Monday, April 1, 2019 - International Association of Risk and … · 2019-03-28 · Monday, April 1, 2019 Top 10 risk and compliance related news stories and world events that (for

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____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP)

Monday, April 1, 2019 Top 10 risk and compliance related news stories and world events that (for

better or for worse) shaped the week's agenda, and what is next

Dear members and friends, Revisiting previous approaches and trends is never a waste of time. On the contrary, you can understand better what works and what not, and how the business environment has been changed. Today I will start with a paper released in April 2013 about an important challenge, the insider threat. What motivated insider activity? In the paper, three main types of insider behaviour are described: - Deliberate insider: those who obtain employment with the deliberate

intent of abusing their access. - Volunteer/self-initiated insider: those who obtain employment without

deliberate intent to abuse their access, but at some point personally decide to do so.

- Exploited/recruited insider: those who obtain employment without

deliberate intent to abuse their access, but at some point are exploited or recruited by a third party to do so.

The last two types of insider behaviour described above are defined as ‘opportunistic’ due to the lack of deliberate targeting of employment. The findings from this study suggest that the vast majority (76%) of insider cases assessed were self-initiated, 15% of cases were exploited or recruited by a third party, and “only 6% were as a result of deliberate infiltration”.

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Well, this only 6% is the real message for me, the number is large, and it is very scary. It can involve blackmail, bribery or both. We continue with the paper: Primary motivation The research demonstrated that the reasons why people undertake insider activity are complex and multifaceted. It is relatively common for insiders to have more than one motivation for their activity, with a third of the cases in the study being identified with more than one motivating factor. The range of primary motivations was identified as: - Financial gain (47% of cases). - Ideology (20% of cases). - Desire for recognition (14% of cases). - Loyalty to friends/family/country (14% of cases). - Revenge (6% of cases). This demonstrates that although financial gain was the single most common primary motivation, ideology, a desire for recognition and loyalty (to friends/family/country) were also quite common motivations. Although revenge against the employer was noted as a primary motivator in only 6% of cases, general disaffection with the employing organisation continued to be a contributory factor in many of the cases assessed. The research showed that in many insider cases there was an element of disaffection displayed by the employee. This ranged from being the main reason for the employee deciding to commit an insider act, to simply being disengaged from their employer and therefore not feeling committed to their organisation. The research identified a clear pattern in the relationship between primary motivation and type of insider incident. - Ideology and desire for recognition were closely linked to unauthorised

disclosure of sensitive information. Ideology was the primary motivation for 40% of unauthorised disclosures and desire for recognition accounted for 22%.

- Financial gain was most closely linked to process corruption or giving

access to assets. Financial gain was the primary motivation for 83% of process corruption cases and for 63% of facilitation of access to assets.

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- Cases involving loyalty were fairly evenly split between unauthorised disclosure and process corruption.

- For those motivated by revenge, the cases were split between

unauthorised disclosure and sabotage. Personality traits The study examined the importance of a range of personality factors among the cases that were reviewed in depth. For the purposes of this study, personality was defined as the characteristics of the individual relating to how they respond to situations and interact with others. The personality factors listed below were considered to be of particular interest (and predictive of case type) when significant signs were shown that had a clear and negative impact on work and/or colleagues: - Immature (e.g. lacks life experience, is naïve and requires excessive

guidance, has difficulty making life decisions); - Low self-esteem (e.g. lacks confidence, is extremely dependent on

recognition and praise, struggles to cope well with adversity, setbacks and difficult tasks);

- Amoral and unethical (e.g. lacks moral values or personal integrity, acts

in an unscrupulous manner and shows no remorse, engages in unethical behaviour);

- Superficial (e.g. lacks a sense of identity and is hard to get to know,

provokes a range of different opinions among people in the workplace); - Prone to fantasising (e.g. believes they are engaged in activities that

have no basis in reality, likes to create the impression that they are engaged in something special);

- Restless and impulsive (e.g. requires constant stimulation and cannot

tolerate boredom, needs or seeks instant gratification and does whatever feels good in the moment, shifts from one thing to another);

- Lacks conscientiousness (e.g. does not comply with rules, neglects

responsibilities and is unconcerned with duties and obligations, shows poor attention to detail and demonstrates poor judgement, shows a lack of focus);

- Manipulative (e.g. uses charm to get their own way and is very

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persuasive, nurtures relationships and manipulates others to serve their own self-interest, tends to adopt whatever position or attitude will result in getting their own way);

