LRN 2023 Compliance Program Report Underscores Importance of Compliance Program Vigilance
LRN continues to provide important insights and trends on the importance of ethics and compliance programs. LRN’s annual report is an important resource and needs to be reviewed by the board, senior management and all compliance-related functions.
LRN’s report is based on survey responses from more than 1,850 ethics and compliance professionals at companies from 10 different countries in 26 industries.
According to the report 85 percent of respondents reported that their ethical cultures were stronger s a result of facing and overcoming challenges during the last year. Interestingly, almost the same percentage reported that their respective companies operated based on values as opposed to a rules-based compliance program.
Notwithstanding the positive accomplishments, the LRN report highlighted the difficulties ethics and compliance program officers face as a result of: (1) inadequate internal systems (76 percent; (2) staff shortages (73 percent); (3) budget constraints (73 percent) and employee disengagement (68 percent).
The LRN reported highlighted deficiencies in responding to the Ukraine invasion and increased export and sanctions regulations – only 25 percent of respondents have enhanced their trade control compliance and training and just under 50 percent has enhanced their risk controls in this area.
On the issue of executive compensation and compliance incentives, approximately 60 percent reported that their board of directors actively ensured that senior management misconduct is addressed, and that their companies have formal requirements for evaluations, bonuses and claw backs linked to ethical performance. Approximately 44 percent of respondents noted that their organization has disciplined or terminated a senior executive or top performer for unethical behavior.
On a positive note, more than half of respondents noted that consideration of ethics and compliance risks caused their organization to modify or abandon a business initiative.
A larger number of companies appear to be collecting and using data to inform and operate their compliance program. Specifically, just over 50 percent of respondents reported that they are using data and metrics to assess program effectiveness, but only 20 percent actually improved their ability to capture and understand program metrics.
Interestingly, almost one-third of the respondents reported that their companies had increased the use of employee surveys, engagement of E&C resources, root cause analysis and other metrics. LRN highlighted a gap between values-based decisions by senior executives (81 percent) and middle managers (41 percent).
Finally, LRN’s report highlighted the need to upgrade internal systems for better training, web-based compliance resources and data collection. And, of course, nearly 73 percent reported that staff shortages and upgrades for internal systems are needed to improve the overall effectiveness of their respective compliance programs.