The Connector Podcast - Clausematch

Welcome to The Connector Podcast, an ongoing conversation connecting fintechs, banks, and regulators worldwide. Join CEO and founder Koen Vanderhoydonk as you learn more about the latest available trends and solutions in the markets.

Hello, Dani. Thanks for joining me in the podcast of The Connector, and it's a real pleasure and joy to have you here. all the way from the UK representing ClauseMatch. Can you tell me a little bit more about yourself, where you come from, and about ClauseMatch?

Great, thank you. Great to be on. Appreciate the invite. So myself, I am based in the UK in Surrey now, and I have been with ClauseMatch 5 years. My background has mostly been in commercial leadership roles, a lot in the compliance and regulatory space. Spent a long time at Complement, which was acquired by Thomson Reuters, governance, risk, and compliance. We created a GRC business within Thomson Reuters. We acquired a lot of companies and was a pretty exciting journey. And then, yeah, got involved in ClauseMatch through someone I worked with at Complement, our now global head of customer success. And ClauseMatch, just very quickly, what do we do? We're the leading provider in the compliance management and policy management space. We work heavily with financial services institutions, but, and other regulated institutions. And my role is Chief Operating Officer and Chief Revenue Officer, which is leading the operations of the business overall globally and then leading the go-to-market strategy, our customer strategy, our marketing strategy of the business.

That's literally a mouthful. But there's something that comes back also where you work now, but maybe also a little bit in the past, and that is regtech. Can I claim that Closmas is 100% a regtech company?

You can.

But I cannot.

Yeah, you can. I mean, we are. Regtech was a term that came around a few years ago, and then everyone became a regtech. So, uh, you're a— yeah, like now there is thousands of regtechs. A few years ago there was a few. So I don't get too caught up on the coining of the term. What I do know is compliance and regulation and technology to help this area is, uh, growing. And even in downturn in economies, it's going to grow further. And there's more funding, investment, um, buying going on in this space because of you cannot you cannot not take for granted compliance and regulation and meeting your obligations. And therefore, this is a growing space, an exciting space, and one that I'm excited to be in.

So would that also still remain to be the biggest challenge for the years to come, that it's still on— well, we know after the crisis, a lot has changed in the industry towards compliance and risk. Would you say that going forward, this continues to be the biggest challenge, or are there any other challenges? we have to take into account?

Yeah, sure. Really good question. I think the— for me, the biggest challenge that I see is we work with a lot of companies that are working in multiple jurisdictions, um, that are growing aggressively in lots of jurisdictions with different levels of regulatory scrutiny and pressure and reputational risk. And with, um, sort of your reputation actually is the biggest area of risk to most businesses. Uh, suddenly you do something that could be deemed wrong and your reputation as a whole company can completely go down, your share price go down, your investment can go down in a click of a button. And what a lot of compliance and risk people are battling with is the hundreds of things they need to be on top of, the multiple requests they're getting every day and trying to work out what is their priority, what is their focus and where do they put their resources. That feels like the biggest area of challenge in the industry that I see from speaking to customers. I think from going forward and what we see from the industry reports like Reuters is there's going to be a big focus around operational resilience and a big focus on how you manage your third parties, a big focus on conduct compliance. These are all really big themes that we're seeing a bigger area on. And that also links into personal liability where we're seeing no longer is it just a company that is at risk, it's actually the individuals and personal liability that are also under huge scrutiny and that we're seeing a change in culture. And that's really interesting as well.

And then could you go a little bit— could you elaborate a little bit on that? Because it's very interesting what you just said.

Yeah, sure. So regulations like SMCR, the Senior Management Regime, we've got equivalents in pretty much every country in the world now, is putting a much bigger scrutiny on the Chief Compliance Officer, the Chief Risk Officer, and the C-suite in general, which means No longer can I work for a ClauseMatch and just ClauseMatch get fined. Actually, Danny Gao is going to potentially go to prison, potentially be fined, potentially be struck off from being a director. And that's because new regulations are coming harder on, has the company been compliant, but also has the key senior management been compliant? And interesting, like with what's gone on in the last few weeks around the crypto space as well.

Mm-hmm.

Suddenly, within a matter of days, a company that was one of the most growing companies on Forbes, the CEO was there, and suddenly just in a matter of days, the whole company is completely gone. And that is all linked into this area of, has a company conducted themselves in the right way? Have they managed what they should be doing, their conduct, their policies, their procedures, their governance in the right way? And clearly not in that instance.

Yeah, that's 2 reflections that come to my mind. First one, it sounds like a reconfirmation of the 3 lines of defense because that also puts the first line as responsible. And the second reflection would be ESG, where governance also plays an important role. So, ClauseMatch, it's all over the place nowadays. I can see it everywhere online. And what I've been reading about you guys, and very impressive, is that you're growing fast in the US. You're a UK-based company, but what has been your experience by moving into the US?

Yeah, very good question. We moved really to, and I would say North America, Canada has been a huge growth for us as well as a business and working with some of the largest companies in Canada as well as the US. We were first introduced to that market and we were pretty reactive. There was companies saying, we need you, we need you, please help us. That's the best scenario, right? And that was great, yeah. And so we were part of the FinTech Innovation Lab in New York, and we were working with some analysts in the industry, and we essentially got pulled into the market and started seeing that what we were able to do and solve for, there wasn't anything that could really do this before. One big example was we won one of the biggest companies globally because they analyzed our product within a couple of months and completely changed from going with an existing provider to working with us. us because they saw the capabilities of what we could do versus what that existing provider was claiming they were able to do. And so we're now growing our team there, we're growing our business there, and it grew also our— it's a key strategic part of our business. No longer is it we're a UK company, we're actually the US and Canada is just as strategic and just as important as our EMEA and other businesses.

