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6 Tips for Building Stronger Compliance Foundations

January 15, 2015

Originally published in Law360 on January 14, 2015.

Enforcement cases in 2014 highlighted the increasingly complex legal, business and ethical challenges faced by legal and compliance professionals across industries and national borders. Whether they are facing the challenges of a fast-paced, demanding global business environment, budgetary pressures and limited resources, myriad and sometime conflicting regulatory regimes, whistleblower complaints or government scrutiny, legal and compliance professionals who are on the frontlines every day know that—to be successful—they must strike a thoughtful balance that supports business growth objectives while strengthening and reinforcing internal controls designed to prevent and detect conduct that may violate the law and put the company’s profits and reputation at risk.

This balancing act is not easy and increasingly requires multifaceted skillsets and capabilities not taught in law school or by litigating cases. To the contrary, the most important skills to achieve success in today’s compliance world range from proactive, creative strategic thinking, through practical business sense and political know-how, to exceptional teambuilding, savvy marketing and, as needed, strong offensive and defensive tactical planning and execution.

Although 2014 brought numerous cases that demonstrated extensive compliance failures and program weaknesses that allowed wrongdoing to go undetected, there are many more success stories and forward-thinking specialists who are meeting the test in an evolving profession and fast-paced environment. To ring in the new year, here are some tips to turn tough, real-world challenges into success stories that build lasting partnerships with leadership, bolster corporate compliance and drive long-term business success.

1. Make Sure You Are Part of the Team

Understand short-, medium- and long-term business priorities and objectives to more effectively build partnerships and assess compliance risks.

The foundation of effective compliance programs are controls that are tailored to a company’s risk profile. To understand the risk profile, you must have a seat at the table and understand both the current business model and future business strategy, starting with 2015. Product launches, new customer targets, changes in distribution methods and expansion into key geographic areas may present exciting opportunities for revenue, higher share prices and growth, but they also present compliance risks that will require your attention and may impact how you manage your valuable and limited resources.

Additionally, business units under increased pressures to perform—particularly those operating in higher risk markets, subject to government regulation, experiencing heightened regulatory scrutiny or facing other compliance risks—should receive more programmatic focus. Similarly, acquisitions and mergers may require significant resources to assess due diligence, manage legal risk and implement strong integration plans, while divestitures may require a different level of attention.

Finally, do not ignore profit centers or sleepy business units in smaller markets. History proves both that reverence for profit centers or superstar executives has no place in effective compliance, and that unmonitored, seemingly insignificant business units can lead to costly investigations.

In short, it is no longer good enough to follow a simple checklist to assess and prioritize risk. Compliance programs and priorities cannot be effectively planned from the comforts of your office. A strong program requires that legal and compliance professionals build partnerships with business leaders. Make sure you are part of the team so that you can support business objectives, prioritize risk and manage deployment of your resources to build the strongest possible compliance infrastructure.

2. Revisit Corporate Core Values with Leadership to Reinforce Shared Values 
and Expectations


Identify opportunities to integrate core values into top down messaging, compliance communications and training. Practice what you preach.

Who are you and what do you stand for? Most businesses (and their compliance programs) are built around a set of core values. Are the company’s core values integrated into its written compliance documents and training materials? More importantly, are you living up to the standards the company preaches? Are you fostering a “speak up” culture that encourages employees to bring concerns to the company before running to the nearest lawyer, reporter or the government? Are you “hearing” and addressing their concerns? What can you point to if the government comes knocking?

Make sure that your stated values, codes and policies are more than just paper. Paper programs run a risk of systematic compliance failures that will be treated very harshly in the event of an enforcement event. While most companies fall somewhere in the middle, it is clear that companies with documented compliance programs, monitoring and periodic assessments of the adequacy of internal controls pick up on problems more quickly, more effectively avert or minimize the damage of whistleblower claims, and fare much better with government regulators. In today’s world, talk is cheap. What you do in practice and showing your work will be worth its weight in gold.

3. Leverage Existing Company Resources as Part of Your Team

Create partnerships to share the risks and the rewards of well-managed compliance.

Find ways to foster and reward teamwork. Shrinking budgets and business pressures make it virtually impossible for legal and compliance professionals to go it alone. Creating compliance partnerships with other control, administrative and business functions, such as internal audit, human resources, security, information technology, finance and key business managers is paramount. These types of cross-functional teams—when working together—are much more likely to identify areas of higher risk overall and to uncover problematic conduct and related patterns that may require heightened scrutiny. Build a relationship of trust with business leaders and, in particular, middle managers who are operating in higher risk areas. The more they see you as a helpful resource, the less you will be perceived as a cost center or “in the way.”

You don’t need to work alone. You have a bigger army than you think. Find ways to build bridges and use them wisely so that you don’t miss opportunities to find and fix problems, and to ensure you have a team around you when you need it most.

4. Foster A Culture of Compliance Ownership—Not Just From the Top Down, But Also From the Bottom Up

Support those who have the courage to raise legitimate concerns, no matter their station.

A quick Google search confirms that compliance professionals are routinely exhorted to create a “speak up” culture, but no amount of speaking up will matter if companies are not listening. The U.S. Securities and Exchange Commission‘s “2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program” estimated that 80 percent of tips from current or former company employees were originally reported internally to supervisors or compliance personnel before the tips went to the SEC. What does this mean? Companies need to become more responsive to whistleblower complaints. A silent, slow or ineffective company response to an employee complaint leads to missed red flags and employees whispering in the government’s ear—a fact all too well substantiated by the same SEC report documenting that 2014 saw both the highest number of whistleblower awards and the largest award given to date.

Effective compliance programs necessitate that employers empower employees to speak up, but also require that employers listen and respond promptly. It’s the only way to build a strong culture of compliance ownership in which every player has “skin in the game,” no one is caught sticking their head in the sand or finding someone outside who will listen.

5. Make Sure You Have Processes in Place to Deal With Potential Problems
and Complaints


Every business has compliance problems that must be addressed. Assume your business will be one of them and plan accordingly.

The important questions are: Do you have processes in place to assess and investigate the problem when you learn of it; how effectively can you manage it; and did you successfully fix it? Companies with compliance success stories generally have an established process for reporting, managing and dealing with potential compliance problems. Do you have a plan in place? How are you managing notifications to internal stakeholders? How do you assess whether public disclosures are necessary? Are you prepared for the collateral consequences? Do you take the opportunity to do post mortems on prior investigations of compliance problems to improve your process? Are you consistent in your processes? How do you manage remediation of problems? On the business side, have you considered ways to manage costs and expectations for more significant matters? These are the kinds of questions you should revisit each year. Aside from being a positive team-building experience, learning from past experiences will make your life easier in the future.

6. Stay Out Front of Emerging Compliance Issues and Opportunities to Strengthen Your Compliance Business Unit

It is important to demonstrate that you consider yourself a business leader.

Help the company sidestep landmines before they explode. Gather intelligence internally and externally to stay ahead of potential new risks. At the same time, work with your team to explore ways to run your business more efficiently. Successful business people study trends to anticipate market opportunities, and so should you. Setting aside time to identify future trends, legal challenges and cost-saving measures will demonstrate to corporate leaders that you have your head in the game.

Conclusion

Living in a perpetually reactive world as a cost center with limited support is no fun. Finding ways to be innovative in an ever-changing world facing complex challenges that may impact your business can turn your story into a success story. Remember, no one is perfect and no one has unlimited time, money or resources. But you can take steps to maximize the value of your investments and build a stronger compliance team where everyone wins.

Wishing you many successful business ventures and an enforcement-free year!

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