KYC360 founder Stephen Platt and strategist Neil Martin explain to Emily Moore how businesses needed to be shown that by embracing compliance, rather than going through the motions, they could gain a commercial edge
THERE is no little irony in the fact that, on the day on which Ayrton Senna was killed during the 1994 San Marino Grand Prix, he had spent that morning talking about the need to improve safety in Formula One.
But the timing of that conversation with former rival Alain Prost was not a coincidence. Senna had been affected by two other crashes which had already taken place that weekend. From one of those, Rubens Barrichello escaped with some broken bones. From the other, Austrian rookie Roland Ratzenberger lost his life after hitting a concrete wall at high speed.
And these fatalities were not isolated incidents. As Neil Martin, a senior adviser to KYC360 and former head of strategy at Ferrari, explained at an event to mark RiskScreen’s rebrand to KYC360, between 1950 and 1994, more than 47 drivers lost their lives while competing in Formula One.
“It was a situation which came to a head on that brutal weekend in May 1994,” he said. “The outcry was huge and, after the shock, all the teams came together to see whether the data they were using to try and improve performance could be used to try and understand the anatomy of an accident to find a way of making it survivable.”
By taking that approach, he added, there had been only one further fatality in Formula One.
“While one is too many, that shows a huge transformation and a commitment to continuous improvement, which has also seen the technology pushed out into the automobile industry, saving 80,000 lives in its first 20 years of use,” he added.
Demonstrating the success that “leaning into the risk” had achieved – an outlook which led to the controversial introduction of the halo [a hoop above drivers’ heads] – he referenced a high-speed crash in Bahrain 2020.
“Upon impact, the car split in two and all you could see was this burning inferno,” he said. “A few years ago, that would almost certainly have been a fatal accident but, incredibly, after a few seconds, the driver hopped out of the car and walked, unaided, to the medical car.”
While it is almost impossible now to imagine anyone resisting the halo, at the time, said Neil, there were genuine concerns.
“None of the drivers wanted the halo but the data showed that, in an accident, the most vulnerable spot was the driver’s head,” he said. “Health and safety is not a tick-box exercise. These accidents are only survivable because we analysed the data from numerous crashes and leant into the unknown to improve the standards. Naysayers said that increasing the safety would slow down the cars and make the races boring. However, by embracing the risk, we found that the antithesis was true.”
While offering a fascinating insight into the world of motorsport, many in the room may have wondered why a race strategist was addressing a group of compliance professionals.
But, as Neil and KYC360 founder and chief executive Stephen Platt said, there are a surprising number of parallels between Formula One and compliance.
“After launching RiskScreen, now KYC360, I spent about 25 years trying to sell professional services, training and products by emphasising negativity and fear,” said Stephen. “The line was always that you should buy my service and expertise because, if you didn’t, bad stuff was likely to happen to you, your organisation and your jurisdiction, something which was a powerful dynamic because of the role of the international community when it comes to financial crime prevention.”
While admitting that “playing on people’s fears” was very effective, Stephen changed his technique after his insight into a number of criminal cases and practices within the industry brought about a “moment of revelation”.
“I became a pretty angry young man,” he reflected. “I was appalled at some of the practices I observed in the finance industry, some of which related to laundering criminal property while others facilitated some of the crimes which generated that property. That experience really accentuated the need for the industry to change to avoid perpetuating those harms.
“And that was when I had a moment of revelation. I realised that I had been banging my head against a brick wall, expecting a different outcome from the same practices. The industry was pouring billions of dollars a year into compliance and yet the scandals kept happening. Even more depressingly, the anatomy of those scandals was always the same. As I gathered information about the causal factors of those disasters, I realised that while the industry was going through the motions, it wasn’t really embracing financial crime prevention.
“That isn’t to say the majority of the people in the industry didn’t want to do the right thing but they didn’t see that the way they were doing their jobs was directly relevant to the ease with which people were able to commit crimes and launder the proceeds of those crimes.”
That was when Stephen realised that the only way he “could effect the change he wanted” was to “move the dial”.
