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Compliance Needs to Understand Business

A chief compliance officer needs to be independent and have adequate authority within the organization.  But do not get confused by the concept of independence.  Compliance depends on collaborative relationships with other corporate functions.

Most importantly, a compliance program’s success depends on its ability to embrace the company’s business.  To do so, the compliance staff has to learn and understand the company’s business inside and out.

If a compliance staff sits in its respective offices and waits to hear from employees about compliance issues, the compliance program is doomed to fail.  On the other hand, if the compliance staff is proactive, engaging the business, listening to the business, and promoting the success of the business, the compliance team will build credibility with the business staff.

To build such a relationship, compliance personnel have to listen and learn, and express their understanding of the business objectives.  With this credibility, compliance staff can truly engage the business in the compliance mission.  In  other words, by building a respectful, collaborative relationship with the business, compliance can learn from the business and in turn can teach the business the importance of compliance.

I am always reminded of a statement made by a Country Manager for China from a company who told me, “I know if I don’t take responsibility for compliance, no one will in China.”  Such a statement reflects exactly what I am talking about.  This attitude, however, reflects a positive working relationship between compliance and the business.  In this context, the business manager and compliance share a common perspective – business growth and compliance go hand in hand.

By contrast, I have heard compliance officers freely admit they do not understand the company’s business.  I was struck by the admission – it made me wonder how can this compliance team engage the business?

A compliance team that does not understand a company’s business is operating as an outsider with little credibility or influence on the business.  A detached compliance team is a recipe for disaster, where the business views the compliance team as outsiders who are only seeking to block or frustrate business development.  In these situations, business staff may circumvent compliance controls and brush off restrictions as irrelevant or meaningless.

Business without compliance is sure to result in misconduct.  Eventually, the company’s culture will break down because of the lack of integration of these two important functions.  A company’s culture and its compliance program depend on business accountability for compliance.  It is impossible for a compliance staff to embed and monitor a successful compliance program without earning the full cooperation of the business.

A chief compliance officer has to prioritize the relationship with the business.  Here are a few key questions that a chief compliance officer should ask:

  • Does compliance have a seat at the table with the business throughout the organization?
  • Does compliance participate in business planning and development activities?
  • Does compliance provide a value-add for the business, promoting compliance as a marketing advantage for business against competitors?
  • Does compliance understand business objectives, operations and incentives?
  • Does compliance devote adequate attention to maintaining and improving its relationship with business leaders, managers and staff?

These basic questions have to be addressed and candidly answered.  In most situations, a chief compliance officer can quickly identify weaknesses in its interactions with the business.  To remedy these weaknesses, the chief compliance officer should develop a specific action plan to promote compliance’s relationship with the business.

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