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Where Do Financial Institutions’ Communications Risks Originate?

October 19 — A survey  of compliance professionals in the financial inudstry by Portland, Ore.-based Smarsh, found that organizations may not be keeping pace with their retention and supervision efforts — particularly with a growing, younger workforce that relies on expanding, mobile-friendly channels, such as social media and text messaging. As a result, evolving technologies and shifting demographics within the workforce, and within firms’ customer bases, are forcing organizations to rethink their approach to the adoption and oversight of electronic communications.

While email remains the largest piece of the overall electronic communications landscape, social and mobile platforms are playing an increasingly important role in how firms, and investors, conduct business. Half of all respondents (50 percent) reported concern around non-email communications channels, such as social media, instant message/collaboration platforms, and SMS/text messaging. Likewise, the growing complexity of managing employee use of mobile devices for business communications was a top five concern for 42 percent of those surveyed, matching recent increases in regulatory scrutiny and enforcement.

“This year’s survey reveals that firms are focusing too much energy on older technologies and not enough time on the mobile and social communication channels that are growing in popularity among their customers and their advisors,” said Marianna Shafir, corporate counsel and regulatory advisor at Smarsh. “Many don’t have archiving solutions in place for the retention and oversight of modern communications channels, such as text messages, which causes problems and significant risk when facing a regulatory examination, open records request, an investigation, e-discovery event or litigation.”

Why Are Firms Concerned? 

While nearly all firms recognize the need for comprehensive oversight policies for electronic communications — the content of a message is determinative of its status as a business record, not the platform or device that sent it — many have been slow to address the channels of the modern workplace. According to the Bureau of Labor Statistics, the workforce demographics are rapidly shifting toward millennials. The same report finds that nearly 30 percent of personal finance advisors are millennials, while another 44 percent are members of Gen X. However, despite clear employee desire to have more flexible in the communications channels that they consistently use for business, most firms are slow to formally adopt and support the governance of new channels such as social media and mobile.

Outside of email, SMS/text messaging presented the greatest perceived source of risk by a large margin. Fifty-nine percent of respondents cited SMS/text messaging as the biggest perceived risk, ahead of social media and instant messaging/collaboration platforms. At the same time, respondents identified content from instant messaging/collaboration platforms and SMS/text messaging as the top two channels where they devote too little time to supervision.

Additional Key Findings

  • Mobile and social present pressing challenges for most firms: Mobile device usage will continue to grow in the workplace, which means responsible organizations need to rise to the challenge when it comes to confronting the subsequent retention and oversight challenges. Among respondents that allow SMS/text messaging for business, nearly half (48 percent) lack an archiving/supervision system. While most compliance gaps have decreased from last year, the SMS/text messaging gap is the same as in 2017, and the corporate IM/collaboration platform gap has increased year-to-year from 24 percent to 31 percent.
  • Confidence in prohibition is low: Prohibition of specific communication channels for business use is not a reliable risk management strategy and is temporarily effective at best. Confidence levels surrounding the effectiveness of prohibition policies is telling. Among firms that prohibit the use of SMS/text messaging, only 44 percent are mostly or completely confident they could prove that their prohibition efforts are working. Respondents also surfaced significant confidence gaps for LinkedIn, Twitter and Facebook.

 

Methodology

The survey was conducted between February and March 2018 among 191 individuals in financial services with direct compliance supervision responsibilities. They participated in a 40-question survey designed to identify current trends and to share insight on policies and practices about the usage, retention and supervision of electronic business communications. Respondents were drawn from a wide range of firm sizes and job titles, from C-level management and chief compliance officers to compliance department staff.

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