Mitigate risk with an effective compliance program
- 7 Elements of an Effective Compliance Program
- What is a Compliance Program?
- Who is Responsible for Compliance?
- What is the Purpose of a Corporate Compliance Program?
- What Will the Scope of a Compliance Program Depend On?
- What are the Seven Elements of an Effective Compliance Program?
7 Elements of an Effective Compliance Program
Want to build a culture of integrity in your organization? Sure you do. Here's how: effective ethics and compliance programs. Establishing compliant and ethical behaviour among the masses (regulating against non-compliance) is a big step in the fight against fraud and abuse. All organizations have their own unique plan in the running of their businesses and achieving success. However, there's a similar foundation that sets the base of any effective program in any industry.
It's important to promote a culture of compliant and ethical behaviour, not to mention exercising due diligence to prevent and detect criminal conduct. Otherwise, you'll find your organization is subject, but not limited to:
- Fines;
- Periods of probation for federal offenses, securities, bribery, fraud, money laundering, criminal business activities, extortion, embezzlement, conspiracy, and otherwise;
- Damaged public/shareholder image and social media backlash;
- And media scrutiny
Today, let’s explore the essential elements of an effective compliance program, helping you mitigate such risks more effectively and proactively.
What is a Compliance Program?
To put it simply, a compliance program is all of the internal procedures that your company has in place to ensure there is no ethical misconduct in the workplace. Compliance programs are important, and different parts of the Canadian government, such as the CRA, run programs and provide information that will help companies avoid committing non-compliant acts such as fraud or tax evasion.
Every business should include a compliance program that is carefully incorporated into their mission statement, onboarding, and training, and that guides their workplace culture and best practices. Businesses should adhere to Canada’s Code of Conduct.
Who is Responsible for Compliance?
On the front lines of compliance is your company’s compliance officer. They have numerous duties to fulfill. To begin with, it’s their job to implement, administer, and promote the policy. Compliance officers need to be aware of any existing or new risks to the company and have to prepare regular reports, which they then hand in to directors or management. That way, these entities know how the organization is performing ethically.
Compliance officers are also in charge of the onboarding process of new employees when it comes to training them on compliance procedures. They should ensure that all employees have the code of conduct, can easily access it, and that they’ve acknowledged it in writing. It never hurts to have employees review it regularly.
In addition, these officers are responsible for following up on suspicious activity in the workplace. They’ll receive all reports of non-compliance from workers. In cases of non-compliance, the compliance officer is in charge of recommending proper disciplinary action. Compliance officers are also responsible for adopting new technologies to the compliance program as required and training employees to use them. Examples of these include reporting software and hotlines.
What is the Purpose of a Corporate Compliance Program?
A corporate compliance program serves many purposes. The first is to prevent ethical misconduct such as tax fraud, extortion, or criminal activity that can lead to wider and business-ruining ramifications. A strong, properly functioning program will help prevent your company from drawing media attention for all the wrong reasons.
When paired with volunteer or charity initiatives, a corporate compliance program can boost your company’s reputation and draw in high-level new hires as most employees prefer to work in businesses with good codes of ethics. It also provides your employees with a comfortable workplace culture where they won’t fear retaliation if they report on misconduct.
What Will the Scope of a Compliance Program Depend On?
The scope of a compliance program often depends on how large your business is. The larger your business becomes, the more the program will need to cover. It will also become more formal and will be able to implement more resources since it can now afford more. To understand the scope of your compliance program, you need to periodically gauge whether it is meeting your compliance needs. You can do this by holding discussions with the Board of Governors, management, and employees to get a better understanding of what they think.
You should also ensure you know what your business objectives are so that you can continuously improve your compliance program in order to meet those goals. As you perform periodic reviews of your compliance program and update it, be sure to conduct regular risk assessments and try to identify any new possible threats to your operations.
What are the Seven Elements of an Effective Compliance Program?
We’ve scratched the surface of compliance programs, what they are, who is involved, and why we need them. However, not all compliance programs are made equal. It’s time that we dig a little deeper into what makes a compliance program successful. So, what are the elements of an effective compliance program?
Communicate Standards and Procedures
The key to a company’s ability to create a culture of integrity is to ensure employees are communicated to and understand what standards and procedures they should be adhering to. Employees, and all stakeholders for that matter, need to be living and breathing the organization's Code of Conduct. Expected behaviour, as outlined in the Code, needs to be understood by everyone. So go ahead, have lunch and learn sessions, team meetings, performance reviews, and otherwise. Educate, communicate, then communicate again.