- Emotionally unstable (e.g. is prone to exaggerated mood swings,

overreacts to problems, complains about unimportant or trivial things); - Evidence of psychological or personality disorders. The paper has been released by the Centre for the Protection of National Infrastructure (CPNI) is the United Kingdom, the government authority which provides protective security advice to businesses and organisations across the national infrastructure. I have read many papers on the same subject, and I always believe that the CPNI paper is excellent. Read more at Number 5 below. Welcome to the Top 10 list. Best regards,

George Lekatis President of the IARCP General Manager, Compliance LLC 1200 G Street NW Suite 800, Washington DC 20005, USA Tel: (202) 449-9750 Email: [email protected] Web: www.risk-compliance-association.com HQ: 1220 N. Market Street Suite 804, Wilmington DE 19801, USA Tel: (302) 342-8828

mailto:[email protected]

mailto:[email protected]

http://www.risk-compliance-association.com/

http://www.risk-compliance-association.com/

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Number 1 (Page 9)

PCAOB Staff Provides Guidance in Advance of CAM Effective Dates

The Public Company Accounting Oversight Board has released three staff guidance documents developed to support implementation of the new critical audit matter (CAM) requirements. Auditors will soon be required to communicate CAMs in the auditor’s report under the standard, AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.

Number 2 (Page 12)

The future of money and payments Agustín Carstens, General Manager of the BIS, at the Central Bank of Ireland, 2019 Whitaker Lecture, Dublin.

The bitcoin hype is over but attempts to create new forms of money or to engineer new ways to pay still appear almost weekly. Central banks have entered the fray, with about 70 percent either exploring or experimenting with so-called central bank digital currencies (CBDCs).

Number 3 (Page 13)

Carolyn Rogers appointed as the next Secretary General of the Basel Committee

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The Basel Committee on Banking Supervision has announced the appointment of Carolyn Rogers as its next Secretary General for an initial term of three years.

Number 4 (Page 15)

A New Horizon Speech by Mr Mark Carney, Governor of the Bank of England, at the European Commission Conference "A global approach to sustainable finance", Brussels.

“A few years ago, I spoke of the Tragedy of the Horizon – how the catastrophic impacts of climate change will be felt beyond the traditional horizons of most banks, investors and financial policymakers, imposing costs on future generations that the current one has no direct incentives to fix. Once climate change becomes a clear and present danger to financial stability it could already be too late to stabilise the atmosphere at two degrees.”

Number 5 (Page 17)

Cyber Insider

An insider is someone who (knowingly or unknowingly) misuses legitimate access to commit a malicious act or damage their employer. These days, most insider acts involve IT exploitation termed “Cyber Insider”. CPNI has been engaging with industry and academia through a broad range of research initiatives that aim to improve IT monitoring capabilities to identify insider precursors and behaviour; raising awareness in employer and employee communities about insider threats; establish methods for

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designing IT and policies to deter staff from committing insider acts; designing IT and work practices to block insider acts.

Number 6 (Page 19)

Consultation Paper Guidelines on liquidity stress testing in UCITS and AIFs

In April 2018, the European Systemic Risk Board (ESRB) published a set of recommendations to address liquidity and leverage risk in investment funds (the ESRB recommendations). The ESRB’s ‘Recommendation C’ requests that ESMA, in order to promote supervisory convergence, “develop guidance on the practice to be followed by managers for the stress testing of liquidity risk for individual AIFs and UCITS”.

Number 7 (Page 21)

Federal Reserve System publishes annual financial statements

The Federal Reserve System has released the 2018 combined annual audited financial statements for the Federal Reserve Banks, as well as statements for the 12 individual Federal Reserve Banks and the Board of Governors.

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Number 8 (Page 23)

FSB letter to ISDA about derivative contract robustness to risks of interest rate benchmark discontinuation

This letter from the Co-chairs of the FSB’s Official Sector Steering Group (OSSG) encourages the International Swaps and Derivatives Association (ISDA) to continue its work on derivatives contractual robustness to risks of interest rate determination.

Number 9 (Page 25)

Avoiding the Crack of Doom New imaging technique reveals how mechanical damage begins at the molecular scale.

Just as a journey of 1,000 miles begins with a single step, the deformations and fractures that cause catastrophic failure in materials begin with a few molecules torn out of place. This in turn leads to a cascade of damage at increasingly larger scales, culminating in total mechanical breakdown.

