5 Myths About Compliance Programs (Myth #2) – Compliance is a distraction
Compliance is a burden. If we can just eliminate all of the red tape, the American economy will take off. Excessive regulation is keeping the unemployment rate high. We frequently hear these outcries from politicians, television news, and some corporate leaders. This chorus gave rise to and reinforces the notion that compliance forces business leaders to take their “eye off the ball”.
Compliance and regulation are not the same. Compliance encompasses many things including the organization’s core values, how they want to be viewed by the world, acting in accordance with agreed to industry practices, as well as regulation. The association solely with regulation (and not all regulation is bad of course), clouds the perception of compliance activities.
Protecting the brand is the utmost responsibility of most company executives and Boards. The May 2013 factory collapse in Bangladesh and labor issues at Foxconn (a major Apple vendor) that came to light in 2010 are just two high-profile examples of 3rd-party partners tarnishing brands. By their very nature, events like these are a huge and unplanned distraction for the companies involved. From that perspective, a robust compliance program should actually AVOID distraction.
A major benefit of a robust compliance process is a profound awareness of the business environment and internal and external factors which can impact the firm. These factors can be of a competitive, political, economic, technological or environmental nature. Those firms that identify change through proper monitoring controls will have the first-mover advantage over the competition. Therefore, far from a distraction, a robust program supports quicker action, faster decision-making and ultimately, competitive advantage.
Many of us have worked for companies that seem to manage from one crisis to the next. This is no way to execute a strategy. On the other hand, a well-planned compliance program allows the executive team to focus on delivering the strategy. They can manage with the confidence that their employees are doing the “blocking and tackling” they expect. They know they have mechanisms in place to provide early warnings. The proper use of technology to support a compliance program adds transparency, and therefore accountability, to this process. Any useful compliance program includes a proactive risk management process that is forward looking and helps in setting objectives and strategy. Such a process leverages compliance efforts to enable an organization to grow w/ confidence.
It seems that corporate leaders are getting the message that compliance is core to what they do. Per the recently released In Focus: Compliance Trends Survey 2014, “Out of the 209 respondents to the Compliance Trends 2014 survey, 50 percent now have a stand-alone chief compliance officer, up from 37 percent last year.” (http://www.deloitte.com/view/en_US/us/Insights/centers/center-regulatory-strategies/511fb48847af5410VgnVCM3000003456f70aRCRD.htm?id=us:2sm:3tw:infocus14:eng:aers:052114:deloitterisks:). While the year-on-year trend is very positive, 50% is a low number considering we are approaching 12 years since the passage of SOX, five years since the financial crisis, and we see an ever growing list of data breaches and other challenges.
A robust compliance process leads to greater awareness of the internal and external forces that can negatively affect your business. It supports timely management adaptations, which keep your company on course to achieving its objectives. Compliance is not a distraction but rather an opportunity. We must all position ourselves and our companies to leverage compliance.
About the Author
Glenn Murphy, the co-founder of BestGRC and founder of GRC Management Consulting, primarily focuses on empowering entities to leverage their compliance activities through the BestGRC “cloud” software, his consulting work, publications and the “Leverage Compliance” blog. Find Glenn’s full profile at http://www.linkedin.com/in/glenntmurphy/ , follow him @GlennMurphyGRC and subscribe to the Leverage Compliance blog at http://www.bestgrc.com/blog/