High-Level Oversight
Meet your compliance officer. This isn’t just anyone at your company; they have to facilitate the ethics and compliance program, and they’re higher up the totem pole in terms of seniority. This position must be held by a strong and honest leader, perhaps even a group of leaders depending on the size of your organization. Regardless, exercising appropriate due diligence during the vetting process must be completed before handing over those reigns because they are higher in authority and, according to the ACFEs 2020 Report to the Nations, the higher the position in seniority, the more median fraud is committed. The compliance officer shouldn’t be in a high-risk position at the company, such as a Chief Financial Officer. As the person in charge of investigating suspicious behaviour, appointing such a person the compliance officer would be a serious conflict of interest.
Educate and Train
Education and training organization-wide is vital to the success of your program. Many organizations have policies in place but have not communicated them fully to achieve optimum success. Not only should the Code of Conduct and Ethics be shared and acknowledged in writing when an employee is onboarded, but there should be a regular review of the code. That way, when you find people doing things they're not supposed to (fraud because it "wasn't clear") and the organization suddenly finds itself in hot water, the compliance officer has done their job. All stakeholders need to understand the Code and prove they understand it via verification. Collecting signatures is integral to this process.
Audit and Monitor
Any internal system needs to be checked out to see if it's working. Auditing and monitoring of the ethics and compliance program should be top of mind of the compliance officer. It’s important to focus on ensuring that relationships with third-party vendors, financial and accounting entities, remain compliant in order to prevent fraud, bribes, abuse, and other wrongdoings.
Reporting
Organizations should have a formal whistleblower system in place as part of their ethics and compliance program. It's essential to ensure that every employee and stakeholder has a place to safely, anonymously report or voice any allegations of wrongdoing without fear of retaliation. Implementing a third-party system is the best solution to enable anonymous reporting and ensures employees feel safe enough to voice their concerns without any threat of bias. Anonymous hotlines are one such popular way to implement whistleblowing systems. Regardless, the compliance officer should receive the reports of non-compliance in the office and follow up on these allegations.
Discipline
When systems are set up and programs are put in place, a set of consequences should be established to deal with non-compliance, and those consequences should be applicable across the entire organization. That means, regardless of the level of seniority of the employee within the organization, disciplinary measures should be the same. From employees in the mailroom to the CEO, if you commit fraud or partake in bribes, you will be punished equally. Bad behaviour should not discriminate on position. In the event that lower-level employees are punished more harshly than higher-ranked employees, there may be numerous consequences for the organization as a whole.
- First of all, since the compliance officer is in charge of disciplinary action, employees may no longer feel comfortable reporting to them or via an anonymous whistleblowing system as they will feel like it isn’t worth their time. They may, instead, report to the media as an anonymous source.
- Second, a failure to implement fair and equal disciplinary action across the company is, in itself, ethical misconduct, and the suitability of the compliance officer for their role may be questioned.
- Third, employees that find themselves in positions that they deem unfair, with no solution, will be more compelled to leave the company if given the opportunity. This leads to higher and faster employee turnover, which can hurt both your company’s bottom line and your reputation.
Address Every Allegation
Don't ignore any allegation that comes forward. By responding to complaints, you're showing an interest in what whistleblowers are feeling or experiencing that made them come forward in the first place. Not all allegations may need outside help; serious issues like stealing and harassment should be relatively quick and straightforward to resolve. Some queries can be passed along to Human Resources, such as one about a co-worker that keeps hanging around an employee’s desk and chatting. Communicating with the whistleblower and keeping them informed of the process goes a long way, however, regardless of who is destined to handle their concerns.
Conclusion
Should your organization find itself suddenly the focus of felonious conduct, having an effective ethics and compliance program in place can greatly reduce any sentencing or fines the organization can otherwise incur. By protecting your team with the right program and a dependable, unbiased compliance officer, you lessen your chances of facing major fines and violations.
There is a lesson here: due diligence is smart business practice. To avoid a breach in ethics that could land you in hot water, make sure you have a working compliance program that is being updated with the needs of your business.
WhistleBlower Security offers the best compliance solutions and technology to keep your company safe from ethical misconduct. From training to analytics to hotlines, we can help set you up for success. Get in touch today to get started.