Did you see any differences between the European market, and I'm talking about still regulations, versus the US market? Because I can imagine this, it all looks the same from afar, but if you go closer, it's completely different. Is that sort of the right impression?

Yeah, I mean, the big difference is in the US, they are very prescriptive. You must do this, and these are the 10 things you have to do. In Europe, we say you have to be compliant. How you be compliant is completely up to you. We don't mind how you do it. So the US are very much leading with these are the things you have to do and much more prescriptive around what that looks like and more like a tick box type scenario. If you do these 5 things, you will be compliant. Whereas in Europe, the regulators are much more focused on you need to be compliant, but it's down to you as a business to work out how you be compliant. compliant and we'll assess you on your decisions you make. And with that, I would also say one of the big other areas is certainly in the US, they're much more experienced at buying software. So they understand how to buy software much better than companies in Europe where we're, I think, and specifically in this space of compliance and risk, companies have been buying this software for 10, 15 years, but a lot of people have never actually bought any software. And so the experience of how to buy software, how to analyze, yeah, I've definitely got some war stories of different companies where you might be working with them for 3 years and they just can't get themselves together of what they need as a company, their priorities, their projects, how to manage it from a beginning to an end. So yeah, I would say that that's the main differences that I see.

Oh, interesting. So does it mean that in the US procurement has bit of a similar role than it has in Europe, but it's more profound within the compliance areas. Is that more or less what you're saying?

I was more talking actually about the business owners. So the compliance and risk professionals—

I'm happy to hear that, by the way.

Yeah. And actually, that's something that we're seeing change generally in the industry is no longer is a compliance and risk professional just a background by law, like just looking at regulation from a legal perspective. They're very much looking at technology at the forefront and operations at the forefront of how they run the business. And you're starting to see roles like COO for compliance or COO for risk or head of technology for risk or compliance. And these are really good roles because they're supporting the business with what they need to do and their operational gains that they can make.

And I can only agree with you that in Europe, I think this is the next step within compliance because so far it feels talking to a lot of banks that they have been surviving since the avalanche of 2010. And now you feel that there's some structure coming into compliance departments, which I think it's what you are describing here. But talking about the avalanche, would you think that we're on top of it, we're still steep hill, or are we going downwards in terms of regulations? What can we expect going forward?

It's interesting, different countries are taking different routes to this. So some countries are saying, hey, we need to stop so much regulation because we want to attract businesses to come and launch here. Lithuania, guess what? I saw something this week about how many companies are now— fintechs are now in Lithuania as a result of the regulations that they've made it more appealing to be there, as an example.

Plus 200 e-licenses, I heard, right?

Yeah, exactly. Like the number of regulations and regulatory scrutiny is not going away, and that's that's going to be increasing. But I do expect regulators to be more focused on the things that truly matter versus a volume play. So I do expect that regulators are going to be saying, "Hey, there's ten things we need companies that are super important that they do going forward." It doesn't need to be fifty things; it can be ten. But we're going to really investigate that they do these properly and well. And if not, we're going to fine them. And you're seeing more and more fines and out-of-public-domain fines happening in this space right now. There's been more fines generally. Before, you would only hear about, oh, Wells Fargo got fined, and ABN Amro got fined, and the big companies getting fined. Now you're seeing it coming into much, much smaller companies, companies being fined and individuals being personally liable. And you're only going to see more and more of that as we see the regulators with the regulations they've put in over the last 5 years start to now take effect in terms of the fines. And there is always this piece of regulation comes in, they analyze the market, and then you'll start to see some fines related to that. A lot of people have said, oh, we haven't seen many fines for GDPR, as an example. You will start to see some more, but— and you'll start to see more in other areas as well. So I don't expect regulatory scrutiny to go down. The regulators have also ways that they need to make money for the government, and they do that through managing the system. And so it's a key part of the environment that you'll see going forward.

Interesting. We're almost at the end of our podcast for today. So I was wondering, because thanks a lot for sharing a lot of the information about the market and the industry. But where does ClauseMatch come in? I think that's also important for the listeners to know. Where does ClauseMatch come in? Where can you guys help?

Yeah, sure. So we work with compliance and risk. We're sort of at the core of compliance and risk, where any company needs to understand what regulations are affecting them, understand their obligations, do a self-assessment, manage their policies, procedures, controls, and risks. ClauseMatch doesn't do end-to-end all of that, just to be clear, but we work with partners that capture the pieces that we don't, like horizon scanning vendors, like GRC vendors. And but we are at the core of that, and we're helping lots of companies, small, medium, big, around managing their policies, procedures, and the linkages and mapping across that. And that's something that's super important and unique to what ClauseMatch does, is we do it at a very granular level. And yeah, we're working with lots of players in the financial services industry and we're here and open if you're interested.

Because that would be my last question is how do they contact you? Where can they contact you or where can they find you?

Yeah, so clausematch.com. We are on, you can put a request through there. My email address is danny.gow@clausematch.com and I'm sure we can post that in the after notes. But if you contact any of our team, myself, or Corinne, I'm sure you will get a hold of us.

Yeah, indeed, indeed. Thank you very much, Danny, for providing all these useful insights about the wonderful world of compliance. Thank you also to our listeners, and I hope to hear you back soon, you in person, Danny, and obviously the listeners on the podcast. So thank you very much.

Thank you.

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