Navigating Digital Examinations | ABA Banking Journal

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By Michael Althouse, CRCM, and Mandi Lermond

One of an important expertise essential to navigate audits and regulatory exams has all the time been communication. However what occurs while you expertise a worldwide pandemic (or different occasion) that forces each facet of the audit or examination course of to be utterly digital? Not surprisingly, communication expertise each internally—and along with your examiners—develop into much more vital.

Within the pre-pandemic world, you would break the examination course of into three primary elements—pre-exam preparation, day-to-day administration, and post-exam wrap-up. These levels don’t actually change in a digital surroundings, however among the important instruments and behaviors wanted throughout them completely do.

We discovered that the working theme all through our current all-virtual examination expertise stored returning to 1 easy query—howgozit?

This text initially appeared as the quilt story within the March/April 2021 concern of ABA Financial institution Compliance journal.

Howgozit?

In case you’re unfamiliar with flying an plane, “howgozit?” is mainly a graph that exhibits distance lined, gasoline consumed, and time elapsed, so the pilot is aware of how a flight is continuing alongside its route. It was fairly vital to seek the advice of the “howgozit?” graph when conducting trans-oceanic flights, since gasoline consumption and the purpose of no return can decide whether or not it’s best to proceed to your vacation spot. Nonetheless, it’s additionally an excellent phrase to bear in mind when navigating this “new regular” of digital audits and exams. It’s the one query it’s best to ask again and again, each with inside stakeholders and your colleagues on the audit or examination groups. Given the lack to fulfill in individual, it’s actually a query it’s best to over-ask as a way to keep away from small points blowing up in a single day.

Pre-exam preparation

The pre-exam preparation section turns into much more vital throughout a digital examination, as your stage of preparedness will dictate how easily the precise evaluation will go, and the way lengthy it’d take. In the course of the prep stage, it’s best to determine the important thing subject material specialists that have to be out there to fulfill with the examiners to clarify their processes and controls. Contemplating the examination might be digital—chances are you’ll want to incorporate key IT employees to debate the implications of delivering all examination supplies electronically.

It’s through the prep section that you just must also construct a library of supplies about your financial institution—course of workflows, new merchandise, key adjustments since your final examination, and so forth. Remember to embody data on how your key threat administration features have been tailored to make sure business-as-usual performance through the pandemic. Whereas these supplies could be jokingly known as “advertising and marketing,” you actually ought to spotlight the nice issues your financial institution has carried out within the spirit of threat administration. We discovered one presentation that labored fairly nicely was an outline of the financial institution and its traces of enterprise for Day 1—basically a “Your Financial institution 101” course. In case your employees asks if they need to present the examiners background details about how they developed X, Y or Z, the reply ought to all the time be “sure.” As a basic rule, it’s best to have extra supplies out there to clarify your companies and the way you developed your threat administration controls, than you assume are needed. The extra context, the higher. As a result of for those who don’t have it, the examiners will probably ask for it anyway and also you’ll instantly end up in a reactive mode. It is a tip that’s significantly helpful in a post-pandemic surroundings as nicely, because it simply makes the examination run extra effectively.

You must also arrange a daily cadence of conferences along with your staff of inside stakeholders. Throughout these conferences, “howgozit?” applies to their deliverables. Are they prepared? If not, when will they be prepared? Are the stakeholders ready to fulfill with auditors or examiners? What do they should get there? Do we now have the best individuals slated to be within the (digital) room?

You additionally want to debate logistics along with your audit or examination staff. Is expertise suitable between the 2 entities? Which video conferencing platform might be used? How will paperwork be shared with examiners? The pandemic has made it almost not possible to share arduous copies of paperwork so how will these be reviewed? Do they have to be scanned? These questions and extra have to be addressed earlier than the examination begins to keep away from any roadblocks or delays.

On the finish of the pre-exam preparation, you must also have a lot of the anticipated Day 1 request listing on the prepared, together with who will communicate to those gadgets if needed.

Day-to-day examination administration

Day-to-Day examination administration is clearly essentially the most important section and would be the litmus take a look at of your communication expertise. In a pre-pandemic world, it was pretty straightforward to speak with regulators. Most banks put their examiners in a convention room or space of the ground the place they might be simply contained, proper? Then a compliance officer might simply “drop by” and see if that they had questions or get a standing replace, or ask the actually vital query—“When did you say you’d be completed once more?”

So, what do you do when you possibly can’t put a bunch of individuals right into a room safely? You create one—a digital one.

