Lean compliance teams leverage technology

Lean compliance teams are forcing chief compliance officers to find technological solutions for everyday tasks, panelists at PEI’s Private Funds Compliance Forum said on Tuesday.

In the absence of a chief technology officer, the CCO often has to evaluate which tasks can be better done by technology, then determine which of those solutions best meets the firm’s needs.

One GC/CCO at the event said her firm does not have one person dedicated solely to the compliance role, so she looks to keep her firm’s operations, including employee performance, marketing, finance and documentation, as centralized and organized as possible.

“I like to keep everything in one spot and have it all organized and automated,” she explained. “We’re a lean team so we can’t always do things manually, so it’s really helpful to have a platform to keep everything organized.”

The CCO of a mid-market PE firm said the first step for any firm looking to leverage a technology solution is to identify any functions at the firm that could be more efficiently automated.

“I think it’s really a question of leverage, both in terms of people and technology. You need to identify new opportunities that are better done by technology. You need to think about which tasks could be outsourced versus being done manually in-house,” she advised.

One legal counsel and CCO agreed that there are certain processes that are easier to automate. To evaluate the efficiency of doing so, he does trial runs of tech solutions before fully implementing them, so he can better understand how the programs work and how user-friendly they are.

“Any mistake can be very costly, so you really need to evaluate a program before fully implementing it,” he warned.

Processes such as expert network documentation, client communications, ESG monitoring and record-keeping tend to be automated most often. However, as new issues and industry practices arise, new technology solutions need to be considered.

Among the biggest compliance challenges now is capturing communications via text and ephemeral messaging apps, such as WhatsApp, to comply with recordkeeping rules. SEC staff have been asking firms how they handle electronic communications in recent examinations.

The legal counsel and CCO said he is looking for an archiving software that accurately captures the necessary conversations, but is also user-friendly.

“Right now, we are just asking people not to conduct business communications that are not from approved email or messaging systems. But people are still using these texting apps, so we are looking at ways of archiving texts. But right now, there’s really no way to completely solve the problem,” he said.