As a compliance professional, you intrinsically know why corporate compliance is important. In fact, it’s likely that’s why you ended up with a career in the field. However, it can be difficult at times to explain the real value of corporate compliance to others.
To better understand the real value that compliance teams drive, we asked 10 compliance experts:
How does corporate compliance bring value to businesses today?
So whether you are pitching the value of compliance to your in-laws, a new executive, or just need to remind yourself why you do what you do, look no further. Here are 10 reasons why compliance experts think corporate compliance is immensely valuable.
The bottom line is that effective compliance creates more efficient business processes that translate to greater profitability at the end of the day. A wide variety of non-profit research, academic studies, and business case studies demonstrate that when compliance is properly seen as a business process, more effective compliance creates value by making the business processes operate more efficiently. Ethisphere and ECI have over 10 years’ worth of data which shows that companies that receive their highest awards for effective compliance programs and ethical standards excellence are more profitable than the average for publicly traded companies. Academic research has shown that effective compliance controls, reporting systems, and compliance programs all reduce costs and improve ROI. Finally, there are multiple business case studies that show that the data generated by compliance solutions can be used to improve business processes and increase business unit profitability.
– Tom Fox of The Compliance Evangelist
Corporate compliance simply makes businesses run better. One of my clients needed to implement a third-party due diligence solution. During the process, they figured out that they had hundreds of third-parties in their various finance systems that weren’t in use anymore. They also found that they had numerous vendors with small accounts performing overlapping activities. By having the business strip out those third-parties that were no longer in use, and consolidating a list of preferred vendors with more favorable terms, the business became more efficient.
Compliance can save a business money and create more streamlined processes. It can also help the company to get business initiatives right the first time, instead of having to undo or redo work because of ignorance of the law. Compliance can be a game-changer for good.
– Kristy Grant-Hart of Spark Consulting
Corporate compliance brings value to a business today by making it a more attractive partner to other businesses.
Say your organization finds two potential suppliers, distributors, joint venture partners, or what have you. Their services are identical in every way — but one has a clear, rigorous, documented compliance program; the other does not. Which would you prefer?
The one with the better compliance program, of course. Its dedication to compliance makes your life easier. That’s true for you, the chief compliance officer; and for your company, looking to build reliable commercial relationships. So your company is more likely to do business with that other party.
Well, that principle is true for every business in the world, too. So why not be that more desirable third party yourself?
We are all somebody else’s third party.
Some organization out there is just as uneasy about your ethics and compliance risks as you are about yet another organization’s risks.
An effective corporate compliance program eases those fears. It makes your business more attractive to customers and business partners, relative to your peers.
Which, last time I checked, was a pretty valuable thing.
– Matt Kelly of RadicalCompliance.com
My practice focuses on export controls and sanctions compliance. You cannot watch the news – or open the US policy announcement app known as Twitter – without seeing something related to these issues in the news whether it is Iran, Russia, China, Venezuela, or North Korea. It has the attention of boards and executives across the world. Given the significant fines and penalties, including personal liability for senior management, associated with this area of law and regulatory compliance in recent years, compliance brings value through significant risk avoidance – personal and corporate. As more companies become acutely aware of the risks, especially non-U.S. companies, compliance brings value through instilling confidence in your business partners and providing certainty to your shareholders that your business is on top of these issues and mitigating the risks of direct exposure as well as secondary sanctions exposure. For business partners who have multiple choices, your compliance program in this space, especially if you operate in challenging jurisdictions or targeted industries, can be a heavily-weighted factor in their decision-making process. We also see this area being a focus of M&A due diligence which can significantly affect valuations or even kill the deal depending on the level of risk exposure.
– Matt Bell of FTI Consulting
I prefer to talk about Business Integrity or Ethics, rather than compliance. For me, compliance is an outcome, not an approach. However, whatever you call it, the function makes a huge contribution when it focuses on creating an effective ethical culture, based on values. Why? By bringing the importance of integrity, fairness, and other ethical values to the attention of employees; by creating the systems and processes that allow them to incorporate ethical ways of working into their everyday lives, and to monitor the results, Business Integrity supports management in their task of creating a sustainable organization. Values-driven organizations have higher levels of employee engagement and better bottom-line results. So never doubt the contribution that your function is making to the organization!
