December 27, 2019 · 8 min read •
The author is Compliance Director, UGP Brasil, Chicago, USA
Corporate compliance is an essential part of operations in every entity no matter what kind of its operation are. A good and simple definition regarding corporate compliance is the process of making sure companies and employees follow the laws, regulations, standards, and ethical practices that apply for.
Effective corporate compliance should cover internal policies and rules as well as federal and state laws. The result of having a good corporate compliance process is the prevention and detection of violations of rules which can save organizations from fines and lawsuits.
But this is not all! Corporate compliance also lays out expectations for employee behavior, helps your staff stay focused on your organization’s broader goals, and helps operations run smoothly.
Corporate compliance must be continuous improvement process. Then, it is sort of topic that is never ends. Most organizations establish a corporate compliance program to help govern policy and compliance.
Corporate Compliance Program Purpose
A corporate compliance program is a formal system to help your organization maintain compliance in all areas of operation. Upholding policies and procedures will be on focus of the program. The goals are to prevent the organization and employees from violating laws and regulations, avoiding future problems with fairness and eroding the company’s image.
An effective corporate compliance program integrates all compliance efforts – from compliance with external regulations to compliance with internal rules and procedures. Ultimately, the purpose of a corporate compliance program is to protect your organization. The employees are trained, stimulated, encouraged to recognize and report illegal or unethical activities that can be putting the organization in troubles.
Another purpose of a corporate compliance program is help organization avoid waste, fraud, abuse, discrimination, and other practices that disrupt operations and put organization at risk. In other hand, it helps all process keep growing and achieving organizational goals.
Corporate compliance can help prevent major disasters and failures by making sure all areas are working together and maintaining standards. Even though the organization does face a lawsuit, the corporate compliance program will help and protect in court.
According the article released by Rutgers School of Law (2010) 1 , “an organization that has made a robust effort to prevent and detect violations of the law by its employees and others acting for it will be treated less harshly than one that was indifferent to complying with the law.”
Successful Corporate Compliance Program
In a globalized world, the organizations can’t afford to ignore the need for having a strong corporate compliance program. The program should be well planned and customized according the organization’s field of activity, using a developed and tested methodology special for this labor. Additionally, the commitment of Board of Director must be supported by all organization without forgetting to train all employees into the compliance program that will guarantee the whole process.
Below some few steps to establish or refine your corporate compliance program:
Leadership on board
Depending on the size of organization, it may have one compliance officer or a committee of compliance. But in any case, those in charge of the compliance program must have the authority to enforce the rules and hold staff at all levels accountable. This structure is necessary to keep the program ongoing – in terms of compliance, the organization won’t run itself.
There must be one person who’s responsible for managing the program daily. Those running the program must have direct access to the company’s governing body – which may include senior management or the Board of Directors. That governing body should regularly assess the effectiveness of the corporate compliance program. It should also act when they learn of a potential compliance issue.
Corporate compliance is about fostering a workplace culture that values integrity and ethical conduct. Nothing is better than starting the corporate compliance program at the top of the organization by leaders who have opportunity to give a good example of abiding by the own organization’s rules.
Leaders should encourage ethical behavior and openly talk about the importance of compliance; meanwhile, they should also welcome employee input, stressing that employees won’t be punished for reporting unlawful or unethical behavior.
Among this process, a relevant document was released in April 2019 by the U.S. Department of Justice entitled “Evaluation of Corporative Compliance Programs” 2 which describe specific factors that prosecutors should consider in conducting an investigation of a corporation, determining whether to bring charges, and negotiating plea or other agreements.
These factors include “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision” 3 and the corporation’s remedial efforts “to implement an adequate and effective corporate compliance program or to improve an existing one.”
Conduct risk assessments
To establish an effective program is mandatory that organization knows what compliance areas pose the highest risks. Once identified these areas, the organization can focus its resources to address them. Therefore, corporate compliance is about managing risk. As the risks are always changing is important to regularly conduct assessments.
The Association of Corporate Counsel (ACC) 5 suggests conducting a formal assessment process to evaluate factors including:
Industry enforcement trends
Policies in each particular risk area
The ACC suggests conducting a risk assessment once a year. Once your leadership team has identified the highest risk factors, you can take the necessary actions to mitigate those risks and ensure compliance. This can help your organization proactively prevent compliance violations.
1. Rutgers School of Law, Compliance and Ethics Programs for Government Organizations – Lessons from the Private Sector (Ney Jersey: Rutgers Center for Government Compliance and Ethics, 2010), 7.
2. U.S. Department of Justice, Evaluation of Corporate Compliance Programs (Washington-DC: Guidance Document, 2019), 1.
3. Justice Manual 9-28.000, Principles of Federal Prosecution of Business Organizations, available at https://www.justice.gov/jm/jm-9-28000-principles federal-prosecution-business-organization