Number 10 (Page 28)

Using AI to Build Better Human-Machine Teams Program seeks to demonstrate the basic machine social skills needed to generate effective human-machine collaborations

The inability of artificial intelligence (AI) to represent and model human partners is the single biggest challenge preventing effective human-machine teaming today. Current AI agents are able to respond to commands and follow through on instructions that are within their training, but are unable to understand intentions, expectations, emotions, and other aspects of social intelligence that are inherent to their human counterparts.

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Number 1

PCAOB Staff Provides Guidance in Advance of CAM Effective Dates

The Public Company Accounting Oversight Board has released three staff guidance documents developed to support implementation of the new critical audit matter (CAM) requirements. Auditors will soon be required to communicate CAMs in the auditor’s report under the standard, AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. The staff guidance consists of the following: (1) a high-level overview of CAM requirements: https://pcaobus.org/Standards/Documents/Implementation-of-Critical-Audit-Matters-The-Basics.pdf

(2) thematic observations that arose from the Office of the Chief Auditor’s review of audit firms’ CAM methodologies: https://pcaobus.org/Standards/Documents/Implementation-of-Critical-Audit-Matters-Review-Audit-Methodologies.pdf

https://pcaobus.org/Standards/Documents/Implementation-of-Critical-Audit-Matters-The-Basics.pdf




https://pcaobus.org/Standards/Documents/Implementation-of-Critical-Audit-Matters-Review-Audit-Methodologies.pdf




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(3) a deeper dive on the determination of CAMs: https://pcaobus.org/Standards/Documents/Implementation-of-Critical-Audit-Matters-Deeper-Dive.pdf

https://pcaobus.org/Standards/Documents/Implementation-of-Critical-Audit-Matters-Deeper-Dive.pdf




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While these documents primarily offer insights for auditors, the high-level overview—“The Basics”—may also be of interest to preparers, audit committees, and investors. “The Board is committed to supporting effective implementation of CAMs, which are intended to make the auditor's report more relevant to investors and other financial statement users,” said Chairman William D. Duhnke. “The staff’s guidance is just one way in which the Board is providing proactive, timely, and useful information on CAMs to auditors and other interested parties.” These documents were informed by discussions with auditors regarding their experiences conducting dry runs of CAMs with their audit clients, the staff’s review of methodologies submitted by 10 U.S. audit firms that collectively audit approximately 85% of large accelerated filers, and other outreach efforts. The Board and staff will continue to monitor CAM implementation and determine if further guidance is needed. The first phase of CAM implementation is effective for audits of large accelerated filers for fiscal years ending on or after June 30, 2019. The second phase, which impacts audits of all other companies to which the requirements apply, is effective for fiscal years ending on or after December 15, 2020. As outlined on the new auditor’s report implementation page (at:

https://pcaobus.org/Standards/Implementation-PCAOB-Standards-rules/Pages/new-auditors-report.aspx), the PCAOB is utilizing a variety of avenues to provide useful information, resources, and training to auditors and other stakeholders on the new standard, placing a particular emphasis on how auditors are preparing to identify and communicate CAMs. These efforts include, but are not limited to: promoting awareness and providing direction through staff guidance, webinars, and external engagement.

https://pcaobus.org/Standards/Implementation-PCAOB-Standards-rules/Pages/new-auditors-report.aspx




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Number 2

The future of money and payments Agustín Carstens, General Manager of the BIS, at the Central Bank of Ireland, 2019 Whitaker Lecture, Dublin.

The bitcoin hype is over but attempts to create new forms of money or to engineer new ways to pay still appear almost weekly. Central banks have entered the fray, with about 70 percent either exploring or experimenting with so-called central bank digital currencies (CBDCs). A CBDC would allow ordinary people and businesses to make payments electronically using money issued by the central bank. But what are the consequences of such a system? How would it differ from what we have now? As money and payments form the backbone of the financial system, central banks need to understand the full consequences of opening up the monetary system for major surgery. Hence, central banks are treading cautiously, and only a very few central banks think it is likely that they will issue a CBDC. To read more: https://www.bis.org/speeches/sp190322.pdf

