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5 More Takeaways From Our Deep-Dive Webinar On Control Room Fundamentals

Why building a control room is like flying an airplane, and other insights from a recent Star webinar with control room veteran, Steve Brown

Last week in this space, we offered you 5 Takeaways From Our Deep Dive Webinar On Control Room Fundamentals. But our subject matter expert, Steve Brown, had so much to say about getting a control room up and running and keeping it up and running, we've returned with five more takeaways from this in-depth discussion .

1. SCOPE AND MANDATE MUST BE REGULARLY REVIEWED
We’ve talked a lot about how to build a control room, the step-by-step process of getting one up and running. But just because you’ve gotten your control room off the ground doesn’t mean you're suddenly done. To employ an aviation metaphor, once an airplane is in the air it still needs attention—constant attention—to get safely to its destination. The weather can change. Fuel must be managed. Air traffic control monitored. In short, information material to the safe completion of the flight is constantly in motion. It’s the same for the control room.

Brown: “Simply put, a control room attempts to control the flow of material nonpublic information within a firm. One of the biggest challenges is figuring out what the control room should cover, i.e., scope and mandate, which needs to be defined right out of the gate. But even when the control room function is mature, it's important to always mentally review who and what you’re covering. What are the types of businesses in motion? What are the types of products in motion? And do we understand it all well enough to properly control the flow of MNPI?"

2. KEEP YOUR FRIENDS CLOSE AND YOUR PEERS CLOSER

Last year in this space, we talked to a Chief Compliance Officer about the necessity of having a network of peers to meet regularly with, to discuss challenging aspects of the job or even just to bounce ideas off of. Best practices. Third-party vendor recommendations. Workflows. Any number of things a friendly and experienced ear can help out with. For this CCO, the network was a lifesaver many times over. Control room officers can benefit equally from their own network of fellow control room officers.

Brown: “Running a control room is challenging. That's why it's so important to have colleagues working in other control rooms you can get on the phone with and ask: ‘So how are you doing this? How are you doing that?’ It can be questions about policies, procedures, controls, just about anything. And aside from the obvious benefit of perhaps helping you through a difficulty, these kinds of chats help keep you in the know. They keep you aware of what’s going on out there in the field. Trends to be aware of. Building out a network of people you can rely on is an important part of building out a control room.”

3. CONSIDER HIRING FROM NON-TRADITIONAL BACKGROUNDS

We touched on this a bit last week, but it’s worth spending a little more time on. Like in so many other professions, people who end up in a control room have often risen through the professional ranks. This makes perfect sense; compliance is no different than any other profession in the sense that general compliance experience can take a person a long way towards control room competence, and as such the compliance department is as fine a place to start as any when the need to fill a control room position arises. But you might be surprised how well an applicant with little—or even zero—compliance experience might do jumping right into a control room position, given the right kind of mind.

Brown: “I think hiring a good control room officer comes down to two things: doing a great deal of interviewing, and trying to find smart, curious, openminded people with a well-rounded background. The first person I hired was someone who had graduated from the Juilliard School of Music. I figured if she had the tenacity and talent to get in, and also had that musician’s brain—the artist’s capacity to synthesize information coming in from competing directions and turn it into harmonious output—that she could probably pick up on control room operations pretty quickly. And she turned out to be a great employee. Of course, it's still not easy to find the right person, and control room managers are probably going to have to go through a number of people to find the right mix of qualities. But I would encourage hiring managers to go outside the lines and keep an open mind.”

4. PREVENTION AND DETECTION IS AS IMPORTANT AS SURVEILLANCE

The idea of compliance officers as the cops of an enterprise financial firm is an old one, and one that persists even as compliance is increasingly trying to position itself as a partner to the business and a facilitator to the profitability of the firm. But for any kind of cop, the stereotype of being the person who surveils, chases down, and catches the bad guys is an inherently attractive one. Less attractive is the idea of being the person who prevents the bad behavior in the first place through the implementation of thoughtful policies.

Brown: “COVID-19 and its related effects aside, trading volume has increased dramatically over the years. Some firms have been able to keep up using technology, and that’s very important. But whether it's employee trading, firm trading, or customer trading, the volume of activity coming through the control room, and bumping up against the watch and restricted lists, is immense. And surveillance simply can’t catch everything. As such, you have to spend the time thinking through policies, procedures, and training, and then put everything into effect in order to prevent and detect. If you don't have prevention and detection, then you're not going to be successful.”

5. IF PEOPLE CAN’T COME TO THE OFFICE, TAKE THE OFFICE TO THE PEOPLE

JPMorgan Chase recently ordered its salespeople and traders to report back to its New York City office. When the pandemic hit, like with so many other banks, this employee cohort went remote. Traders and salespeople are a tightly knit and tightly wound bunch, accustomed to operating in close quarters with a lot of verbal give and take. Kind of like control room officers. Part of the give and take for salespeople and traders is something called the hoot-and-holler, often referred to simply as “the hoot.” It’s a squawk box system that keeps a circuit permanently open, so traders and salespeople can quickly and candidly communicate back and forth across an expanse of office, like a trading floor.

One of the reasons JPMorgan was initially reluctant to close its physical trading floor was a fear that trading simply couldn’t be done from home. That the element of face-to-face human contact was irreplaceable. But necessity is the mother of invention, and a simple workaround was found that did surprisingly well. Brown: “My company had a virtual forum recently. One of the things people were talking about was how firms are leaving Skype or Zoom pages open all day, to emulate the functionality of the hoot. It occurred to me that you could do something similar with the control room function. That is, replicate the kind of ad hoc encounters you’d normally have in the office, with your control room colleagues within shouting distance. Having open Zoom calls or open chats might go a long way in these strange times. Or having scheduled sessions showing near misses. Or picking records at random for sampling sessions. These kinds of things don’t just help replicate the office environment; they also serve as a way to test the program to make sure things are still being done in a consistent way.”

To learn more about the services Steve Brown and Compliance Risk Concepts can offer, please visit: compliance-risk.com or email steve.brown@compliance-risk.com

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With clients in more than 80 countries, StarCompliance is a global leader in financial compliance software. Our scalable, easy-to-use solutions provide a 360-degree view of employee and business activity to help firms monitor and reduce risk, meet regulatory obligations, gain efficiencies, and drive employee adoption. To see what Star can do for you, book a FREE demo now.

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