For many executives, compliance is something they know is important but do not deeply understand. Compliance is often viewed as a necessary evil that hinders business, rather than understanding that compliance is essential to your business’s success. Having strong compliance officers on staff to make sure regulations are followed is critical, but that does not mean the C-level executives can totally check out.
There are five essential things that top tech leaders must understand when it comes to compliance. What’s more, tech leaders can play an integral role in helping safeguard against misconduct at the top—often working alongside compliance officers to ensure the business has a strong regulatory structure with executive buy-in.
Five compliance essentials
- Compliance is much more than just something that facilitates your business
Rather than being viewed merely as a cost center, the compliance department provides real value by offering the business a more comprehensive cost-benefit analysis that incorporates compliance-related costs. The initial business analysis typically does not take into account the third-party-related expenses of due diligence, ongoing monitoring and a possible compliance failure. When these expenses are factored in by a compliance expert, the business receives a more accurate view of the cost of working with that third party before a contract is signed. This can help the business save real money if it is determined in advance that the cost outweighs the benefit of the third party.
- A lack of compliance can cost you millions in fines and brand damage
Fees and fines can cost a company a lot of money if it is found to be noncompliant. The data privacy law (DPA) levies criminal penalties and other government agencies hand down civil penalties for bribery, competition, labor, environment and accounting violations.
Customers want to believe their information is protected, and that they are doing business with companies practicing legally and ethically. Compliance violations can turn customers away. That makes it hard for a company to recover its reputation, as there are few to no new customers to vouch for the trustworthiness of your business. The damage to brand reputation can often cost even more than those fines.
The damage to C-level employees and the board of directors can also be high. D&O Insurance (D=Directors and O=Officers) is therefore gaining ground and—in some countries—has already reached sensitive levels. D&O Liability Insurance is available in the Philippines and it may be worthwhile for D&Os to discuss this with their proactive insurance experts.
- Strong compliance can make your business more competitive
IN today’s activist, social media-fueled culture, one ethical misstep can lead to ruin for your business. The flip side of that is compliance with regulations and ethics can serve as a differentiator from your competitors. Companies need to ensure that the third parties they work with aren’t going to get them in trouble. And as a third party, being able to demonstrate compliance can help land that deal.
In addition, strong compliance slashes business risk due to unvetted partners and can empower new revenue streams in new markets as that risk is reduced. This is an advantage over competitors who lack the ability to vet third parties well.
- Not having an organized and systematic approach to compliance will cost you more in the long run
The up-front expenditures for an integrated compliance approach using advanced technology will end up costing less than the fines, fees and damage to brand reputation that can result from violations. Compliance is often very complicated, especially when grappling with regulations set by multiple countries. This is why having an organized and systematic approach is essential. It will ensure that nothing falls through the cracks and that there is total visibility at all times, freeing compliance professionals to work on high-impact projects that protect the business.
This systematic technology approach includes supporting compliance monitoring activity, as well as communication and training activities. Compliance professionals can take advantage of the ubiquity of mobile devices to deliver ongoing training, alerts and reminders.
In addition, data analytics can be a tremendous boon to the compliance department. This analysis can, among other things, help predict future compliance issues, improve the efficiency of compliance testing and conduct real-time monitoring of high-risk areas.
- Having compliance officers (and a DPO) on staff is essential
Compliance is a highly specialized arena within the organization. It requires time, effort, investment and a thorough programmatic approach. A professional compliance officer understands the various nuances that can ultimately protect your company from the problems described above and save your company’s bottom line and reputation.
To take full advantage of this expertise, your head of compliance needs to be involved in strategic business decisions. This individual will need to understand and speak the language of business so that other leaders are willing to hear what needs to be said about the business value of compliance. Then they will be able to embrace the critical nature of compliance and provide the buy-in that then trickles down through all levels of the business.
Working together
IN the fast-paced age of digital business, compliance is often thought of as a burden and a cost center. Yet, with the right approach, it can be revealed for the cost- and reputation-saving function that it is. Compliance can provide the ethical center of gravity that influences the entire organization. Rather than merely enforcing policy, today’s compliance officers can help accelerate business by providing the information that lets business leaders make more informed decisions regarding the risk and expense of working with third parties. In this way, business and compliance need to converge rather than being at odds, and jointly they can create a firm foundation for success.
Comments are welcome—contact me at Schumacher@eitsc.com