In this two-part discussion, Josh Hogue, Andreas Pyrcek, and Dr. Annie Green provide insights into the future of compliance and legal with a digital lens. Topics discussed include, among other things:
- The business case for incorporation of more digital technology (episode 6)
- Challenges posed by digitizing or further digitizing (episode 6)
- The impact of digital technology on employment and labor needs (episode 6)
- Customer data platforms (episode 7)
- Chatbots (episode 7)
- Blockchain (episode 7)
- Document automation and management (episode 7)
- Cloud technology (episode 7)
Flyers and Resources
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Why I’m Excited About This Episode
“First, as with episode 2 on privacy, and episode 3 on cyber breach response, the COVID-19 pandemic and presumptive shift to more remote work has increased the importance of this topic. Second, in episode 4, we discussed artificial intelligence and bias, and I’ll be interested to hear more about the reliability of digitized legal and compliance services. Finally, increased reliance on technology may have broad implications for the employment and labor needs in organizations’ compliance and legal departments, and I would like to hear our guests’ thoughts in that regard.”
Meet Our Guest Speakers
I asked our guests to “tell us a little bit about themselves, what they do and how they got there.”
“I’m partner of EY based in Düsseldorf, Germany. With the firm around about 16 years and my journey started actually in audit, and around about 2007 we had major compliance issues in the German market and European market, and this was also the big time and big rise of compliance programs within Europe.
So this was the time in 2007 when I started working in the compliance environment, helping organizations setting up compliance programs and advising on certain components of compliance programs. But while compliance was maturing, I also moved along and from 2012 to 2015, I was based in New York also working for EY forensics and integrity group global, working on the compliance integrity agenda of the firm, and based as of 2015, back in Germany, and having two major global roles which are relevant for today’s webcast. On one hand, I’m the Global service leader for integrity, compliance and ethics, but my main day to day challenge is to advise clients in finding the right strategies when it comes to compliance and ethics to certain components and how to run compliance programs. And secondly, I’m the Global forensic sector leader for telecommunications, media, and technology. So I see a lot of transformations happening, especially in technology firms, how they leverage technology, but also the new emerging incoming risks based on technology solutions, or digital solutions, which are actually on the agenda of the compliance office today.”
Dr. Annie Green
“I have been on a digital path for quite some time. I work in the field of digital transformation and looking at how we can actually make our organizations more of a thinking and cognitive type of entity. I started out in systems engineering, not necessarily network engineering, but systems engineering, where we did process engineering and data engineering, and we put together systems. From there I traveled and I actually started working in artificial intelligence, with my master’s in information systems in AI, but then I’ve ventured into knowledge management, because that seems to be a part of what we’re doing in this intelligence age. And as we kind of drifted over into the fourth industrial revolution, I actually took a path down toward digital transformation, which actually encompasses all that I’ve worked on. I currently have worked in consulting as well as private industry. And I work in academe and have been an adjunct professor to several universities. I currently work with digital transformation and helping George Mason University establish their data foundation so that we can increase the integrity of the data within their system, so it can be used within intelligence and knowledge.”
“I’m a partner with Ernst & Young, specifically within our EY law practice. I’ve been with the firm for about six years, but I’ve been in what we call the alternative legal services industry for about 20 years, primarily focus on regulatory risk, legal operation, really the business of law as it relates to our clients. And specifically for me, focus on our financial clients, everything from banking, capital markets to insurance, and wealth and asset management. I got in this industry, really, in a startup context, very many years ago was more in investigations and forensic discovery type work. Was part of the startup until that and then moved into more consulting years down the road.”
I asked our guests “what is legal operations, and what do we mean by the future of compliance and legal with a digital lens?”
“I think legal operations really, and I’ll look at it too, from outside, and then also, internally here at EY. We have what we call EY Law, which is a traditional law firm, where we’re actually practicing law outside the U.S., but internally, in the United States, because attorneys, and non-attorneys can’t split fees, we’re not a traditional law firm.
So really, what we focus on within the U.S. is primarily around, basically, the business of law, that’s really what legal operations has become. Especially in the past, I’d say, six to seven years, it’s really taken off where most law departments, they’re actually identifying folks to have a director of legal operations. So if you think about everything from Contract Lifecycle Management to matter management, it’s a number of things from operating model process technology, but it’s really about how can you help the attorneys within law departments work smarter, be optimized, and help them actually be able to be more efficient. And if there’s certain tasks, or things that they do on a regular basis that can maybe either be outsourced or pushed down to other types of resources, that’s really what a lot of the things that we focus on from an operational standpoint. So, I think overall, it’s really kind of focusing and putting a business lens over what we would typically think of as the traditional practice of law.”
