The Cost of Compliance

cost2The title for this posting is a little ambiguous.  What is the “cost” of compliance?  Is it the cost of implementing an “effective” compliance program?  Or is the “cost” to the company of an “ineffective” compliance program.  Let’s just say it is both.

I often criticize the compliance profession for relying on the “negative” message around compliance – “if you do not comply, then the government will put people in jail and fine the company.”  That is a real profound grasp of the obvious.  Running around and telling everyone in a company that they are going to jail is not a very effective compliance strategy.

Tough enforcement is a reality but it is only one part of the compliance message – the more important message that should be emphasized is a positive message: An effective ethics and compliance program contributes to the bottom-line profitability of a company.

A Chief Compliance Officer who communicates this message is more likely to influence management in a company.  People do not like negative messages (except in political campaigns).  People naturally respond to people who are positive.

There is more to this story than just the headline message of compliance.  CCOs are creative relationship builders.  In fact, that is an essential part of their profession.  I liken it to Blanche Dubois from “A Streetcar Named Desire” – They depend upon the kindness of strangers.

CCOs need to do more than communicate a positive message.  They have to build internal alliances in a company. How can they do that?  By providing something of value to internal business partners.cost

CCOs have a unique perspective.  By definition, they have to view the company as a whole.  They can get access to information across the enterprise, and analyze the information.  In doing so, CCOs can provide valuable information to business managers.

One easy example – CCOs need to identify, review and monitor a company’s third parties.  CCOs gather, verify and develop accurate lists and analyses of the third parties.

One important step in this process is for the CCO and the business manager to review the third party list to determine if the third parties are still being used, what value they provide and whether the list is accurate.

cost3This process is a valuable exercise for business managers.  It helps them to collect information, reallocate resources and develop new marketing strategies.  The CCO and the business manager have a mutual interest in fostering this process.  Compliance is served and so is the company’s business.  CCOs have to look for other ways in which to be a value-add to the business.

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