by Katie Halpin1
Why A Culture Of Compliance Is Essential In Your Organisation In 2016
Culture – that most mentioned word in companies today is an essential component of success – and risk and compliance is now right at the centre of it. But there are multiple reasons for this.
Risk and compliance regulator focus
Evidently, the economic downturn increased demand for risk and compliance professionals as companies sought to get their “house in order”, but there are several other factors that have pushed the function to the forefront. The regulator focus is primary amongst these. With the fallout from scandals such as PPI miss selling and rate fixing; regulatory bodies have had an even larger role in the future shape of organisations. This has led to increased investment in compliance operations, strengthening and empowering teams and providing appropriate training where necessary – thus moving them much more into the corporate spotlight.
Although the upturn in risk and compliance has largely been around financial services, companies in other sectors are also starting to realise the benefits of creating a culture of compliance. Many organisations are finding that having a strong compliance function underpins corporate integrity and provides better productivity, increased engagement and loyalty amongst staff, and better candidate attraction in the labour market. Linked to this is brand reputation. Companies who can show a demonstrable commitment to compliance in their chosen marketplace can also benefit from enhanced brand perception, a huge differentiator. This can also extend to another major area: risk conduct. Strongly linked to customer relations, improved perceptions of your risk conduct can also be a benefit to business.
Third Party Risk
Similarly, third party risk has also come to the forefront and it is essential that businesses now get a firm grip on this part of risk and compliance and what it means for organisations. It is no longer good enough to have a strong, transparent risk function for just your business. Regulators and the public are now also keeping a very close eye on the third parties or suppliers that different organisations use. Key questions around supplier selection and outsourcing services are being asked. Looking at your suppliers from an ethical and compliance standpoint, showing you have done your due diligence and that your suppliers mirror your own high standards, vision and values is a key part of today’s competitive marketplace. Evidence of appropriate policies, procedures and screening in relation to suppliers are all under scrutiny.
There is also a, perhaps unexpected, commercial aspect to consider. Robust risk and compliance functions have been shown to reduce regulatory fines which delivers more money for the company bottom line and less to the FCA and similar regulators. This development means that compliance can actually show itself as a profit making department, adding value to the business in a unique way.
Underlining this is the evolution of the Compliance Business Partner. Much like their HRBP counterparts, these professionals act as first line operatives and are integrated into the business for delivery, no longer behind the scenes or in the shadows. This repositioning means that rather than being seen as the “police” of the business, compliance is now moving to the centre of most organisations, acting as the heart and head, not the hard hand.
Approved persons era
To be successful, this change in role for risk needs to be led from the top, especially in the era of approved persons. This extra accountability in a risk role takes a large degree of professionalism and confidence – the responsibility is now personal and Boards are increasingly recognising this. Whether this is through giving risk and compliance a “proper place” at the board table or significantly increasing investment in the function, the approved persons agenda is also focussing companies around the importance of risk and compliance.
Size doesn’t matter
It is also important to note that, although the headlines around risk and compliance have been around larger firms and financial services providers, the regulators are equally looking at smaller, challenger companies to ensure their policies and procedures are just as secure. SME’s, who make up a large percentage of the UK business scene, may not have the large compliance departments and skill sets, but they still have the (personal) liability and accountability.
The future: horizon scanning
As for the future, I think the trend of “horizon scanning” is here to stay. Making sure your company is aware of the ever-coming changes and compliant as necessary will only become more important. Robust risk and compliance is about asking “what good looks like” and making sure that is where your company is. Many firms are now using their compliance team as a blue print for how other functions should work across the business.
Risk and compliance is about safeguarding your company – and without it, you are endangering your businesses future.
I am planning more content around risk and compliance trends over the next few months, if you would like to receive updates to your inbox, please sign up for our newsletter in the sidebar on the right. I would also welcome your feedback, if you would like to share your thoughts on this subject please use the comments box below or email me directly - [email protected]