Compliance Training Failing to Deliver Meaningful Outcomes

Efforts to shape employee behaviour through compliance training have failed to deliver meaningful outcomes, says a new report from Quinlan & Associates.

About USD 1.06 trillion has been wiped out in the banking industry in the last ten years as a result of poor risk culture, according to a new report from strategy consultancy firm Quinlan & Associates.

The report analyses the cost of banking misconduct since the global financial crisis and how efforts to shape employee behaviour through compliance training have failed to deliver meaningful outcomes.

“We estimate that bad behaviour has wiped out USD 1.06 trillion in profits for the top 50 global banks since the GFC in the form of write-downs, trading losses, fines, foregone revenue, and incremental compliance costs,” said Quinlan & Associates CEO and managing partner Benjamin Quinlan.

In response to heightened regulatory scrutiny, most banks have focused on bolstering their risk and compliance frameworks across the ‘three lines of defence’, where much of the effort has focused on the first line – the business units – as firms seek to drive greater individual ownership and accountability, and encourage a movement from rule-based to value-based behaviour.

In particular, the industry has focused on employee education, spending an estimated USD 10 billion a year on compliance training in 2018, three-quarters of which was directed at online delivery.

However, “ongoing scandals provide a clear indication that a decade’s worth of compliance training has failed to shape industry risk culture in a meaningful way,” said Quinlan.

The report finds that employees treat online compliance training as a tedious, box-ticking exercise that detracts from their daily responsibilities, and that it is not taken seriously due to a lack of repercussions for ignoring or failing training modules.

Further, Quinlan says, current online training methods lack employee alignment and support, which results in low information retention.

Financial institutions need to take a more strategic approach across the entire training value chain – including employee identification, material selection, employee incentivisation and performance supervision – to properly augment employee mindsets, he says.

In particular, greater attention should be paid to employee engagement levels through improved monitoring of their online training activities, where these insights should be incorporated into reviews, and compensation and promotion decisions.

“The battle against unethical behaviour should always start with effective training, as an overhaul of employee mindsets is crucial in tackling the root cause of misconduct,” Quinlan says.

“We believe this new breed of ‘CultureTech’ has the potential to save the industry USD 10-15 billion per annum in misconduct-related penalties.”

The full report is available here.


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