https://www.bis.org/speeches/sp190322.pdf

https://www.bis.org/speeches/sp190322.pdf

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Number 3

Carolyn Rogers appointed as the next Secretary General of the Basel Committee

The Basel Committee on Banking Supervision has announced the appointment of Carolyn Rogers as its next Secretary General for an initial term of three years. Ms Rogers will also serve as the Chair of the Committee's Policy Development Group. She has 20 years of executive management experience in the financial services industry, having worked in both the public and the private sector. Since mid-2016, Ms Rogers has been the Assistant Superintendent of Regulation at the Office of the Superintendent of Financial Institutions (OSFI) in Canada and also OSFI's representative on the Basel Committee. Ms Rogers will assume her new responsibilities on 14 August 2019. Pablo Hernández de Cos, Chairman of the Basel Committee and Governor of the Bank of Spain, said: "Carolyn has a strong supervisory and regulatory background and has been an active and highly respected member of the Basel Committee over the past three years. Carolyn's broad experience, in-depth understanding of the Basel Committee and leadership skills make her an ideal appointment to the position of Secretary General. I look forward to working with her in the coming years." Mario Draghi, Chairman of the Basel Committee's oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), and ECB President, expressed his appreciation of William Coen, who has served as Secretary General since 2014, having first joined the Committee in 1999. He said, "Bill has done a tremendous job leading the Secretariat over the past five years, playing a pivotal role in the successful completion of the Basel Committee's post-crisis regulatory reforms. On behalf of the GHOS and the Basel Committee, I would like to thank Bill for his dedication,

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professionalism and commitment to the job, and I wish him the very best for the future."

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Number 4

A New Horizon Speech by Mr Mark Carney, Governor of the Bank of England, at the European Commission Conference "A global approach to sustainable finance", Brussels.

A New Horizon? A few years ago, I spoke of the Tragedy of the Horizon – how the catastrophic impacts of climate change will be felt beyond the traditional horizons of most banks, investors and financial policymakers, imposing costs on future generations that the current one has no direct incentives to fix. Once climate change becomes a clear and present danger to financial stability it could already be too late to stabilise the atmosphere at two degrees. The paradox is that risks will ultimately be minimised if the transition to a low-carbon economy begins early and follows a predictable path. But for markets to anticipate and smooth the transition to a 2-degree world, they need the right information, proper risk management, and coherent, credible public policy frameworks. Today, catalysed by the COP21 Paris Agreement, and national policies such as the UK Government’s Clean Growth Strategy, some of these elements are coming into place, creating a potential path to break the Tragedy of the Horizon. But the task is large, the window of opportunity is short, and the stakes are existential. In pursuit of that New Horizon, let me briefly discuss progress and prospects in three critical areas - reporting, risk and return.

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To read more: https://www.bis.org/review/r190322a.pdf

https://www.bis.org/review/r190322a.pdf

https://www.bis.org/review/r190322a.pdf

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Number 5

Cyber Insider

An insider is someone who (knowingly or unknowingly) misuses legitimate access to commit a malicious act or damage their employer. These days, most insider acts involve IT exploitation termed “Cyber Insider”. CPNI has been engaging with industry and academia through a broad range of research initiatives that aim to improve IT monitoring capabilities to identify insider precursors and behaviour; raising awareness in employer and employee communities about insider threats; establish methods for designing IT and policies to deter staff from committing insider acts; designing IT and work practices to block insider acts. See the video below on system sabotage - a common insider act involving exploitation of IT at https://youtu.be/iekkUMpQhAY

Further information on protecting against insider acts is available under Related Pages below, covering guidance on insider risk assessment.

https://youtu.be/iekkUMpQhAY

https://youtu.be/iekkUMpQhAY

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Follow this link to visit the Legal Considerations for Employee IT Monitoring page: https://www.cpni.gov.uk/legal-considerations-employee-it-monitoring

The paper discussed at the first page of the newsletter: https://www.cpni.gov.uk/reducing-insider-risk

https://www.cpni.gov.uk/legal-considerations-employee-it-monitoring

https://www.cpni.gov.uk/legal-considerations-employee-it-monitoring

https://www.cpni.gov.uk/reducing-insider-risk

https://www.cpni.gov.uk/reducing-insider-risk

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Number 6

Consultation Paper Guidelines on liquidity stress testing in UCITS and AIFs

In April 2018, the European Systemic Risk Board (ESRB) published a set of recommendations to address liquidity and leverage risk in investment funds (the ESRB recommendations). The ESRB’s ‘Recommendation C’ requests that ESMA, in order to promote supervisory convergence, “develop guidance on the practice to be followed by managers for the stress testing of liquidity risk for individual AIFs and UCITS”. Furthermore the ESRB recommendations set out: “The guidance issued on liquidity stress testing by ESMA should include, but not be limited to: (a) the design of liquidity stress testing scenarios; (b) the liquidity stress test policy, including internal use of liquidity stress test results; (c) considerations for the asset and liability sides of investment fund balance sheets; and (d) the timing and frequency for individual funds to conduct the liquidity stress tests. Such guidance should be based on the stress testing requirements set out in Directive 2011/61/EU and how market participants carry out stress testing”. These draft Guidelines set out the criteria for managers’ LST programmes, in doing so fulfilling the above ESRB recommendations. ESMA has produced a set of fourteen (principles-based) draft Guidelines for managers to fulfil when executing LST on their funds.

