Original article from the Flevy business blog can be found here: http://flevy.com/blog/achieving-sustainability-and-responsibility-through-stakeholder-engagement-the-financial-services-case/ The Increasing Role of Compliance Finance plays a critical role for society at large, serving individuals, families, businesses, governments, and civic institutions. The Financial Services industry performs indispensable functions such as enabling saving and investment, providing protection from risks and supporting the creation of new jobs and enterprises. It is critical that the industry operates to provide these functions for society in a stable, sustainable way. Experiences of recent years have revealed a range of vulnerabilities of the financial system. Consequences of its functioning have been extremely costly to society and resulted in a significant loss of public trust and confidence in the financial system. An enormous, multi-year effort by policy-makers and financial institutions is underway to make the financial system more resilient and enable it to sustainably contribute to economic growth and prosperity. The regulatory community has strengthened oversight and prudential requirements as part of a global effort to overhaul and improve financial regulation. Today, the Financial Services industry is subject to multiple and complex legal and regulatory compliance requirements that span international boundaries. Accenture’s Compliance Risk Study indicates that investment in the compliance function will continue to increase. Compliance officers will need to adapt their programs to navigate the disruption that the financial services industry is going trough. In fact the industry is facing disruptive forces in many forms, from changing customer behavior and the rise of digital technologies to a shifting regulatory landscape. New risks are emerging as well, many fueled by increasing challenges of fighting cyber-crime and others from managing more complex operations in today’s world. In order to respond to these challenges among others, the industry is taking a range of steps to change the way it does business. Improvements have also been made to business practices such as training, sales and product approvals, with increased penalties for breaching standards.

1. Achieving Sustainability and
Responsibility through Stakeholder
Engagement: The Financial Services
Case
Contributed by Dr. Maria Veludo on September 17, 2015 in Organization, Change, & HR
The Increasing Role of
Compliance
Finance plays a critical role for society at large,
serving individuals, families, businesses,
governments, and civic institutions. The
Financial Services industry performs
indispensable functions such as enabling saving
and investment, providing protection from risks

2. and supporting the creation of new jobs and enterprises. It is critical that the industry
operates to provide these functions for society in a stable, sustainable way.
Experiences of recent years have revealed a range of vulnerabilities of the financial system.
Consequences of its functioning have been extremely costly to society and resulted in a
significant loss of public trust and confidence in the financial system. An enormous, multi-
year effort by policy-makers and financial institutions is underway to make the financial
system more resilient and enable it to sustainably contribute to economic growth and
prosperity. The regulatory community has strengthened oversight and prudential
requirements as part of a global effort to overhaul and improve financial regulation.
Today, the Financial Services industry is subject to multiple and complex legal and
regulatory compliance requirements that span international boundaries. Accenture’s
Compliance Risk Study indicates that investment in the compliance function will continue
to increase. Compliance officers will need to adapt their programs to navigate the disruption
that the financial services industry is going trough. In fact the industry is facing disruptive
forces in many forms, from changing customer behavior and the rise of digital technologies
to a shifting regulatory landscape. New risks are emerging as well, many fueled by
increasing challenges of fighting cyber-crime and others from managing more complex
operations in today’s world. In order to respond to these challenges among others, the

3. industry is taking a range of steps to change the way it does business. Improvements have
also been made to business practices such as training, sales and product approvals, with
increased penalties for breaching standards.
The Increasing Importance of Stakeholders Engagement
Despite many improvements since the financial crisis of 2008, much work lies ahead to
repair the bonds of trust between the industry, its clients, regulators, investors and society
at large. The need to harmonize shareholders’ demand for profitability with the concerns of
other stakeholders (including society and the environment) has intensified. Taking
stakeholder concerns and interests into account can improve relationships, which may make
it easier for a corporation to operate, lead to ideas for products or services that will address
stakeholder needs, and allow the company to reduce costs and maximize value. Overall,
stakeholder responsive corporate governance results in a more comprehensive
understanding of corporate risk and opportunity while contributing to a strong reputation
over time.
As the industry continues to evolve, there is a shared belief that all stakeholders will need to
work together to ensure that the financial system continues to fuel economic growth and job
creation. While recent consultation processes between the private sector and regulators

