As we near year-end, Artificial Intelligence is ranked as one of the top business trends for 2018. Leading organizations are investing in AI to enable more automation of tasks and decision making. As organizations integrate machine learning into various aspects of their complex business processes, it will be interesting to explore whether AI can also predict patterns of risky behavior.
In December 2009, TIME Magazine published a memorable cover entitled “The Decade from Hell” stating “bookended by 9/11 and a financial wipeout, the first 10 years of the century will likely go down as the most dispiriting decade Americans have lived through since World War II.” Spiraling levels of trust in business and decision making were at an all-time low. Financial markets underwent a significant shift as the multi-billion dollar accounting scandals of Enron and WorldCom unfolded. Leadership accountability began to thrust into the spotlight, questions arose around who knew what, when? Analysts wondered how such epic failures of corporate malfeasance could fester for so long.
The first response to crises, is typically to legislate. The conventional wisdom is that rules drive behavior. Therefore, the Sarbanes Oxley Act was passed by Congress in 2002, implementing strict reforms with the objective to improve financial disclosures from corporations and prevent accounting fraud. The intent was to protect investors from the possibility of fraudulent accounting activities by corporations. Further legislation emerged such as the Dodd-Frank Consumer Protection Act in 2010 which was implemented as result of the 2008 financial crisis. A few rounds of revisions to the US Federal Sentencing Guidelines for Organizations followed. There continues to be a more deliberate focus on corporations taking responsibility for ethical cultures as an outcome of an effective compliance and ethics program.
Guidelines and rules matter, but they represent the floor, the common framework that keeps our business practices within the guardrails. At the core of patterns of misconduct is a decision-making engine. Evaluating complex situations and taking action is where the decision lies. What we can observe from the headlines is that in some instances, there is no evaluation performed, or the action is more impulsive and isolated. Unfortunately in many cases we are seeing that patterns of decision making are so broken and tolerated that some businesses have not questioned the actions, merely citing complicit cultural norms. Company representatives will indicate, “this is how we’ve always done things.” As long as the action does not impact profits, then the misconduct does not rise to a level that takes priority to investigate, eradicate, or change.
What has changed? Social media and full transparency into behavior has emerged as the equalizer. Now that actions are taking place in full public display, consumer perception is directly impacting profits and corporations are facing an abrupt awakening. Today’s headlines point to patterns of misconduct in organizations that were repeated, often for years if not decades. Fascinatingly, most of these organization have rules, policies and standards of business conduct. These companies often have training, onboarding processes and leaders in positions to review, assess and enforce.
As 2017 comes to a close, we are entering one of the most uncomfortable public conversations as a country, and society as a whole, centered around sexual harassment. Unfortunately, this very public discussion places a spotlight again on the risky businesses practices and patterns of toxic corporate culture. Over the last few decades, many organizations have attempted to legislate patterns of workplace behavior by establishing standards and policies, it is very clear that rules alone, have not been enough to eradicate toxic and illegal behavior. The cultural reckoning we are seeing in the headlines and active voices raised in the #metoo movement are driving a much needed conversation around abuse of power, workplace accountability and responsibility.
The Equal Employment Opportunity Commission’s 2016 report on sexual harassment cites the need for a sea change in the corporate attitudes and responsibility around sexual harassment. The commission reported that “much of the training done over the last 30 years has not worked as a prevention tool — it’s been too focused on simply avoiding legal liability.” In a flashing headline a few weeks ago, I found it remarkable that even at our highest levels of government, The House of Representatives was still evaluating a vote on a resolution to mandate sexual harassment training. Establishing policy does not have impact without accountability and enforcement. Shockingly only a handful of states in the US require any mandatory sexual harassment awareness training for leaders in supervisory positions. Although we may expect an uptick in statewide regulations on this issue, the guidelines will have little impact without organizations being prepared to observe, measure and enforce thorough accountability. Holding up responsibility at the highest levels of organization matters. Policy, without enforcement, will continue to permit abuse of power and toxic corporate cultures.
Gaining insights into patterns of risky behavior and risky decision making by business, function, and individual can bear the visibility companies need to run equitable and informed business cultures. Progressive organizations are the ones investing in AI to help with predictive reasoning based on consumer buying patterns, sentiment-analysis, brand loyalty, location preferences, and employee behavior. At an organizational level, I expect machine learning to emerge as an integral component of delivering insights into shaping equitable corporate cultures and more broadly, possibly driving well-informed regulatory decisions nationwide.
Dr. Marsha Ershaghi Hames joined the Compliance.ai Advisors Team in October 2017. Dr. Hames has over 20 years of experience developing transformational strategies in approaching ethics, compliance, and organizational culture. She is currently the Managing Director of Strategy and Development for LRN, a global leader in advising and education organizations about ethics and regulatory compliance.
Check out the full list of our Advisors here.