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Broadly, these Guidelines set out that LST should: be tailored towards the individual fund, reflect the most applicable risks to a fund, be sufficiently extreme or unfavourable (yet plausible), sufficiently model how a manager is likely to act in times of stressed market conditions, and be embedded into the fund’s risk management framework. One Guideline applies to depositaries, outlining how they should fulfil their obligations regarding LST. The Guidelines are reinforced via a number of sections providing explanatory considerations for managers, to assist their compliance with the Guidelines. In publishing draft Guidelines for managers, ESMA is also seeking to promote convergence in the way the NCAs supervise LST across the European Union. Stakeholder’s views are also sought on ESMA’s overall approach, which is to develop a set of Guidelines for managers of UCITS and AIFs to follow, with explanatory considerations accompanying these. The document also contains Guidelines for depositaries. To read the paper: https://www.esma.europa.eu/sites/default/files/library/esma34-39-784_esma_guidelines_on_liquidity_stress_testing_in_ucits_and_aifs.pdf

https://www.esma.europa.eu/sites/default/files/library/esma34-39-784_esma_guidelines_on_liquidity_stress_testing_in_ucits_and_aifs.pdf




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Number 7

Federal Reserve System publishes annual financial statements

The Federal Reserve System has released the 2018 combined annual audited financial statements for the Federal Reserve Banks, as well as statements for the 12 individual Federal Reserve Banks and the Board of Governors. An independent public accounting firm engaged by the Board has issued unqualified opinions on the financial statements and on the Board's and the Bank's internal controls over financial reporting. The audited financial statements provide information about the assets, liabilities, and earnings of the Reserve Banks and the Board as of December 31, 2018. The Federal Reserve Banks' 2018 earnings were approximately $63.1 billion, representing a decrease of $17.6 billion from 2017. The Reserve Banks provided for remittances to the U.S. Treasury of $65.3 billion in 2018, including two lump-sum payments totaling approximately $3.2 billion that were necessary to reduce the aggregate Reserve Bank capital surplus to $6.8 billion as required by the Bipartisan Budget Act of 2018 and the Economic Growth, Regulatory Relief, and Consumer Protection Act. Interest income on securities acquired through open market operations totaled $112.3 billion, a decrease of $1.3 billion from the previous year. Interest expense on depository institutions' reserve balances during the year was $38.5 billion, an increase of $12.6 billion from the previous year.

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Interest expense on securities sold under agreements to repurchase was $4.6 billion, an increase of $1.2 billion from the previous year. Reserve Bank operating expenses were $7.0 billion, including assessments of $2.0 billion for Board expenses, currency costs, and the operations of the Bureau of Consumer Financial Protection. Total Reserve Bank assets as of December 31, 2018, were approximately $4.1 trillion, a decrease of $392.1 billion from the previous year. Total Reserve Bank assets were composed primarily of $4.0 trillion of U.S. Treasury securities and federal agency and government-sponsored enterprise mortgage-backed securities acquired through open market operations. The Federal Reserve Bank of New York provides additional detailed information about open market operations and securities holdings on an ongoing basis on its website at: www.newyorkfed.org/markets/pomo_landing.html During 2018, all remaining securities held by Maiden Lane LLC, a variable interest entity created to support the Federal Reserve's response to the 2008 financial crisis, were sold. The net proceeds were distributed to the Federal Reserve Bank of New York and on November 1, 2018, Maiden Lane was dissolved. The Board engages KPMG LLP, an independent public accounting firm, to conduct annual audits of these financial statements in accordance with auditing standards issued by the American Institute of Certified Public Accountants, the Public Company Accounting Oversight Board, and, for the Board of Governors audit only, the Generally Accepted Government Auditing Standards. The public accounting firm also conducts audits of internal controls over financial reporting for the 12 individual Federal Reserve Banks and the Board of Governors. The Federal Reserve System financial statements are available on the Federal Reserve Board's website at https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm

http://www.newyorkfed.org/markets/pomo_landing.html

http://www.newyorkfed.org/markets/pomo_landing.html

https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm




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Number 8

FSB letter to ISDA about derivative contract robustness to risks of interest rate benchmark discontinuation

