July 24, 2019
Keeping Compliance Top of Mind at a Trouble-Free Firm
It is sometimes said the best thing that can happen to an ethics and compliance program is for the organization to do something bad and be penalized. Nothing better to get the undivided attention of the board, C-suite and employees, and to ensure sufficient resources to build a robust program and operationalize it. A little trouble can go a long way.
Still, no ethics and compliance professional in their right mind wishes for their organization to realize the value of a strong program by having to pay out millions of dollars, and have its reputation suffer damage.
So, how to keep ethics and compliance front and center at organizations that haven’t faced charges of serious misconduct was a topic of conversation during a roundtable of E&C executives last week in New York put together by Consero and LRN.
The first step is to take an honest assessment of your program, what it does well, and what it doesn’t do, then create a plan to address any challenges.
“We had a robust plan, but it was not very operationalized,” said a compliance executive for a car rental company. As a company with operations in more than two dozen countries, the executive is working--and having success--getting more ethics and compliance people on the ground in its various locations, part of a larger goal of getting business units to take ownership.
“It’s putting compliance back out in front, even though we don’t have issues,” the executive said.
A compliance head at a medical services company said because the focus was on dealing with individual issues, the team wasn't “really stepping back and saying, "Do we really have an effective program?"
The team developed a risk assessment protocol that involved identifying key risks, and the people in the company most likely to intersect with those risks. Then it came up with meaningful ways to measure the program. As a result, the company now is better able to prioritize and organize which risks to respond to, when, and how. "It lets us focus on what matters,” the executive said.
A compliance executive at a technology and entertainment company said even though E&C has all the resources it needs to maintain a strong and effective program, the most important thing is to keep people engaged.
Part of the way the department does that is by showing in every budget cycle how fostering an ethical culture adds value to the organization. For instance, one month the executive provided details from a survey that found millennials will take a pay cut to work at companies they feel have ethical cultures.
Moderator Susan Divers of LRN said being able to embed compliance in the business helps employees understand the value of taking ethics into consideration. "The more that ethics and compliance factors are part of the business and its processes, the easier it is for everyone to take them into account," said Divers.
The chief compliance officer at a tech, data, and financial services firm said there are challenges that come from having parts of the business that are regulated and other parts that are not, and also to building consensus for the compliance program’s need and scope when nothing bad has happened.
Building that consensus sometimes involves having difficult conversations with other business unit leaders, especially those outside of the U.S. that are not as fully aware of the ramifications of failing to follow all rules and to do what is right at all times. Learning about their business objectives, and showing them the risks they likely are to encounter while working to meet those goals, is key, the executive said.
“You can identify potential issues and help them to understand that I am here as an advocate to ensure the sustained growth of the company,” the executive said. "It’s about shifting that mindset, and it’s an ongoing exercise.”
Many organizations get stuck in the trap of reacting to risks from the past, and Divers wanted to know how the executives anticipate what their next big risk areas will be. LRN research shows the most effective programs use robust analysis to shape and improve programs.
Each of the leaders said it is vital to really understand what the business does, and how it does it, so you can plot a path that allows for agility in meeting whatever challenges arise.
Part of having success comes from being able to frame issues, and how ethics and compliance can help in the language used by business units, said the car rental executive. “When we can do that with our program, we’ll be seen as a value-add, and not a cost center.”
The tech and entertainment executive said the company embeds compliance in every business unit, then holds each business unit leader responsible, while giving them resources and a dedicated chief compliance officer and staff. The company uses a tool to help identify the top risks for each unit.
“We are always looking at current risks, emerging risks, benchmarking,” the executive said. “We are trying to make sure we have it covered as best we can.”
The medical services executive said it’s important to identify the specific people in the organization who may put the company at risk, either through the way they use language, or their lack of understanding of the risks they are encountering.
What to do, then? Boil down to digestible, understandable concepts the risks those employees faced, so they are aware of what can happen if things go wrong. Also, it’s imperative to use managers to convey messages about ethics and compliance, as employees are most likely to see the issue as important if it is being raised to them by their direct supervisor.
The tech and entertainment executive told a story about measuring awareness for its policy against retaliation, on which was spent substantial time and resources. Yet, when asked in surveys, many employees said they hadn’t heard about it. It wasn’t until the message was filtered through their managers that employees began to hear about it and take it seriously.
“They weren’t paying attention to messages from HR and compliance,” the executive said. “Direct managers have the most impact on culture.”