Regulators More Sophisticated in Measuring Compliance: The E&C Pulse - August 5, 2020

August 5, 2020 Ben DiPietro

Aug. 5, 2020

Regulators More Sophisticated in Measuring Compliance

LRN participated in two recent events that focused on issues of ethics and compliance--one looking at issues in Latin America, one concentrating on what is happening in Canada.


Both gatherings talked about the more sophisticated approach regulators are taking when it comes to evaluating an organization's ethics and compliance program.


LRN’s Yoab Bitran led a digital discussion in Latin America with webinar organizer Estado Diario that asked questions about how technology is shaping compliance, how it can help inform ethics and compliance decisions and initiatives, and what are the main concerns companies have as they adopt new compliance technologies.


An emphasis in the discussion was on the relationship between compliance effectiveness and technology. Companies need to know why a certain percentage of employees failed to answer correctly a question on a training quiz, and then to be able to tell regulators what they are doing to address the issue. All of that capability requires technology.


“Prosecutors used to ask companies under investigation to prove they had elements of E&C programs,” said Bitran. “Now they don’t ask if you had E&C training, but also whether the employees learned, whether the form and content was appropriate, and whether it had an impact on employee behavior. Companies need to prove they were accessible, relevant to day-to-day operations, and understood by employees.”


Regulators also expect companies to have knowledge of their third-party partners, said Bitran. They not only care about whether the company detected misconduct with third parties, but how it was uncovered, what the response was, what lessons were learned, and whether they are incorporated into training and program enhancements.


The need to prove compliance effectiveness accelerates the adoption of technology, said Bitran, as the ability to measure the effectiveness of programs is a key test for E&C teams.


For example, a company’s management may be sure it has a fantastic code of conduct, but nobody uses it, and may not even have read it, or it could be touting its helpline, but none of the employees trusts it, and are afraid of retaliation, he said.


“By being able to measure effectiveness, I risk knowing my compliance initiatives have little or no impact,” said Bitran. “Culture is what determines the success of an E&C program, and culture is about consistent and observed behaviors,” said Bitran. “Technology can help change behavioral patterns, and therefore, culture.”


LRN also took part in Ethisphere Institute’s Canada Ethics Summit, where some of the talk centered on how to measure program effectiveness. Among the lessons: The effectiveness of an E&C program is not based on one topic.


For example, Ethisphere annually releases a list of the World’s Most Ethical Companies, and companies are measured in several areas, including tracking misconduct trends; culture of ethics employee assessments; root cause analysis following misconduct investigations; soliciting employee feedback after training; and tracking reporting frequency against training roll-out timing.


Increased emphasis on short-term planning suggests flexibility is increasing in priority. "That is manifesting itself in increased collaboration between E&C teams and other functional leaders, such as adding an ethical component to awards identifying and recognizing top performers," said LRN's Maggie Bettinson.


Other issues include combating Zoom fatigue; offering a diversified array of trainings that address issues of shortening attention spans; ensuring accurate leader-led messaging; creating DEI teams and altering the structure of E&C departments to incorporate societal needs; taking a public stance from an organizational point of view to global events; and ensuring other departments are included in culture-building activities.


A key takeaway was the importance of adapting and pivoting in the face of challenge, such as replacing in-person training with Webex or Zoom, and asking managers to take on more of the training/interface responsibilities for E&C, said LRN’s Susan Divers, who moderated a Summit panel about how companies are using different methods to address COVID-19. (I wrote about it here.)


There was much discussion about the importance of empowering middle managers, which not only creates tone from the middle but overall helps the flow of information throughout the company, and helps CECO’s open doors and gain visibility into areas they may not have been able to before.


“Operating in silos, you will always miss something, you will always have a gap,” said Tiffany Archer, regional ethics and compliance officer, and corporate counsel at Panasonic Avionics Corp., and a Summit participant.


                                                                                                        BEN DIPIETRO




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