Corporate Compliance and Integrity in the headlights

What is corporate compliance, and why is it important for your company? Vanessa Rogers of TextBOX Conceptual weighs in on this fundamental topic.

To remain compliant, a firm is required to adhere to industry and organisational standards, and/or policies, which can range from an employer’s behavioural expectations of his or her employees; to the business laws and regulations of the country in which they are based, and territories in which they do business.

Examples of compliance-related scandals that you may have heard of in the South African news, include:

• An accounting scandal, which contributed to a 95 percent fall in a certain food producer’s share price.
• Fraud charges, which were laid against senior executives of a grocery chain by the franchise’s operators, as a result of false allegations that the grocer was owed money and could therefore gain control over certain branches.
• The liquidation of an insurance company, which the Reserve Bank had apparently had its eye on for years, due to breach of its capital requirements.

In the international arena, high-profile scandals have exposed the likes of:
• A British public relations company, which was forced to issue an apology for a social media campaign they curated that heightened violence-inciting racial tensions.
• An energy company, which made use of special-purpose entities to hide debt from its balance sheet and used accounting to overstate its revenue. Further, when advised against these practices by an expert, it ignored the advice and continued to publicly disclose a false financial position.

Not only could the non-compliant organisation be liable for financial penalties, but a damaged reputation can result in fewer strategic partnerships, investments and revenue generated from company initiatives.

Five common types of compliance risk include:

  • Corrupt and illegal practices, which may range from fraud, theft and bribery, to money laundering and embezzlement.
  • Damaging environmental activities, including destruction to natural habitats and ecosystems, use of harmful chemicals, hazardous waste disposal, and the pollution of pristine groundwater.
  • Violation of privacy laws, by not putting the necessary steps in place to protect sensitive data from the likes of hackers, viruses, and the purveyors of malware.
  • Omitting to follow workplace health and safety protocols, as enforced by occupational/food and drug authorities.
  • Process risks, where the established procedure is not followed when tackling a workplace task.

Internal officer
Because of the extent of the role of compliance in any given company, many boards opt to hire a chief compliance officer (CCO). Reporting directly to the chief executive officer (CEO), this individual is placed in charge of keeping both the head of his/her firm and the board of directors informed, and assured, about the way in which compliance-related policies and procedures are being: 1) understood, 2) respected and 3) complied with across all individuals, teams, and departments.

Those in a compliance job are also required to identify, prevent, and detect any forms of non-compliance within the firm, so that these occurences can be corrected with a nod to the applicable laws and regulations of the region in question.

External trainer
Another way to tackle compliance within a business entity, is to carry out compliance-related training across all company departments by bringing in an external training company or individual who will work in partnership with the heads of legal and human resources. In these sessions, compliance-related matters will be explained; problems and challenges identified; and solutions developed with input from all attending employees.

Charissa Bloomberg Western Cape

Celebrity psychologist and Integrity Specialist, Charissa Bloomberg, advises that compliance and integrity training should ideally go hand in hand.

“Cultivating a culture of integrity is key to upholding an organisation’s values and ethical standards, to ensure adherence to regulation standards and to reduce the risk of unnecessary lawsuits,” she enthuses.

“In my professional opinion, compliance policies and integrity training/ awareness need to be strongly aligned, so as to avoid both integrity lapses among employees and costly (or damaging) repercussions for the organisation as a whole.”

 – “Integrity costs nothing but when you lose it you lose everything” – Charissa Bloomberg

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