This letter from the Co-chairs of the FSB’s Official Sector Steering Group (OSSG) encourages the International Swaps and Derivatives Association (ISDA) to continue its work on derivatives contractual robustness to risks of interest rate determination. The letter raises three important issues that the OSSG believes ISDA is moving to address: - the addition of other trigger events; - the timing for an ISDA consultation on U.S. dollar (USD) LIBOR and

certain other key Interbank Offered Rates IBORs; - the governance and transparency necessary as ISDA makes its final

decisions. The letter encourages ISDA to ask for market opinion on the events that would trigger a move to the spread-adjusted fallback rate for derivatives referencing IBORs. Triggers that would only take effect on the date on which LIBOR permanently or indefinitely stopped publication could leave those with LIBOR-referencing contracts still exposed to a number of risks. The OSSG also understands that ISDA intends to consult on USD LIBOR, CDOR, HIBOR and SOR in early 2019, and the OSSG strongly supports this. The OSSG Co-chairs also encourage ISDA to consult on the key technical details that ISDA’s Board Benchmark Committee will need to decide on before implementation can begin. The FSB and member authorities through the OSSG are working to implement and monitor the recommendations of the 2014 FSB report Reforming Major Interest Rate Benchmarks.

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Since July 2016, ISDA has undertaken work, at the request of the OSSG, to strengthen the robustness of derivatives markets to the discontinuation of widely-used interest rate benchmarks. The OSSG engages regularly with ISDA and other stakeholders with a view to their taking action to enhance contractual robustness in derivatives products and cash products, such as loans, mortgages and floating rate notes. To read more: http://www.fsb.org/wp-content/uploads/P150319.pdf

http://www.fsb.org/wp-content/uploads/P150319.pdf

http://www.fsb.org/wp-content/uploads/P150319.pdf

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Number 9

Avoiding the Crack of Doom New imaging technique reveals how mechanical damage begins at the molecular scale.

Just as a journey of 1,000 miles begins with a single step, the deformations and fractures that cause catastrophic failure in materials begin with a few molecules torn out of place. This in turn leads to a cascade of damage at increasingly larger scales, culminating in total mechanical breakdown. That process is of urgent interest to researchers studying how to build high-strength composite materials for critical components ranging from airplane wings and wind-turbine blades to artificial knee joints. Now scientists from the National Institute of Standards and Technology (NIST) and their colleagues have devised a way to observe the effects of strain at the single-molecule level by measuring how an applied force changes the three-dimensional alignment of molecules in the material. The technique uses single-molecule, super-resolution optical microscopy, which can resolve objects in the range of 20 nanometers (billionths of a meter)—about one-tenth the size of what can be seen at the sharpest focus with a conventional optical microscope. The new method examines a polymer doped with fluorescent molecules that emit light of one wavelength when they are illuminated with light of another wavelength. An image of the emitted light reveals not only a molecule’s location, but also its orientation horizontally and vertically. The super-resolution microscope, development of which won the 2014 Nobel Prize in Chemistry, has been widely employed for biomedical applications. “But we started wondering what you could do with it in the materials area,” said NIST scientist J. Alexander Liddle. “That is, how can we see what is happening at the molecular level at the very earliest stages of deformation or damage? If those mechanisms can be understood, researchers may be able to design better composite materials that can inhibit failure.”

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Composite materials are used throughout industry to increase strength and decrease weight. For example, half the material by weight in a Boeing 787 airframe is carbon fiber-reinforced plastic and other composites. For many such materials, it is difficult to see the early onset of damage because there are no visible markers to track its effects. To provide those markers in their experiment, the researchers used a very thin film of a polymer found in Lucite and Plexiglas that had been doped with thousands of fluorescent molecules. Initially, the polymer was unstressed, and the embedded fluorescent molecules were in completely random orientations in three dimensions. Then the scientists applied force to the polymer, deforming it in a controlled specific direction. As the polymer was strained, the embedded fluorescent molecules were carried along with the deformation, losing their random orientation and lining up with the path of the damage. That path was made visible by observing the pattern of emitted light from the embedded fluorescent molecules, which acted like a series of little flashlights pointing the way. Prior to the experiment, the scientists used a mathematical model that predicted how light would look when emitted by molecules in different 3D alignments. When they illuminated the fluorescent molecules and made images of the emitted light, the results matched the model. After about 10,000 cycles of illumination, a telltale pattern emerged showing the extent of deformation. “It’s sort of like a pointillist painting, where individual dots build up to form a shape,” Liddle said. In addition to the technique’s clear relevance to the design of essential composite materials, there might also be applications in medicine. “Let’s say you have a new bioimplant—for example, a knee replacement,” said Mitchell Wang, now at Northwestern University, who worked on the experiment while at NIST. “To make it biocompatible, it will likely be made of soft polymers, but you also want the device to have excellent mechanical properties. You want it to operate easily while also being stiff and tough. This technique could help inform design so the materials used have excellent mechanical strength.” There are many avenues for future research. “This technique was a post-mortem study, in that we could view the damage in a material after it

