This month, Madelaine Russell writes on the topic of ethical data handling, and how compliance with data protection law typically fosters goodwill with investors, clients and staff.
A Political Science major at Brock University in Canada, Madelaine has spent this summer at home in Guernsey working with the ODPA’s investigations team.
In our current world, the modern financial landscape and even our way of life are changing at an unparalleled pace. With shifting advancements, customer expectations and regulation changes, building trust through transparency and ethics is vital for successful leadership and business.
Within said landscape, it is pertinent to understand that data protection and funds management are not separate entities and are instead deeply intertwined concepts that must be viewed as such. Moreover, a tick box approach to regulatory frameworks, such as the local data protection law, may not even meet the minimum legal requirements of businesses and certainly does not demonstrate transparency or correct ethical practice.
For any business, it should be recognised that data, whether it be personal or exchange-based, is a vital and principal asset for successful day to day operations. The use of data for business helps inform the best investment strategies, predict market-trends, and provide client-specific services, just to name a few examples.
Circling back to the ethics of data handling, we hope that all businesses aim to lead by example in compliance with not only the law, but their own expectations of transparent and trustworthy data operations. Falling short of these expectations can have extremely negative consequences for businesses: reputational damage, poor decision making, and potential legal penalties. All businesses must understand that success is not possible when a client does not trust your services, especially regarding the handling of their personal data.
To prevent this, implementing robust data protection mechanisms will help to build a positive relationship between a business and its clients, and therefore strengthen the foundation of success. If this implementation is not successful, the confidence of investors, clients and staff will deteriorate.
To quote former European Commission sustainability expert Miguel Reynolds Brandao, ‘Merit is a product of knowledge and transparency’. In maximising ethical practise in any manner within your organisation, open communication and transparency are the key to establishing trust. This could be trust between your business and its clients, or even trust within your organisation. Either way, authentic relationships are the key to success in fund management and beyond.
We understand that you cannot discuss appropriate data handling in the modern financial landscape without acknowledging the presence of Artificial Intelligence. This new technological innovation not be shied away from, but utilised in an ethical manner to boost your business’s progress.
To operationalise AI, a number of considerations must be taken into account. First, your business should assess what processes or systems are already in place to support a successful AI programme, what gaps need to be filled or opportunities grasped. Most importantly, to accomplish ethical practices, two key steps must be taken: creating a tailored AI framework for your company, and raising organisational awareness of the risks and benefits of utilising AI as a tool.
It is that the most valuable currency for any organisation is trust. To accomplish this, transparency is key; telling people what you are going to do with their data and doing it well. This process not only signals an effective ethical framework within a business, but serves as a critical component of changing a firm’s unique value into a competitive differentiator.
At its core, ethical data handling is guided by the overarching principles: privacy, transparency, accountability, and fairness. Whilst the implementation of these principles differs between businesses, the foundation should be consistent throughout the sector, a foundation rooted in ethical business practices. Whilst we hope that the incentive of these principles is what drives businesses to analyse their proceedings, we understand that this is not always the case.
If so, please reflect on the negative consequences of failing to view transparency as a competitive advantage, or even the minimum expectation for clients. View this process as an opportunity to build trust with your clients and strengthen your reputation in the modern financial landscape. A decision that will, either over the long or short term, bring positive outcomes for your business.
Clients don’t expect perfection from businesses. However, they do require an assurance that their data is respected and their trust in your business is valued. Or to put it another way, a quantum of solace.
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