Dr. Annie Green
“I’m going to kind of jump in here and talk about the digital lens for a second. Like with any application, and even in legal, like they said, the legal operations, what we’re doing is you’re actually recreating your reality within a computer. So therefore, when you’re looking at it through a digital lens, you have two perspectives of it. The first is digitization, which is where you create the entities or the components that actually drive your operations within a digital format and store it within a computer. The second is, you have digitalization. They sound very similar, but the second is where you transform your organization such that it is using that particular data and those technologies that help them to perform their tasks. And in most cases, when you’re looking at a digital lens, you need to be cognizant that this is your reality. So for example, when a typewriter was developed into a word processor, they looked at each component and they recreated it, and then it was introduced into the business environment, such that we could use it. Once it was actually copied over, we began to improve it, so people could work with it better. That’s the same sort of process that we’re doing now. So to look at legal through a digital lens, you have to be very cognizant and aware that it is your reality, and there are things that you cannot forget when you move it into a digital realm.”
Blockchain and the Future of Legal and Compliance
I asked our guests how, “if at all, does blockchain play into the future of legal and compliance?”
“I haven’t seen this very often where compliance and legal professionals really considering blockchain as one of a strategic solution in an organization. It would definitely add more security into business procedures, especially in payments, but I think the market is not there yet. So there is not really, at the moment, I wouldn’t say not the interest, but at the moment, it’s not really tangible how legal and compliance practitioners should make use of the blockchain, etc., in their effective risk management.”
“I think it’s very early days for blockchain, at least for legal and compliance. The one area I’ve seen it start to come up a little bit is when you think about smart contracts or contracts that would be tied to blockchain, just to let you know exactly what version, from a version control standpoint. I think that’s one area down the road. But I would say, I’ve seen very, very little movement or tangible, meaningful, material interest around blockchain right now with some of our legal and compliance clients.”
Chatbots and Legal and Compliance Function
I asked our guests “what chatbots are, and a little bit more about how they play into the legal and compliance functions”.
Dr. Annie Green
“Well, chatbots are what you would call conversational AI. They are electronic figures that talk back and forth to humans. You can also augment it with humans in any place where you may make a phone call, and they answer the phone. They’re very realistic. They can learn from the advice they’re getting, and they can actually answer some of your questions.
I think the biggest problem with chatbots early on was that you got into a continuous loop, they wouldn’t let you go to a human. And I think now that they have hybrid, and actually, I think a lot of chatbots now can actually recognize when they can’t answer a question. And they actually then tell you, let me transfer you over to a human. So I think in the compliance area, because it is, like I said, heuristic based, kind of if-then and questions, I think that it would actually be a positive to be used within the legal field, where you can have intelligent conversations using electronic technology.”
“I think if anything, it’s going to help in-house counsel, especially, with a lot of administrative things that they get burdened with, with a lot of their internal stakeholders.” He also suggested that this was an area that would, very quickly, he thought, help in-house counsel “optimize” and make “best use of their time during the day.”
“I think chatbots are really beneficial for legal and compliance practitioners, especially in the distribution to the first line, because most of the day to day work in legal compliance is consulting. So people have questions reaching out to the compliance and ethics professionals and try to find a solution. And the chatbot, as Dr. Green was saying, can go in two directions. Firstly, the chatbot is having with you a conversation, trying to find a proper answer, even to the point where the chatbot is saying, I don’t find the proper answer for you, let me forward you to the respective person who can help you. Secondly, the chatbot can work like workflow management and gather the proper information in a consistent way and also storing the information already that the individual who’s then reading finally through the questions and documents can make a decision. So there are two definitely options you can use while you’re implementing chatbots. I’ve seen very good solutions, especially in regards to legal and compliance consulting, where questions which are coming up from the first line from sales, from procurement, etc., can be actually navigated through the chatbot. And where the chatbot is also providing a response or guidance. I’ve seen also very good solution when it comes to policy digitalization where policies are completely in the system of the chatbot, and the AI behind that. And once the question is being posed, like, I’m going to do a soccer game with the governor, the AI will identify the Governor as a public official and the soccer game as an entertainment event, and then refer to the right clause of the policy where it can pose whether it’s allowed or not, or where the certain professional can read, more in detail, what are the compliance and legal requirements inviting a public official to an event. So the technology for chatbots is significant material, and I think it’s a great added value also for the compliance department.”
I asked our guests for one “actionable, monetizable takeaway” for our listeners.
“Transformation, digital technology, really don’t try to get overwhelmed with trying to do something or transform everything overnight, right, make baby steps. Find areas that you can start to do it and kind of build a consensus. But I think, going back to me, there’s a lot of culture element that goes around this.
And I think that’s the one thing I would just say, if you take anything away, it’s not just the technology, but it’s everything else that goes with it. It’s the people and it’s the process that are taught to it. And anytime you’re going to roll something out or adopt something, you’ve got to make sure you’ve got those other two components baked in.”
