Can technology crack human governance risk for financial institutions?

What if there was technology that could prevent a human resources disaster in a financial institution? Or even just significantly reduce the chances of the kind of bad behaviour that is the bane of compliance officers everywhere and a perpetual shadow over the c-suite and board?

The value would be high, since these types of governance risks are hard to reduce because they are hard to spot. Next-generation human assessment technology could change this, equipping those with responsibility for reducing these risks with a powerful, and cost-effective, tool to do their job.

Background: The governance risk has grown for financial institutions.

The urgency for such a solution has grown in recent years. After all, The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry concluded its process with a final report published a little more than three years ago. As everyone in the financial services industry is aware, the Commission raised the bar in terms of governance standards. Namely around “requiring” that financial institutions: financial services:

  1. Ensure that they do not take advantage of vulnerable consumers
  2. Put in place the correct and legal compliance processes to monitor their activities, and
  3. Maintain the appropriate governance, oversight, and systems over those compliance processes.

While it’s true the Commission didn’t result in a Sarbanes-Oxley style outcome with serious and consistent penalties for not abiding by these standards, the years since the reports release has seen a range of ASIC-driven investigations and penalties that have resulted in more than $120 million in civil penalties and range of financial institutions in the spotlight.

How Next-gen human assessment technology cracks the governance risk code.

Even a cursory review of the kind of actions launched by ASIC show that human lapses are usually the cause behind enforcement actions –and these lapses, while not exactly predictable, do have underlying human features that are potentially discoverable.

Our AbilityMap team gets a thrill out of seeing what our human assessment technology can do, what problems it can solve, and ultimately applying these insights to use cases that are critical for a range of businesses and industries.

Since one of our particular focuses has long been financial institutions, specifically determining models of high performance in hiring and internal promotion, it made sense to widen the scope to integrate the governance and ethical parameters that the Royal Commission had set out.

The core of Next-gen human assessment technology is the interaction between the analysis and the action. No technology is any good if it doesn’t lead to effective execution. Human assessment technology builds on these three pillars:

  1. Define
  2. Compare
  3. Act

In the context of a role or a particular profile (e.g., “high performer in sales”), the technology defines the key characteristics and then compares them to the psychometric assessment of the candidate. If there’s no correlation, then don’t hire.

This is an oversimplification since other factors might intervene to make you apply the insights from the data differently (e.g., hire with coaching, etc.) or, even, create a new role for the candidate. But hopefully the point is clear: once you define and compare, the action is pretty clear cut (hire/no hire; promotion/no promotion; role change/no role change).

Next-gen human assessment technology in action.

When it comes to financial institutions and the particular emphasis put on ethical behaviour and governance, Next-gen human assessment technology has a special role to play because it can map psychometric characteristics against critical ethical and governance capabilities at scale –something that previously was nearly impossible to do cost-effectively.

Here are two examples of how it does this:
If you want to find the best match for compliance with the Royal Commission culture guidance, you can readily map individual candidates, both internal and external, against a range of criteria. An assessment would rapidly surface how strong candidates were in critical capabilities such as “evaluating and managing risk” or “accepting responsibility” that strongly track with the culture guidance.

Similarly, you can map for an APRA/BEAR accountable person, surfacing critical capabilities like “displaying consistency” and “coping with pressure.” Low scores in these areas are red flags that would likely lead to an action not to hire, promote or re-assign. Additionally, the mapping of critical capabilities can be complemented by adding desirable capabilities (e.g., “adapting to change”) that can help fill out the picture and provide even more certainty that you are placing the right person in the right role.

And this just scratches the surface of what’s now possible. Risk and uncertainty will always be a feature of financial institutions, but flying blind when it comes to the capabilities of the humans who constitute the greatest part of financial institution risk doesn’t have to be anymore.

See AbilityMap in Action

Request a demo to learn how we can redefine the future of work together.​