Compliance takes centre stage as regulators come down hard on business

In today’s complex regulatory environment, it is hard enough for risk officers to proactively identify compliance breaches within customer communications. Businesses receive hundreds of thousands of calls, emails and online interactions a day from customers requesting support and advice.

This human to human interaction leaves businesses open to the risk that one simple mistake, erroneous assumption or miscategorisation, can open the door to a compliance breach that could well end up leading to legal action, financial penalties and significantly impact a brands reputation. 

Exacerbating the problem is the fact that regulators are no longer taking a ‘soft touch’ approach to enforcement, following a plethora of mishaps, misconduct and bad behaviour from businesses.

Post-Royal Commission Regulation Frenzy

The Hayne Royal Commission has much to do with the increased regulatory activity in Australia.

Firstly, the commission shone a spotlight on the poor practices and compliance issues within banks for all to see. Consumers, regulators and politicians alike received a front-row seat to Hayne’s forensic dissection of the banking, insurance and wealth industries, which had a significant focus on customer service.

Secondly, the Royal Commission highlighted the lack of enforcement of regulations in the banking sector, with financial institutions regularly receiving no more than a slap on the wrist for compliance breaches by regulators.

This has led to regulators being given more power than ever before to enforce compliance. And, it’s not just in the financial sector this is happening. Across the board, from the Fair Work Ombudsman to the Australian Competition and Consumer Commission (ACCC), regulators are starting to up the ante against misconduct and compliance breaches.

A prime example of this is the recent news the ACCC has launched legal action against Medibank Private’s budget brand AHM over a compliance breach, where it rejected insurance claims that should have been paid due to an internal process failure. According to Medibank, item codes relating to the relevant category were not entered into their claims systems correctly, leading to breaches occurring over a five year period. 

Whilst AHM did the right thing and self-reported the breach and has already begun remediating customers, the ACCC isn’t going to go easy on the brand, with ACCC chair Rod Sims looking to use the legal proceedings to send a message to other firms to “check your systems”.

Where self-reporting might have once been a way to limit the punishment from regulators, times have changed. And, it’s not just Australia either, levels of regulation are increasing across the Asia Pacific creating significant legal, regulatory and reputational risks for organisations.

It’s not just the regulators putting companies to the sword

For many businesses facing regulatory action, the need to remediate affected customers quickly and effectively is critically important. However, often the approach taken is one that leads to a poor customer experience and potential reputational damage.

The challenge for businesses is that it is extremely difficult to identify affected customers. Businesses would have to trawl through hundreds if not thousands of call recordings, online messages and emails, grinding the remediation process to a halt. Not only would this take an enormous amount of resources to manually go through these interactions but the costs would also be astronomical for business - probably more than the total remediation costs.

To mitigate this issue and to resolve the problem quickly, many businesses have taken to alerting all their customers at once. It is thought that this is a quicker, more cost-effective and efficient way to identify the typically small number of customers impacted. But, it also means customers have to ‘self-serve’ and identify whether they are eligible for compensation themselves.

In an era where brands live and die by the customer experience, this is definitely a hard pill for many customers to swallow and risks becoming a reputational nightmare for brands.

Real-time compliance - augmenting compliance practices with AI and machine learning

Today, Artificial Intelligence (AI), automation and natural language recognition can streamline compliance activity by searching through all customer communications across all channels to identify and flag issues. This could help businesses quickly identify the small pockets of customers impacted in record time, enabling proactive remediation.

Furthermore, this technology can conduct analysis in real-time, whilst your operatives are communicating with your customers, and flag potential compliance risks as they arise. It essentially acts as a ‘Compliance-as-a-Service’ offering, ensuring your interactions with customers - whether online or offline - meet the regulatory standards. Even if the conversation enters a grey area, smart AI can flag these potential issues to compliance or risk officers for further review.

This proactive approach to compliance shouldn’t be an afterthought or a solution you put in place once an issue has been raised. It should be the foundations of businesses compliance efforts to ensure the customer experience is the best it can be, whilst mitigating long-term compliance breaches, which can quickly spiral out of control.

Not only would a proactive approach help avoid the expensive legal processes and the need to communicate the breach with all your customers, but it reduces the risk of getting into the situation in the first place, protecting your reputation, customer trust and the bottom line.

Compliance is no longer just red tape, it is the foundation of a good customer experience and the very least what we should expect from businesses.