail to champion individual employee competency as one of the primary culture influencers within their 2021 culture framework will find it extremely difficult to meet increasing regulatory expectations. Employees must possess the necessary skills and knowledge to deliver their firms’ – and the regulator’s – ambitions for the future.”

Author

  • Francis is a junior journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.

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