We discovered that when we arrange common conferences to debate rising questions, we finally noticed fewer request lists, which resulted in much less inside work chasing down deliverables with our enterprise companions. However it wasn’t nearly getting individuals on the telephone; video conferencing was a should.

Throughout an examination—particularly throughout a pandemic—it’s so vital to have the ability to put faces to names but in addition to learn physique language. It has been reported that upwards of 70 to 80 p.c of communication is non-verbal. On video, you possibly can inform in case your message is being acquired or not. You possibly can inform if what you thought was a cogent clarification actually did make sense. And, actually, you possibly can humanize the entire course of. The examiners have a job to do similar to the financial institution does, and it may be straightforward to neglect that if all of your interactions are audio-only.

Organising video communication could be an surprising problem, although. You will need to perceive what potential expertise restrictions your examiners could have. For instance, our regulators use a videoconferencing instrument that our financial institution’s IT division blocks. Our examination staff additionally acquired steering that they weren’t allowed to make use of different video conferencing instruments, which created a little bit of an deadlock. Communication, although, helped remedy the issue. All sides laid out their info, and we had been capable of decide that so long as our examiners didn’t current their data onscreen, our video conferencing system might be used. We needed to ask the query although, and have it answered to uncover that data.

This anecdote brings up one other suggestion for the day-to-day section—you should ask your auditors and examiners extra questions than you’ll most likely really feel snug asking, akin to:

  • Does this course of make sense?
  • What else do you want on this matter?
  • Would one other assembly assist?
  • What considerations do you will have that we now have not addressed?
  • About which facets are you continue to unclear?

You’ll want to flip the script and ask them questions, and chances are you’ll have to ask questions past the purpose the place it feels uncomfortable to be doing so. The identical objective of having the ability to ask your examiners “howgozit?” applies within the digital world because it did when all the things was in individual. However when participating nearly, be ready to probe a bit extra forcefully than it felt such as you did in your earlier in-person examination. It’s vital to proactively verify that every one lingering points or rising considerations raised by the examination staff are recognized as early as doable.

There may be additionally an inside day-to-day examination administration facet that’s made tougher by doing all the things nearly. Not are you able to simply go stand by a co-worker’s desk, faucet your foot, and ask how their deliverable is coming. You’ll want to arrange common inside video conferences with inside stakeholders, similar to you probably did along with your audit or examination groups to seek out out “howgozit?” with these request responses. You must also count on longer lead instances for these gadgets, particularly when you have groups in a number of time zones.

Put up-exam

The take a look at of your communication expertise doesn’t finish with the fieldwork. We advocate holding no less than a weekly assembly along with your examination staff to ask, “howgozit?” How is the report coming? Did any new questions come to thoughts as you had been writing your observations? Do you will have any rising considerations we will handle or are there one-off conferences we have to set as much as evaluation a course of once more? You’ll want to ask extra questions of your audit or examination staff than you reply as a way to be certain there aren’t any surprises when the report is lastly issued. Communication should additionally happen with and at completely different ranges of administration. Senior leaders from the financial institution’s administration staff ought to meet and talk frequently with corresponding senior leaders in your audit or regulatory groups. You possibly can’t depend on upward communication touring to the highest, so pressure it to occur.

One other good follow is to conduct an inside “classes discovered” session so you possibly can refine your examination or audit administration plan. What labored nicely? What didn’t go as deliberate? What obstacles might have been averted? These classes must be documented and shared inside your inside examination administration staff and must be reviewed within the subsequent pre-exam preparation course of. As they are saying, those that can not study from historical past are condemned to repeat it, and nobody likes to see the phrase “repeat” in an examination or audit context!

These strategies ought to enable you handle your subsequent examination or audit, which is able to probably have a heavy digital element. Whereas each examination or audit could be the final word take a look at of a compliance officer’s communication expertise, these traits might be put to a good stricter take a look at in a totally digital examination. To be able to be as profitable as you possibly can, it’s best to attempt to replicate the in-person surroundings as a lot as doable. Video conferencing and uncomfortably frequent check-ins may also help you retain monitor of examination progress and potential rising considerations. When doubtful, ask the query. Even for those who assume the reply, ask the query anyway. And all the time, all the time keep in mind to test “howgozit?”

Michael Althouse, CRCM, is chief compliance officer on the Bancorp Financial institution, the highest U.S. pay as you go card issuer in the USA, and a former U.S. Navy pilot. Mandi Lermond, is chief of employees for the COO on the Bancorp Financial institution, main regulatory remediation initiatives primarily associated to BSA/AML and main the Bancorp’s examination administration course of.

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