Behavioural science can improve decision-making and encourage ethical behaviour, regulators say
Regulators increasingly touting behavioural science as a way for businesses to improve corporate culture
Ropes & Gray is launching an analytics and behavioural science consulting practice amid a growing recognition among US and UK regulators that data-driven insights can help improve compliance and corporate culture.
R&G Insights Lab is a cross-industry consultancy service that will provide advice on multiple areas, from corporate and investment strategy and decision-making, to compliance, ethics, and risk management. The project is being co-led by partners Amanda Raad and Will Rosen, and new recruit Zach Coseglia, who joins from Pfizer as head of innovation and the Lab’s managing principal.
Raad, who also co-leads the firm’s anti-corruption and international risk practice, said: “R&G Insights Lab is a complementary offering that will position us to more holistically fulfil our advisory role to clients across industries and sectors. The focus on analytics and behavioural science, in particular, is intended to help our clients make more effective, efficient and data-driven decisions to fulfil the desired outcomes.”
The firm said the creation of the Lab follows feedback from companies and investors around the world that there is a lack of integration when it comes to legal, compliance, and behavioural and data science.
One compliance officer at a global life sciences company said successfully combining data analytics and behavioural science theories and applying them to operational issues would allow businesses to solve problems instead of being “in a reactive mode and putting on band aids.”
Last September, the US Department of Justice said that federal prosecutors will assess whether compliance officers make ‘adequate’ use of data analytics when reviewing companies that are under investigation.
That underscored a growing emphasis in the US and the UK on the potential for data analytics and behavioural science to improve regulation and enforcement, and encourage cultural change across organisations.
The Financial Conduct Authority, for instance, believes poor corporate culture is often the root cause of conduct failures, suggesting that behavioural science could be used as a way to measure and drive ethical behaviour.
Ropes & Gray says behavioural science can help companies understand the factors underlying compliance risk, such as why employees might commit fraud or ignore policies and procedures.
Bob Murray and Alice Fortinberry, who co-authored a book on how human sciences can be used to lead, manage and market law firms, say that behavioural science touches all aspects of running a legal business, from making strategic decisions through to the way good or bad news is delivered to employees.
Meanwhile, the increase in regulation that businesses have to comply with, such as GDPR and CCPA, is also encouraging some firms to offer more specialist data regulation-related advice.
US legal services provider Legal 2 Legal, for instance, recently opened two new practice areas focused on compliance and privacy, in part because clients said they were dissatisfied with the quality of compliance services being offered by the big four accountancy firms.
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