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already happened,” Wang said. “The next step might be to learn how to perform this work in real time, to watch not only where the damage is happening, but when.” Liddle’s team is also developing an improved imaging technique. It involves making two simultaneous image sets—one on each side of the doped polymer. On one side, imaging is produced by the method described above. On the other, a separate lens gathers fluorescent light from the material and divides it into four different polarizations in individual channels. Because the polarization of the emitted light is affected by the orientation of the fluorescent molecules, “if you measure the ratios of the intensity in each channel, you can figure out which direction the molecule is pointing,” Liddle said. “That would give us an independent measure of orientation.” In addition, the scientists hope to improve resolution by a factor of about five—allowing them to image areas as small as a few nanometers. This could be accomplished by increasing the brightness of the fluorescent molecules, perhaps by reducing their exposure to oxygen, which shuts off fluorescence. Meanwhile, Liddle said, “it still amazes me that I can look at this little bright spot in a microscope and know within five or ten nanometers where it is and also know, within a few degrees, in which direction it’s pointing.” In addition to NIST scientists, researchers at the University of Maryland NanoCenter contributed to the experiment and journal article.

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Number 10

Using AI to Build Better Human-Machine Teams Program seeks to demonstrate the basic machine social skills needed to generate effective human-machine collaborations

The inability of artificial intelligence (AI) to represent and model human partners is the single biggest challenge preventing effective human-machine teaming today. Current AI agents are able to respond to commands and follow through on instructions that are within their training, but are unable to understand intentions, expectations, emotions, and other aspects of social intelligence that are inherent to their human counterparts. This lack of understanding stymies efforts to create safe, efficient, and productive human-machine collaboration. “As humans, we are able to infer unobservable states, such as situational beliefs and goals, and use those to predict the subsequent actions, reactions, or needs of another individual,” said Dr. Joshua Elliott, a program manager in DARPA’s Information Innovation Office (I2O). “Machines need to be able to do the same if we expect them to collaborate with us in a useful and effective way or serve as trusted members of a team.” Teaching machines social intelligence however is no small feat. Humans intuitively build mental models of the world around them that include approximations of the mental models of other humans – a skill called Theory of Mind (ToM). Humans use their ToM skill to infer the mental states of their teammates from observed actions and context, and are able to predict future actions based on those inferences. These models are built on each individual’s existing sets of experiences, observations, and beliefs. Within a team setting, humans build shared mental models by aligning around key aspects of their environment, team, and strategies. ToM and shared mental models are key elements of human social intelligence that work together to enable effective human collaboration.

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DARPA’s Artificial Social Intelligence for Successful Teams (ASIST) program seeks to develop foundational AI theory and systems that demonstrate the basic machine social skills necessary to facilitate effective machine-human collaboration. ASIST aims to create AI agents that demonstrate a Machine ToM, as well as the ability to participate effectively in a team by observing and understanding their environment and human partners, developing useful context-aware actions, and executing those actions at appropriate times. The agents developed under ASIST will need to operate across a number of scenarios, environments, and other variable circumstances, making the ability for them to evolve and adapt as needed critical. As such, ASIST will work to develop agents that can operate in increasingly complex environments, adapt to sudden change, and use observations to develop complex inferences and predictions. During the first phase of the program, ASIST plans to conduct experiments with single human-machine interactions to see how well the agents can infer human goals and situational awareness, using those insights to then predict their teammate’s actions and provide useful recommended actions. As the program progresses, the complexity will increase with teams of up to 10 members interacting with the AI agents. During these experiments, ASIST will test the agents’ ability to understand the cognitive model of the team – not just that of a single human – and use that understanding to develop appropriate situationally relevant actions. Full details on the program can be found in the Broad Agency Announcement (BAA) solicitation, which has been posted to the Federal Business Opportunities website: https://www.fbo.gov/index?s=opportunity&mode=form&id=9d4acf0aba98916288a541bd07810004&tab=core&_cview=1

https://www.fbo.gov/index?s=opportunity&mode=form&id=9d4acf0aba98916288a541bd07810004&tab=core&_cview=1