I have served as the chief compliance officer for 5 companies while living in the U.S., China, Europe, and the Middle East during my career. Although my experiences have varied, how compliance delivers value has remained constant. By engaging leaders and strengthening the integrity culture, we protect the company and help employees make the right day-to-day decisions. We have a number of measurement tools – hotlines, KPIs, employee surveys, training statistics, audits – that keep us focused and heading in the right direction. True value delivery is, however, reflected in actions — employees raising their hands to ask questions so they can do the right thing, leaders proactively carrying forward integrity messaging at their team meetings, or the C-suite delivering authentic tone from the top and being transparent when holding people accountable. Those are the signals that we have helped the business do the right thing to win in today’s market.
– Kurt Drake of Kimberly-Clark
Compliance, whether capital “C” as in the function or lowercase “c” the act of being compliant, is rarely viewed positively. In Compliance’s case, there is often a perception that they are the Business Prevention Unit. Meanwhile, compliance is red tape, an unavoidable cost of doing business.
What these perceptions undermine, is the strategic advantage that a respected Compliance delivering effective compliance can provide. Regulators exist because self-regulation and market forces, don’t always deliver desirable societal outcomes.
In an era where technology, particularly social media, is fuelling unprecedented activism, the reputational risks associated with regulatory breaches are often far more costly than the fines they incur. To survive, companies need sustainable business models, founded on compliance.
The value that Compliance and compliance bring to organizations in the 21st century is, therefore, to manage one of the most significant risks facing most organizations. Far from being a necessary evil, they’re both strategic necessities. Get compliance right, and you have a substantial advantage over your competitors. Get it wrong, and you risk being out of business.
– Christian Hunt of Human Risk Limited
Companies exist to protect and maximize shareholder value while also addressing key stakeholder needs, including the communities they serve through sound corporate responsibility. Corporate compliance is directly tied to this “existence” statement as a process to promote internal and external compliance. Internal compliance adds value by fostering an ethical environment to prevent and detect fraud and deceitful practices, while external compliance helps to protect companies from adverse legal actions thus protecting shareholder value. Value as an ethical organization is realized through a culture of attracting people of robust values and the ability to retain competent personnel with a more competitive culture than others who don’t take corporate compliance seriously.
Too many times corporate compliance is spelled out simply through written policies and procedures without management walking the talk. Remember that It is the substance of corporate compliance (i.e., actions) that is more important than the form (i.e., written policies and procedures). While both “form” and “substance” are necessary, companies that continuously pump life into their corporate compliance efforts oftentimes realize a lower cost of capital, reduced losses due to occupational fraud, and the ability to attract, develop and retain competent people superior to their competitors.
– Ron Kral of Kral Ussery LLC
Corporate commitment to compliance and ethics delivers value at every level of the organization. When compliance programs are tailored and well-executed, the Board should breathe easier knowing that employees all work in an ethical environment – one that encourages transparency and the worry-free raising of concerns. When we read about astronomical fines by enforcement agencies (think anti-corruption, export control failures) and/or press that creates reputational damage (think #metoo movement), the origin of these issues can always be traced back to human judgment or lack thereof. Meaningful value is when an employee feels comfortable raising a red flag early enough to allow the organization to address the issue and mitigate damage before it becomes a crisis. And increasingly, business partners expect as much or more commitment to compliance as enforcement agencies. Effective communication, technology, and accountability in compliance and ethics can transform culture and change behavior – that’s powerful value.
– Valerie Charles of GAN Integrity
In order to get their stakeholders on board, compliance professionals themselves need to be deeply convinced of the huge value they bring to the business.
A strong ethics & compliance program will protect employees and top management, maintain the company’s reputation, its bottom line and help secure the future of business.
Most importantly, a strong program is also likely to have a sustainable and deep cultural impact across the company, helping it further shape its values, and thus its identity over time. And this should not be underestimated in a world where millennials value missions more than money. A strong culture of integrity is not only key to recruit the best talents (Linkedin’s 2018 Workplace Culture report found that 86 percent of millennials would consider taking a pay cut to work for a company whose mission and values align with their own), it is, in my opinion, becoming increasingly critical when it comes to recruiting your clients.
– Pauline Blondet of GAN Integrity
The Value of Corporate Compliance
We hope that these responses have given you some new perspectives to consider when you are thinking about the value corporate compliance brings to businesses globally. Thank you to all of the inspiring respondents who took the time to answer our question. To learn more about compliance experts, check out our post on Compliance Thought Leaders You Should Be Following.