Lawyer Monthly - January 2022 Edition

22 WWW.LAWYER-MONTHLY.COM | JAN 2022 HOW CAN DIGITAL STRATEGY HELP COMPANIES BE COMPLIANT? country X will not accept her precisely because she has a role in country Y? The traditional, static, two-dimensional picture of entity compliance information is of limited use here because the risks hide inside the dynamic relationships. By bringing data together from a variety of sources (the entities themselves, KYC information, due diligence information, regulatory and legal updates) and using AI to perform complex analyses across jurisdictions, persons and roles, it is possible to pinpoint long-buried risk factors. Bigging up data In 2018, Gartner grabbed the headlines by saying that 85% of AI projects don not deliver because a poor understanding of AI led to it being fed poor quality or insufficient data. Today, data is nothing like the obstacle to digitalisation it once was. Better tools enable us to find meaning in data that is messy and imperfect. Data privacy is now a process we know how to manage. Data sovereignty is a growing concern, especially if you are trying to do your global administration on a single consistent platform. Governments like Russa, China, Singapore and Switzerland are stopping certain data from leaving their jurisdictions. But will other governments follow suit? And what will that mean for digitalisation? Time will tell. Blockchain unblocked In confidential matters of trust, the chain of security and confidence has only ever been as good as the weakest, and leakiest, human link. All that is changing. Distributed ledger technology is the foundational technology of blockchain. It is best known for its cryptocurrency applications, but it will soon usher in a fundamentally different approach to many aspects of transparency and trust in transactions. The consequences for compliance and legal professionals will be profound. Blockchain manages the complexity of trust, transparency and certainty by granting all parties on the network simultaneous and secure access to precisely the same data. This removes the need for trusted intermediaries to facilitate interchange and exchange. Time currently spent making and remaking complicated documents, and establishing the evidence of their authenticity, will be replaced by a one- off need to codify the information and knowledge into the blockchain technology landscape. ‘Smart contracts’ will be able to automate agreement outcomes between two parties and grant auditors, advisors and even the authorities the ability to see all that they need to see about a transaction, with certainty and in real time. The ability to prove that someone is who they say they are, and that their source of wealth is legitimate, is compelling. Regulators and governments will start to apply blockchain capabilities (which includes the ability to combine multiple blockchains) to tackle money laundering and financial crime. In taxation, blockchain will form the basis of future record-keeping, leading to fundamental changes in how we collate data and make submissions. Taking the helm or missing the boat These are exciting times. We have already come such a long way and continued digitalisation is inevitable and accelerating. We all need to be thinking about how we can make this new world work for us. Today, success in digital transformation initiatives, like any business change, often boils down to whether we can make change ‘stick’. It is never easy, but it is less hard with some guiding lights. Here are mine: • Always start with the business problem you want to solve, not the technology. • Change and transformation is not a destination. It is a journey with no end. Not only is the technology in constant flux, but so too is the business landscape we are applying it to. • Keep sustainability front-of-mind. Think in terms of end-to-end processes. And do not expect to implement and walk away – plan to stay close and connected to the project because you will always be learning. • Start small. A pilot or proof-of-concept model first, then proceed incrementally (country-by-country or function-by function). Large scale and top-down? It hardly ever works these days. Finally, sometimes you must accept that the change we seek just will stick, even though we have done everything right and worked with colleagues in the business who are enthusiastic and fully engaged. Do not worry. Another one will be along in a minute. Good luck on your adventures.