Susana Sierra is CEO of BH Compliance, which gathers real-time evidence about a corporate compliance program’s performance using Blockchain.
Compliance is not limited to guaranteeing the adequate fulfillment of each company’s internal regulations and policies but rather has a much deeper role within the organization. For example, having a strong compliance program can help prevent corporate crimes that impact a company’s revenue, avoid scandals that could damage its reputation and scare away current clients, and inspire trust in order to attract new clients. In short, emphasizing compliance has become a tool to protect and improve a company’s bottom line.
One important way to protect a company’s financial performance is to prevent fines caused by not following a compliance program. This is more common than one might think; for example, according to Stanford Law School data, corporate sanctions amounted to over $1.53 billion in 2022. The sanctions for companies that voluntarily reported themselves surpassed $95 million on average, and it was much higher ($241 million) for companies that did not voluntarily report. Currently, the U.S. Department of Justice has a less severe policy for companies that voluntarily report their corporate crimes.
Based on my experience in measuring the effectiveness of corporate compliance programs, here are seven features of a solid compliance program that can help your company improve its revenue and keep your stakeholders happy.
1. Reduce operational risk.
When looking to strengthen your compliance program, identify and mitigate the potential risks in advance. By doing so, you may avoid disruptions in the midst of negotiation processes with customers or suppliers, or reputational damages stemming from a breach of established procedures or regulations. Furthermore, such preparedness could help prevent the ever-more-frequent security risks related to cyberattacks, malicious hacking and ransomware, which can paralyze an operation.
2. Improve efficiency.
Add a layer of supervision to the compliance performance. That way, your company will be more likely to identify opportunities to standardize processes and procedures and thus reduce redundancies, which should cut costs and boost effectiveness. It is important to empower the compliance team to take this proactive role.
3. Strengthen positive reputations.
The whole of management must be committed to preventing and identifying risks so that company leaders can manage complex situations and avoid getting involved in scandals caused by bad practices. Not only is senior management commitment essential but also middle management, because they are often responsible for monitoring the effectiveness of procedures and the collection of evidence showing compliance to best practices. Protecting and improving a company’s reputation should be a priority to increase customer and investor confidence, brand fidelity, and market share.
4. Minimize fines and penalties.
Upon learning of an irregularity, you should immediately launch an investigation or—when required—cooperate with law enforcement agencies. Cooperating with regulators can help companies avoid costly fines, penalties and legal actions that could affect their bottom line. Having an effective compliance program is required by the DOJ to negotiate Non-Prosecution (NPA) or Deferred Prosecution Agreements (DPAs) and to reach favorable economic agreements.
5. Add a level of oversight to a compliance program.
Investors are more likely to trust companies that have strong oversight of their compliance programs, as this demonstrates that the company has good corporate governance, which reduces financial or reputational risks. In today’s environment—characterized by historically low levels of trust, new and more numerous risks and concern over sustainability—investors are more demanding than ever. Therefore, adding an extra layer of supervision to your company’s compliance program can be critical for your bottom line. When it comes to multinationals, a properly monitored compliance program should also make it possible to check if the headquarters’ policies are being correctly implemented and complied with, and if the training is effectively understood and conducted, among other matters.
6. Improve employee morale and retention.
Fostering a positive work environment makes employees more willing to follow compliance protocols to protect the company from losses rooted in bad practices. Instill a culture of integrity that permeates your company deeply, so that the employees truly feel they are part of the organization and seek to do things as best as possible. This can also help reduce staff turnover costs and white-collar crime.
7. Put Integrity First.
The current times require us to put integrity first because customers, suppliers, investors and society in general are more aware of the effect that human activity has on the planet and have thus raised the moral bar. It’s important to take steps to demonstrate your company’s commitment to compliance and ethical behavior. This can not only add value and differentiate you from your competitors but also attract customers who value corporate responsibility.
Having strong compliance programs can improve the financial performance and long-term sustainability of your company by minimizing risks, optimizing operational efficiency and fostering an ethical culture within it—one where trust, transparency and responsibility prevail.
Compliance is more than abiding by policies and regulations—it should be the heart of the business and help define the behavior of your company based on forward-thinking values.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Read the full article here
