Can Business Intelligence Help Companies Avoid Compliance Troubles?

Abstract

This study examines how the extent of business intelligence (BI) systems within business enterprises is associated with compliance risk. BI tools promote a risk-aware culture by providing real-time data and analytics, helping establish objectives aligned with compliance, and ensuring transparent communication of compliance information across the organization. Using BI, organizations can better address compliance challenges, strengthen risk management practices, and adhere to regulatory requirements more effectively. Based on a BI implementation dataset, we find that firms with more widespread BI implementation in the organization have lower compliance risk and report fewer regulatory violations and lawsuits. We also provide evidence that some measures of strategic IT focus moderate the association between BI implementation and compliance risk outcomes. Delving into the particularities of the association between BI implementation and compliance risk, we find that greater BI implementation is associated with lower lawsuit settlement amounts, fewer lawsuit types, and shorter lawsuits. Further, the beneficial association of BI implementation with compliance risk is mainly related to operational compliance risk rather than financial accounting compliance risk. Our findings have crucial implications for the value of BI in corporate compliance risk management.