Quick Audio Take: KPMG’s Emily Frolick on The Trusted Imperative

Emily Frolick of KPMG on The Trust Imperative: A Dynamic Approach to Risk and Regulation in the Digital Age

Building trust increases the value of the business and secures the trust of stakeholders. It also fosters growth and innovation, improves performance, and helps you manage change. To thrive in today’s complex business environments and keep pace with the rapid transformation in the digital age, you need a dynamic approach to risk and regulation.

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Julie Devoll, HBR

Welcome to the HBR quick plug. I’m Julie Devoll, Special Projects and Webinar Writer at HBR. Today we are joined by Emily Frolick. Emily is KPMG’s U.S. Trusted Imperative Leader, helping clients take a new approach to risk in our digital age. Emily, thank you very much for being with us today.

Emily Frolick, KPMG

Hi Julie, happy to be with you.

Julie Devoll, HBR

Emily, let’s start by telling us what you mean by “the trust imperative” and why is it so important?

Emily Frolick, KPMG

This is so important because we see that trust can be the ultimate catalyst in business. Growth, performance, efficiency and innovation are all fueled by the trust people have in an organization. With the recent changes in market dynamics, now more than ever, companies must focus on building and maintaining their trusted status.

This means taking multiple stakeholders into account when approaching risk management. When we talk about these multiple stakeholders, we mean not only customers, investors and employees, but also suppliers, partners, regulators and even our communities.

When companies inspire confidence in all of their stakeholders, they create a platform for better business performance, including responsible growth, bold innovation, and lasting progress in performance and efficiency. We have found that stakeholder trust is a multiplier of benefits.

For example, automating a customer onboarding process can reduce costs and keep the regulator happy, but it can also transform the customer experience and increase market share. The integrity and ethics of a supply chain and the ability to deliver goods and services on a demand-driven basis can build or destroy a brand’s reputation.

Julie Devoll, HBR

Emily, tell us more about how the Trust Imperative works.

Emily Frolick, KPMG

Our Trust Imperative is designed to reframe the way businesses think about risk management. Rather than focusing narrowly on passive and more responsive compliance, we work with our clients to think about strategic and proactive ways to build trust and drive value across their business ecosystem.

We understand the disruptors that have radically changed – how and where stakeholders place their trust, be it global megatrends, such as the shift to hybrid and remote working, the continuous digitization of business processes and models, alliances and partnerships with third parties, responsible data collection and management, physical and operational disruption, or even changing regulatory and compliance landscapes.

Julie Devoll, HBR

What does the trusted organization look like?

Emily Frolick, KPMG

Research suggests that a trustworthy organization is one that demonstrates three key characteristics: capability, humanity, and integrity. Organizations that demonstrate situational capacity or competence have the collective knowledge, skills, and capabilities to reliably deliver their products and services.

For example, the retailer who has demonstrated mastery of a customer-centric supply chain is highly trusted by customers to deliver orders accurately and on time. Organizations that put humanity first go beyond profit alone to show that they care about stakeholders as well.

And not just the people involved in the transactions, but also the entire community where they do business. It’s no wonder that environmental, social and governance, or ESG, activities are becoming a major concern on boards of directors, as stakeholders want to work with companies that share their values.

For example, many consumers will only buy from companies that are committed to reducing their carbon emissions. And employees are likely to feel loyal to companies that accommodate their desire for flexible working arrangements. Organizations that value integrity are respected when they do the right thing.

For example, if a customer’s expectations are not being met, it is the companies that take responsibility and correct the situation, building on those principles we all know, like honesty, fairness, l ethics, communication and keeping promises.

Integrity also comes into play when organizations have to respond publicly to difficult issues. For example, some airlines have responded to COVID-19 by blocking the middle seats, clearly prioritizing passenger health over corporate profits. It may not be a coincidence that we are now seeing some of these airlines with high rankings in passenger satisfaction surveys.

At the highest level, these are the factors that create trust, and their implementation begins at the top of the house with strategy, culture, leadership and management.

Trusted organizations are those that ask, “Does our organization have a purpose that creates value for society?” Do employees at all levels share our beliefs, values ​​and behaviors that create trust? Do we have the right governance and the right organizational structures to make it happen? “

Julie Devoll, HBR

When I ask about digital transformation in this framework, as we know, there are many companies that are striving to transform to meet the demands of the market. So how do you think digital transformation relates to risk and trust?

Emily Frolick, KPMG

In the rapidly changing market we find ourselves in as a result of a global pandemic, digital transformation is no longer that distant aspiration. This is the new reality.

As businesses face pressures to grow while increasing agility, managing risk, and building resilience to whatever the future throws at them, risk management and regulatory functions are at the heart of this transformation. Whether you are digitizing just one part of the organization, connecting the business to your customers, or reviewing the entire business model, you need these functions to assess what could go wrong and determine how to mitigate it. so you can build stakeholder confidence at every turn.

Unfortunately, too often risk and regulation are afterthought. Compared to areas like front-office digital transformation, they’re sometimes seen as those stilted necessities that slow down business and have a real elusive return on investment.

However, we find that when you approach risk and regulation in a disciplined manner, through the eyes of all stakeholders, it doesn’t hold you back. It gives you the freedom to go fast. So you can confidently explore new markets and create new technologies and customer experiences because you have built confidence in your systems and processes.

And we know people want to work and do business with companies they trust. Sometimes that ROI, like I said, isn’t always that obvious, but it’s there, whether it’s avoiding fines because you’ve complied with a regulatory requirement, keep customers because you’ve protected their data; or attract and retain top talent because you’re a trusted organization.

Julie Devoll, HBR

What actions should leaders consider taking to help them with their own trust imperative?

Emily Frolick, KPMG

They need to think about how to build trust into systems, processes and products or services. Trust is built on acting consistently and predictably at important times, such as protecting data, delivering the right product on time you’ve promised, using ethical business practices, complying with regulations, and partnering with credible third parties.

However, even if you do and say the right things, failure at a critical moment can undermine the reputation of trust that you have worked so hard to earn. This is why it is important to integrate elements such as security, compliance and trust into all systems and transformation activities.

For example, do you analyze interconnected risks to identify potential vulnerabilities? Are you proactively monitoring market signals for your industry, anticipating changes in customer sentiment or regulations? Do you audit the risks related to your culture and the conduct of your employees? Are you automating your fraud and financial crime processes to improve accuracy, speed and trust as well as the customer experience?

Thinking about and planning for risks in these areas can help organizations thrive in uncertainty while being trustworthy and respected for the example they set.

Julie Devoll, HBR

Emily, thank you very much for being with us today. It has been a great discussion.

Emily Frolick, KPMG

It’s a pleasure to be with you, Julie. Thank you for.

If you would like to learn more about how KPMG helps its clients gain stakeholder trust, visit read.kpmg.us/trust.

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