Dr. Annie Green
“What I would say is the two things that will increase performance are your data and your people. Those are critical.”
“Pretty straightforward. Don’t be afraid of technology. Technology will help you, and it’s not a bad thing.”
Advice for Starting Out
I asked our guests if “a student or someone more junior would like to do what you do or get into your area, what advice would you give them?”
“What I would recommend, typically when we when we consider the career path of a student, focusing, for example, on the legal profession or business economics, etc., even though you’re focused on a certain track, be open minded. Take a look at what’s happening left and right. Understand what are the trends and try to gather those kinds of information in the things you really like.
When I take a look back on my career, I was always focusing on core compliance and with digital transformation, I was very open minded to see what kind of opportunities are opening up there. Also as a legal compliance practitioner, you have to take a look at how does education work in your company? How can you convince people to do the right thing and not be on the dark side of compliance. Be very open minded and expand the knowledge also in areas where you haven’t studied, and then you will be more successful.”
Dr. Annie Green
“Along my path, I’ve taken a journey to here. In STEM, we have people running from STEM right now, which I don’t understand, because I think it’s a great field. But the one thing that I would tell them is, go in with an open mind and be prepared to utilize your thoughts, because thinking is like life’s lightbulb. You will get so much reward from this field. Start in understanding all of the components, and then pick where you want to go, and you can create your own position now.”
“Looking back when I went through law school, I didn’t really ever think I would end up in this career or this industry. I’m one that that likes new, innovative, to kind of focus in areas that are maybe on the edge, and years ago it was. Things have changed today. But, I think, looking at other disciplines, if you’re especially a law student right now, understanding business. I think that’s one thing that I’ve picked up and learned is having a good business mind because a lot of what we do is really around, is business principles, but it’s in the realm of legal and compliance. And, in technology, not to be afraid of technology, back to what we talked about earlier. Any opportunity to understand kind of the state of the union and where things are, from a technology perspective, as you’re going through what you might think of as a traditional legal path or legal career. It’s being open minded to learn those other disciplines because that’ll drive you into this area.”
I asked our guests to “recommend an article, book, blog, website, talk, or other resource” for our listeners.
Dr. Annie Green
“Well, one that I would recommend is Weapons of Math Destruction by Cathy O’Neil. I think it’s a really good read, and it just gives you a keen insight into what you should be aware of. And I have a couple of articles out on the Georgetown site that kind of talk to this and the business. It is not necessarily with legal, but it talks about different compliance issues within other organizations, as well as on my LinkedIn site.”
So I think it’s an interesting resource to give you perspective on where the hotspots are around the world. Certainly, if you’re a company looking to make acquisitions or looking into expanding into other markets, it’s sort of a good first port of call. The World Bank does a wonderful Doing Business In series that will detail some of the issues and challenges of operating across the geographies, how long it takes to get a specific type of license, all the really interesting things that are a bit mundane, but as you think about how to operate in geographies, and the complexity of operating in some of those geographies, it can be quite useful. And it’s, as Jon said, EY has plenty of resources, country by country around corruption issues, and then how to address them and address specific compliance requirements in various markets.”
“I think one area that I would always push, both clients and colleagues, if you’ve heard about CLOC? CLOC stands for corporate legal operations consortium. It’s fairly new, I would say in the past, probably seven to eight years. But that’s a great website. Has a lot of really helpful material around just legal operations, kind of the future of law department ops. And then the other one I would recommend is legal. It’s called legal evolution, legalevolution.org. It’s another pretty good site that you can look at, that provides really good quality public education on the changing nature of legal services. And then, self-promoting a little bit to Andreas’s point, we have a on the EY Law website on ey.com, a website lead, that basically, we’ve done some surveys of late that we went out and we surveyed a number of like 2000 General Counsel and other leaders just around kind of legal operations. And technology is a big part of that. So that’s another area that you can pick up and see some really good survey data that kind of speaks to where the industry has gone.”
“I would recommend two areas where the listeners should take a look. Firstly, definitely something which is coming more from the EY side, our upcoming Global Integrity report, which is dealing with cultures and organization, also touching the technology side, how technology will have an impact on the integrity and the compliance of organizations. So this is coming up very soon, so I recommend taking a look at that very interesting study and very interesting survey. But secondly, and I think this is even more important for practitioners of legal and compliance, which have to deal with those kinds of new and emerging risks, is everything which is communicated about the new AI ethics regulation of the European Union. It’s very, very interesting to read what’s the emerging risk out of that, also what kind of technology is being used in an AI in respect of the legal and compliance solutions. There are tons of articles around that, whether it’s from the U.S. or in Europe, because it’s the European Union Act. Very, very interesting to follow this discussion at the moment.”