5 Steps To Developing A Corporate Compliance Program

Corporate compliance programs are essential to a company’s business operations. You are required by law to comply with various regulations, and a compliance program allows a company to navigate those duties with more efficiency and discipline. As your organization grows, the number of regulations and compliance burdens increases.

Although corporate compliance can feel overwhelming, compliance programs offer a sound foundation for business strategy and risk management. Understanding and following the five typical steps to building a compliance program is important.

What Is the Purpose of a Corporate Compliance Program?

Corporate compliance programs help a company meet its obligations to obey various laws, regulations, and other rules so that the company can stay in business. Without a compliance program, a company is at greater risk of legal violations that might bring monetary penalties and other punishments from law enforcement.

More broadly, a corporate compliance program reinforces a company’s commitment to mitigating fraud and misconduct, aligning those efforts with the company’s strategic, operational, and financial goals.

Importance of a Corporate Compliance Program

A robust corporate compliance program demonstrates that your business is aware of the laws and regulations that apply to it and that the company takes reasonable measures to comply with those rules and laws.

When your business does commit misconduct or suffers an incident (such as a cybersecurity breach), regulators will examine your compliance program to see whether the business was making a good-faith effort to avoid those events. If your compliance program is strong, prosecutors and regulators will give you a more favorable resolution. If it isn’t, they won’t. That can lead to financial costs, possible loss of licenses to operate or to bid on government contracts, civil lawsuits, and other unpleasant circumstances.

Corporate compliance may also aid in preserving your brand’s reputation. Thanks to social media, word of a business breaching a code of conduct or misbehaving can spread quickly. Strong compliance programs can help protect your company from such complaints and attacks.

What Is a Compliance Officer?

The compliance officer runs your compliance program. This individual reviews laws and standards and then develops plans to meet those requirements.

Traditionally, the compliance officer (or compliance manager) must retain independence from individuals within the organization, to assure objectivity and impartiality when investigating allegations of wrongdoing.

The independence requirement means that your organization should carefully determine whether to have a chief compliance officer report to the board of directors, the CEO, the general counsel, or another senior executive.

Steps for Developing a Corporate Compliance Program

Compliance programs are not one-size-fits-all. Some basic principles and practices exist, but you’ll need to tailor your plan to your company’s unique needs.

Here are some steps that can help you streamline this process:

Step 1: Win the Support of Executive Leadership

Effective compliance requires the support of senior management. If the board and the C-suite don’t care about compliance programs, at best you’ll have a “paper program” that looks good but accomplishes little. At worst, you’ll have no program at all.

Leadership sets the overall tone for compliance. The more the C-suite talks about the importance of compliance—and the more it supports the program with budget, staffing, resources, and other efforts—the more the rest of the enterprise will see that and follow suit.

Step 2: Assess Risk Accurately and Appropriately

Organizations must address internal and external risks that could compromise their compliance stance. Assessing your organization’s risks means incorporating not only legal risks for noncompliance but also your vendor and transaction risks.

For example, a luxury resort may include YouTube videos as a marketing strategy. While this seems innocuous, if those videos use guest images without the individual’s permission, especially if the guests are children, that could violate numerous regulatory requirements and bring enforcement actions against the resort.

Risks come from many directions and affect many areas of an organization’s business. Try to find and understand them all.

Step 3: Establish Standards and Controls

Your compliance program must develop standards and controls that respond to the risks you find. In the resort example above, that might mean adopting a policy requiring employees to get guests’ consent before posting their images online.

Or if you’re a healthcare provider offering tele-medicine and accepting credit card payments, you need to implement controls protecting both electronic personal health information (ePHI) and cardholder information. While measures such as endpoint encryption and firewalls may overlap, additional controls, such as data segregation, may also impact the compliance stance.

Step 4: Train Employees

Employee training is crucial for compliance programs. Many regulations expressly require that employees be trained on your policies and controls. Moreover, training requirements are another reflection of the “tone at the top” that makes a compliance program successful.

Step 5: Test and Monitor Your Efforts

Compliance risks evolve over time, as regulations change and your own business updates its operations. So compliance programs must also test the effectiveness of their controls, monitor the program’s performance, and introduce improvements as needed. Monitoring often incorporates audit requirements (either external or internal) as part of the regulatory or industry standard.

Elements of a Strong Compliance Program

The United States Sentencing Guidelines specify seven critical components of a successful compliance program:

1. 1.Create and implement written policies, procedures, and standards of conduct. Clear written guidelines and policies that outline compliance requirements promote consistency throughout your organization.
2. 2.Establish program oversight. Determine who will be in charge of overseeing, monitoring, and enforcing the compliance program and acting as your company’s “watchdog” with queries and concerns.
3. 3.Provide staff education and training. Employees at all levels must grasp your compliance program’s expectations and requirements to comply. Implement a training program that clearly conveys your company’s program criteria, including an annual refresher session that reminds staff of your code of conduct and includes revisions.
4. 4.Establish two-way communication at all levels. Set the expectation that workers will communicate proactively and in a timely way, whether it is to ask compliance questions, report difficulties, or address ethical concerns. Include a method for workers to report compliance problems and fraudulent or illegal activities anonymously and without fear of reprisal.
5. 5.Set up a mechanism for monitoring and auditing. You must assess the efficacy of your company’s compliance program and identify potential hazards. To accomplish this, create a system of internal and external monitoring, including formal audits.
6. 6.Maintain steady discipline. Create a strategy for enforcing standards of behavior in a timely way, defining suitable disciplinary consequences for workers who fail to meet program criteria.
7. 7.Take appropriate action. When vulnerabilities or violations are discovered through monitoring and audits, make a prompt and consistent effort to address the problem.