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On this episode of Coffee Chat with CastleHill, Managing Partner Tim Carbery is joined by Wolters Kluwer’s Senior Specialized Consultant, Elaine Duffus. A former career compliance officer and attorney, Duffus works with Wolters Kluwer to provide financial firms worldwide with compliance solutions.

Follow along at Episode #28: Automation, Optimization, Success as they discuss upcoming trends in the ESG space and how automation such as Wolters Kluwer’s regulatory change data feed is the key to an organization’s success.

The Right Things for the Right Regulators

While Environmental, Social, and Governance criteria have been around for several years, the speed at which new regulations are released has increased significantly. In the wake of weather-related factors such as flood and fire, the continuing impact of the COVID-19 pandemic, and social upheaval across the world, a fundamental shift is occurring in the way that ESG regulation is being considered.

“What role can corporate governance play in addressing some of these factors?” Asks Duffus. “It’s getting broader now. What can we do, in our business model, for the greater good? Because, frankly, we have to.”

As ESG’s scope widens, organizations may find themselves buried under the onslaught of new information. Multi-national firms are likely already working through these changes, but for those organizations that are solely based in the United States, Duffus recommends looking overseas for guidance.

“I would be looking to global standard setters, like the International Association of Insurance Supervisors, the Basel Committee, to start giving us some guidance,” She suggests. “From there, look at who you care about as an organization, who supervises you, who is examining you, and also the places where you get horizon scanning information.”

Small companies will also feel the effect of the sheer quantity of regulation being pushed down the pipeline. The Biden administration has taken an especial interest in ESG, considering it a “whole of government problem.”

“There’s decisions being made. For that smaller firm, I would look to where there has been some established regulation already,” Notes Duffus. “Maybe you aren’t going to make any hard and fast decisions or change policies as a result, but it certainly will keep you plugged into where the wind is blowing.”

Automation in the Age of Information

In her role as Senior Specialized Consultant at Wolters Kluwer, Duffus speaks to companies on a daily basis about their compliance program management. The number of firms which remain analog is often surprising.

“There are still those who remain in a manual mode, using Excel or Access databases, things like that, to conduct their reg change and their risk assessments and all that. Frankly, the days of being able to continue to do that are behind us.”

Automation comes with numerous perks. For one, the sheer influx of information puts analog processes at a severe disadvantage – computerized processes are capable of filtering and organizing data at a far greater rate than human contemporaries. But automation offers companies greater power than just collecting information. It provides users with a star map; a way to not just navigate ESG, but to use change to your advantage.

Automation allows users to, through a series of meta content and tags, comb through a staggering amount of information and pull out those pieces relevant to the organization. By creating this web, companies can tailor their regulatory change process to best support their operations and cut out the noise.

“When something comes to my attention, maybe it was a speech that the Fed made and they really made this point about where they’re headed on some ESG element – maybe I want to get that off to my board ASAP. I want to make sure that they have seen it and understand it and contact me if they don’t,” Duffus says. “Think of what would happen in a manual sense. A number of emails flying around, I have to save them somewhere to show when they knew, how they knew, here it is in this folder. Say I leave the company – where are those records now?”

“As complicated as things have become, even without ESG but now adding these issues on top of all that compliance departments have to manage today, there really isn’t another way to do it in my view but to automate that process and to connect those things that need to be connected,” Urges Duffus.

Automation is also notable for its ability to dispense information across a company, helping large organizations ensure their entire employee body is up to speed. “One of the challenges is making sure that the rest of the organization is aware of these things – being able to distribute it in an efficient way and get the information out to the impacted parties,” Notes Carbery.

Furthermore, the documentation built into automation provides companies with a strong defense again review.

“A regulator might not be able to say that you are ‘wrong’ because you made a certain decision, but they could say, ‘You didn’t even consider this item, you didn’t even look at it and weight its risks to your organization,” Points out Duffus. “The connections need to be made and the record kept more fulsomely.”

A Strong Defense is a Proactive Offense

As ESG continues to develop, companies’ best bet is to remain proactive in their approach to regulatory change management. Those organizations with a strong process for acquiring, filtering, and distributing information relating to ESG will be in a significantly better position to weather the expanding rate at which regulations are being presented.

“I can’t imagine how you are doing effective scenario analysis if you are not looking at the full gamut of what is coming down the road,” says Carbery.

That road can take surprising forms. Effective horizon scanning includes sources such as speeches, posts, and blogs – many of which are overlooked in more traditional processes.

“I think it’s the OCC that has a blog – and they aren’t putting these items out anywhere else. It’s not a law, rule, or regulation, of course, but it does give you a sense of what they are thinking about that topic and how things are probably going to play out,” States Duffus. “Something that automation can do to help you get there is by tagging. If that information doesn’t hit one of the things you are looking for, then no one has to look at it. You are saving resources. If it does, then of course there is going to be a deeper dive.”

“In the old way of doing things, every single item has to be pulled out and looked at, and it’s just not sustainable,” Concludes Duffus.

“We are in a long series of events that the regulatory bodies are going to continue to react to, with a very large set of variables,” Carbery agrees. “The most critical piece is getting that process down.”

To hear more about how automation will set up your organization for success, join us at our joint webinar and demo with Wolters Kluwer and Archer on November 4th, 2021, or email us at .