“I had to show the industry that, through compliance, there was an opportunity not just to avoid negative outcomes but, crucially, to gain significant commercial advantages,” he said. “Until very recently, compliance has been regarded as a barrier to business, a process which has made doing business slower and more difficult. But today, I believe that we stand on the precipice of what I call the compliance industrial revolution, as compliance has gone from being a barrier to being a major point of difference for visionary organisations which are prepared to embrace regulatory technology and, as a result, increase their profitability and improve their customers’ experience.”
Regtech, he continued, offered businesses the potential to reduce the customer onboarding process “from weeks or months to minutes or hours”.
“The advantages are not just time-related,” he added. “Technology uses 60 points of biometric analysis to identify whether documents are genuine. Regtech therefore offers not just an acceleration but also a higher level of compliance assurance.”
And this mix of enhancing performance and minimising risk is, Neil adds, very much at the heart of Formula One.
“If you take the Ferrari pitstop, for example, we looked at a mathematical equation and found a way to minimise the time of the pitstop while maximising safety and repeatability,” he said. “By carrying out a time and motion study and understanding the tiny nuances involved, we managed to complete the 36 processes of the pitstop in less than two seconds.”
He also highlighted the ways in which a combination of strategy and data analysis could generate results.
“If you look at the 2012 season, Red Bull were the stars of the season but there was still a chance that Fernando Alonso could win the championship for Ferrari. To do this, though, 15 or 16 races in, Alonso needed to achieve three more podium positions, something we were confident that he could do. At the USA Grand Prix, though, he qualified ninth, halfway down the pack and two places behind his teammate, Felipe Massa.
“The team came to me and said: ‘Neil, we need the podium or we lose the championship.’ I replied: ‘You don’t need a strategist; you need Harry Potter.’
“However, when another drive was awarded a time penalty, our drivers moved up to sixth and eighth on the grid, and I realised that if Felipe also received a time penalty, Fernando would move up another place. This was first time in the history of Formula One that a team had penalised one of its drivers, a decision made based on race simulations.”
Although the team principal needed some convincing that this was the right strategy to adopt, Neil said that the “data was so powerful that he believed me”.
“It was a surefire way to get myself off Felipe’s Christmas card list but it kept our championship hopes alive,” smiled Neil. “However, it did raise a regulatory/compliance issues. Would such a move bring the sport into disrepute? We spoke to the race director and he loved the idea, so we weaponised the story, leaking it to the press and leaving Red Bull wondering what on earth they had missed.”
But this was only half the story. To achieve that elusive first, second or third finish, Neil calculated that Fernando needed to be in fourth position by turn one.
“We therefore set the car up for the first 400m of the race, bringing the tyres and brakes up to race temperature from the beginning,” he said. “Even then, we were not ready, as we knew that if we got a great start, we would then run into traffic. Again, we turned to the simulator, predicting the paths that the other drivers would follow and identifying a route which, although it went against the driver’s instinct, gave him a chance to find a clear section of track.”
And, through this data- and digital-driven strategy, not only, said Neil, did Fernando finish third but Felipe made it up the grid to fourth – thereby ensuring that Neil did still receive a Christmas card from the Brazilian.
What this, and many other team tactics revealed, Neil concluded, was the ability of actual and predicted race data to “provide fidelity and shape strategy”.
“Data is the new currency,” he said. “By the tenth lap of a race, we can normally see how the race will end. When I joined Formula One, the teams were professional engineering companies. Now, we have much more in common with data and technology companies. In our case, we are developing a car but all businesses are embracing data to enhance their product and performance. If you lean into the risks associated with that, you will see the performance benefits.”
And this, said KYC360 co-founder and chief commercial officer Tom Devlin, demonstrates, from a business perspective, the value of planning ahead, predicting clients’ needs and the benefits of being able to “change elements of the risk model in a sandbox environment to see their potential impact on customers”.
“The stories from Formula One show how, by responding to the limitations imposed by the sport’s governing body – whether those restrictions relate to budget or personnel – leveraging digital solutions has allowed additional resource to be deployed, often creating an opportunity from a restriction.
“That is a hugely powerful message. If you can leverage a change of circumstances to benefit your business, then you will gain a true competitive advantage. Take this approach to compliance and by taking a function which is traditionally seen as expensive and time-consuming to do and using regtech to perform the task more quickly and at a lower cost, you will win on an individual, corporate and jurisdictional level.”
