Posted by Clay Richardson on February 9, 2009
Okay, I have to admit it: “My name is Clay and I am a political junkie.” They say the first step to recovery is admitting that you have a problem. I am also a policy geek and I love watching C-SPAN.By now, I’m sure you’re wondering “What the heck does this have to do with I&KM pros?”
I believe last Wednesday’s House Hearing on Madoff and the SEC should be required viewing for all I&KM Pros – particularly for those of you that want to understand how BPM can keep you from getting fired.
If you caught the hearing in its entirety on C-SPAN (I had a front-row seat on my couch, thanks to being taken down by a nasty flu-like virus last Wednesday – this will become relevant a little later), you saw the whistleblower, Harry Markopoulos, rip into the SEC, FINRA, and other industry regulators. Mr. Markopoulos raised numerous red flags to the SEC about Madoff’s Ponzi scheme over an eight year period.
Pulling no punches, Mr. Markopolos called the SEC "incompetent" and FINRA "crooks" to their faces – senior representatives from both organizations were in the audience listening to the hearing and waiting for their opportunity to respond. Following Mr. Markopoulos’s testimony, I thought "Hey, its time to get some popcorn, the fight’s on!" Then I recalled why I was home in the first place – sick, right?
After a little break, the House brought out the SEC heads for their grilling. I was particularly taken by the grilling given to the heads of SEC Compliance and SEC Enforcement. My naïve assumption was that these people would have reasonable answers about why Madoff’s $50B Ponzi scheme fell through the cracks. Boy, was I wrong! They had not a single coherent answer. In fact their collective answer was (I am summarizing here for them): "I don’t understand my own process."
Rep. Gary Ackerman completely went off on all of the SEC heads testifying at the hearing. Based on Ackerman’s response, I hope all of the SEC heads started job hunting immediately following the hearing. There is no doubt left in my mind that they will all be fired summarily (looks like I moved too slow on getting this blog post out).
After watching the hearing, I thought to myself "These people could have avoided being fired if they had simply implemented a good BPM solution." Here are my Top 3 suggestions on how BPM could have kept them from getting fired (or at least kept them from appearing incompetent on C-SPAN):
Job Saver #1, Transparency – During the hearing, the SEC was grilled numerous times regarding specifics on how their compliance and enforcement processes worked. For example, several congressmen asked "How many red flags does it take before action is taken?" None of the SEC heads could answer this question. Implemented properly, BPM provides the transparency needed to answer these types of questions. Or at least it allows you to say, "We did not consider red flags as part of the process, and here is why…" The other benefit of BPM is that the SEC's visual process for enforcement and compliance could have been published on the web for all to see. Then, the SEC heads could have answered, "…as outlined in our current process, published on the Web…" This would have helped them demonstrate the greatest degree of transparency. I believe there is an opportunity here for process-wiki vendors (e.g., Lombardi Blueprint, Itensil, etc.)...
Job Saver #2, Business Rules – Many of the congressmen also asked about escalation rules for investigations in addition to several other "rules" related failures that allowed Madoff’s scheme to go undetected. My immediate thought was that most of the rules discussed could easily have been captured by a rules engine to automatically escalate and route processes accordingly. One of the congressmen asked "Do you give additional weight to tips coming from highly credible sources, like Mr. Markopoulos?" The SEC responded, "Yes, we do. However, we have to look at the history of the source." The SEC's response left me thinking this is not a "rules" governed process – in other words "you are credible, if we think you are credible." No, there should be documented and institutionalized rules that govern whether a source is credible.
Job Saver #3, Workload Management – Finally, one of the congressmen asked "How many fraud tips do you get in a given year?" The SEC response: "We get over 100,000 and there is no way we can chase down each and every one…" I thought this was the most telling response. In other words, the SEC was saying "We could not catch Bernie Madoff because we had too many fraud tips coming in..." Using BPM, they could have automatically identified tips that had a high chance of fraud and routed these tips to be vetted by staff members with the appropriate expertise.
I&KM pros should take note! If you have internal processes that are compliance-related (or otherwise), BPM is ideally suited to provide the transparency needed to make you look good in front of Congress, ahem, I mean key stakeholders, that have hard charging questions when things go haywire.
After the House Hearing on Madoff and the SEC wrapped up, I finally decided I was sick enough to take myself to the doctor. However, instead of going to my family practitioner, I decided to check out the “Minute Clinic”, CVS’s in-store quick clinic. My experience there was the exact opposite of the fiasco I had just seen on C-SPAN. I left the doctor thinking "The SEC could learn a thing or two from the Minute Clinic about how good processes work…"
In my next blog I will share more about my positive process experience at the "Minute Clinic"…
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