4. have demonstrated a joint interest in collaborating to achieve these goals, the dialogue is
also a microcosm for the range of obstacles hindering greater progress. Different
stakeholders continue to operate within very different frames of reference and use divergent
vocabulary to describe the purpose and activities of the sector. Participants often defend
pre-defined positions and self-interests. This is resulting in too little useful dialogue to
support mutual learning, too much focus on technical issues and insufficient attention to
developing an overarching framework and vision of a stable and inclusive financial system
that meets society’s needs. There is the belief that a new kind of dialogue is needed to
overcome these challenges.
The trend towards stakeholder dialogues and cross-sector collaboration is clear. Visionary
companies are tapping into these trends and understand the interdependence between
societal and corporate performance on the global scale. Studies have shown that stakeholder
cooperation can improve business performance and that anticipating the potential in
stakeholder dialogues at an early stage and following a step-by-step guide can lead to
successful shared value creation. Stakeholders can have economic, technological, political,
social or even managerial effects on a company and engagement is therefore an important
part of anticipating business opportunities and risks, which, in turn, is fundamental to
proactive, strategic management. It has also been realised that not keeping good

5. relationships with stakeholders can have a damaging effect, not just on reputation but also
on actual corporate and project results.
However, to many companies a question remains: is there a formula to make stakeholder
dialogues a fruitful experience? There can be misunderstandings and pitfalls in stakeholder
engagement and it is necessary to filter out what works and what does not. Moreover
stakeholder engagement requires a new set of skills within companies to engage with the
world beyond. Many companies suffer from a lack of focus when engaging stakeholders,
failing to define when and why and what for.
When engaging with its stakeholders, a financial corporation is acknowledging that it is an
interdependent entity, which is impacted by and has an impact on many different groups.
For many companies, however, finding the right approach to stakeholder engagement and
tapping the wider benefits it offers to their business is still uncharted territory.

6. Sustainability with Responsibility through Stakeholder
Engagement within Compliance
Hence, in order for the Financial Services industry to remain competitive within the
increasing competitive nature of financial market and to be successful, it should achieve
Sustainability.
On one hand, and according to various reports, the integration of Sustainability into
management systems and practices brings tangible benefits, including new lines of business,
lower risks and better returns, improved access to international capital, new clients, greater
value to stakeholders, improved brand value and reputation, and improved communities
relations. The business case for environmental and social risk management and sustainable
finance for financial institutions is clear.
On the other hand, different groups of actors in the society are constantly demanding
enterprises to act and react in a sustainable and responsible manner in relation to the
environment and society. The result is the assumption of this responsibility by a company
and the efforts to fulfil their demands and expectations. Thus approaches to stakeholder
engagement are changing from the original consultation and disclosure methods as means
for the achievement of short-term business requirements, to new forms of engagement that

7. seek to build relationships, manage risks and identify new business approaches. Stakeholder
concerns can inform and enhance the risk management and wealth creation responsibilities
of Financial Services’ Board of Directors. Stakeholder engagement strengthens the long-
term sustainability of companies and enhances trust and reputation among stakeholders.
If for certain minds it remains unclear how companies within the financial sector can
comfortably fit into a Sustainability model, for others one key to forging a true path to
Sustainability might directly lie in social and governance performance, from customer
transparency to risk management. In order to reach this objectif, financial organizations
need an appropriate sustainability performance management system (PMS) relative to
social, economic & environmental conditions. The increase of the interest for Corporate
Sustainability and Responsibility is at the same time extending the awareness among
companies about the positive impacts of transparency and reporting.
Finally, it is also my view that there is the need to develop innovative paths of collaboration
among key stakeholders and to implement new frameworks, among which I place the
“Sustainability with Responsibility Spiral.”

8. About Dr. Maria Veludo
Holding a PhD (2005) from the University of Glasgow on Management and with a career path of over 20
years in various roles and various domains of knowledge, Dr. Maria Veludo is the founder and manager
director of ExcKlam. She is dedicated to working with Businesses for their growth and development
bringing my experience and competences as Business Analyst and Business Developer. Her drive is
embracing an integrated and multidisciplinary approach to target Sustainability, Corporate Social
Responsibility (CSR), and Resilience throughout supply/demand value chains and networks in
international contexts, for maximization of business Performance and of Value while strengthening risk
governance, taking into account stakeholders expectations and needs. Besides consulting, which is at the
core of her professional activities, Maria writes and organizes events in order to boost professionals'
knowledge on cutting edge topics and on the latest tools and methods that can help them excel in their
results. You can connect with Dr. Maria Veludo on LinkedIn here .

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