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Disclaimer The Association tries to enhance public access to information about risk and compliance management. Our goal is to keep this information timely and accurate. If errors are brought to our attention, we will try to correct them. This information: - is of a general nature only and is not intended to address the specific circumstances of any individual or entity; - should not be relied on in the context of enforcement or similar regulatory action; - is not necessarily comprehensive, complete, or up to date; - is sometimes linked to external sites over which the Association has no control and for which the Association assumes no responsibility; - is not professional or legal advice (if you need specific advice, you should always consult a suitably qualified professional); - is in no way constitutive of an interpretative document; - does not prejudge the position that the relevant authorities might decide to take on the same matters if developments, including Court rulings, were to lead it to revise some of the views expressed here; - does not prejudge the interpretation that the Courts might place on the matters at issue. Please note that it cannot be guaranteed that these information and documents exactly reproduce officially adopted texts. It is our goal to minimize disruption caused by technical errors. However, some data or information may have been created or structured in files or formats that are not error-free and we cannot guarantee that our service will not be interrupted or otherwise affected by such problems. The Association accepts no responsibility regarding such problems incurred because of using this site or any linked external sites.

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International Association of Risk and Compliance Professionals

You can explore what we offer to our members: 1. Membership – Become a standard, premium or lifetime member. You may visit: www.risk-compliance-association.com/How_to_become_member.htm Become a lifetime member of the association, and to continue your journey without interruption and without renewal worries. You will get a lifetime of benefits as well. You can check the benefits at: www.risk-compliance-association.com/Lifetime_Membership.htm 2. Weekly Updates - Subscribe to receive every Monday, the Top 10 risk and compliance management related news stories and world events that (for better or for worse) shaped the week's agenda, and what is next: http://forms.aweber.com/form/02/1254213302.htm 3. Training and Certification - The Certified Risk and Compliance Management Professional (CRCMP) training and certification program has become one of the most recognized programs in risk management and compliance. There are CRCMPs in 32 countries around the world. Companies and organizations like Accenture, American Express, USAA etc. consider the CRCMP a preferred certificate. You can find more about the demand for CRCMPs at: www.risk-compliance-association.com/CRCMP_Jobs_Careers.pdf For the distance learning programs, you may visit: www.risk-compliance-association.com/Distance_Learning_and_Certification.htm For instructor-led training, you may contact us. We can tailor all programs to meet specific requirements. We tailor presentations, awareness and training programs for supervisors, boards of directors, service providers and consultants.

http://www.risk-compliance-association.com/How_to_become_member.htm

http://www.risk-compliance-association.com/How_to_become_member.htm

http://www.risk-compliance-association.com/Lifetime_Membership.htm

http://www.risk-compliance-association.com/Lifetime_Membership.htm

http://forms.aweber.com/form/02/1254213302.htm

http://forms.aweber.com/form/02/1254213302.htm

http://www.risk-compliance-association.com/CRCMP_Jobs_Careers.pdf

http://www.risk-compliance-association.com/CRCMP_Jobs_Careers.pdf

http://www.risk-compliance-association.com/Distance_Learning_and_Certification.htm




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Some CRCMP jobs:

4. IARCP Authorized Certified Trainer (IARCP-ACT) Program - Become a Certified Risk and Compliance Management Professional Trainer (CRCMPT) or Certified Information Systems Risk and Compliance Professional Trainer (CISRCPT). This is an additional advantage on your resume, serving as a third-party endorsement to your knowledge and experience. Certificates are important when being considered for a promotion or other career opportunities. You give the necessary assurance that you have the knowledge and skills to accept more responsibility. To learn more, you may visit: www.risk-compliance-association.com/IARCP_ACT.html

http://www.risk-compliance-association.com/IARCP_ACT.html



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5. Approved Training and Certification Centers (IARCP-ATCCs) - In response to the increasing demand for CRCMP training, the International Association of Risk and Compliance Professionals is developing a world-wide network of Approved Training and Certification Centers (IARCP-ATCCs). This will give the opportunity to risk and compliance managers, officers, and consultants to have access to instructor-led CRCMP and CISRCP training at convenient locations that meet international standards. ATCCs use IARCP approved course materials and have access to IARCP Authorized Certified Trainers (IARCP-ACTs). To learn more: www.risk-compliance-association.com/Approved_Centers.html

http://www.risk-compliance-association.com/Approved_Centers.html

