Culture, Conduct & Growing Expectations: The Evolving Role of Compliance Officers

September 25, 2019 Captain Compliance

When SAI Global founded Compliance Officer Day in 2016, we were in the midst of significant changes to the compliance discipline and the roles of the professionals dedicated to it. The speed the industry has evolved since can be surprising even to those closest to it. 

With changing regulatory obligations and shifting societal expectations, the role of the compliance officer has become a multi-dimensional challenge. Not only has the skillset of compliance officers grown in tandem with the velocity and complexity of risks and regulations, but ethics, culture and values have also become more crucial to their role. It’s a very different world compliance officers find themselves in compared to even three years ago. 

Today, compliance is no longer seen as the “back office police” second to front office profit-makers; compliance officers fulfill a business partnership role with a seat at the table. Compliance officers offer more than ensuring that organizations avoid penalties. They are the chief advocates of “doing the right thing.”

This new breed of compliance leaders are tech-savvy and people-, culture- and change-management facilitators of brand resilience. Through training, policies and procedures, they lead from the front. By identifying appropriate controls and managing the organization’s relationship with regulators, compliance leaders and their teams increase operational effectiveness, drive cost efficiencies and provide a value.

Against a recent backdrop of high-profile misconduct allegations and new regulations enforcing executive accountability, business leaders must drive culture and conduct risk up the board agenda. There is significant pressure on compliance professionals to not only ensure their organizations meet their obligations, but to do so with an increased focus on culture. 

In the broadest sense, this reinforces the principle that compliance is an issue for everyone in the company. “Tone from the top” and embedding the right behaviors throughout an organization are the bedrocks of a robust ethics and compliance program. Never has it been more relevant than in today’s values-based global economy, where expectations and scrutiny on a business’ practices are so high. 

Establishing and strengthening the tone from the top requires a concerted effort involving the CEO, the board and the chief compliance officer (CCO). This partnership can establish a tone at the top that binds the organization together. Those without can soon find themselves facing potential business and reputational damage.

For the first time in 19 years, ethical lapses were the number one cause of CEO turnover in an annual PwC study. In the wake of revelations about the pervasiveness of behavioral misconduct among executives, two-thirds of CEOs terminated from their roles in 2018 had been accused of ethical lapses, according to the May 2019 report.

Consequently, we have also seen a rise in “CEO activists.” This growing band of executives are taking public stands on political and social issues unrelated to their organizations’ bottom lines. In August, the Business Roundtable, a lobbying organization that represents many of the US’ largest organizations, released a statement from 181 chief executives on “the purpose of a corporation.” The group, which included the leaders of Apple, Johnson & Johnson and Pepsi, jointly proclaimed their commitment “to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.”

They also vowed to “protect the environment by embracing sustainable practices across our businesses” and “foster diversity and inclusion, dignity and respect.” Any CEO who has the courage to insert themselves in morally complex debates, and has the fortitude to stand by their principles, regardless of the profit implications, is certainly a strong ethical role model and can potentially increase employee’s moral engagement or resistance to immoral acts.

Expectations for compliance officers have never been higher. The prolific growth of social and mobile technologies, the pressures mounted by conscious consumers and Environmental and Social Governance (ESG) investors have ushered in a new era of transparency and ethical capacity for businesses. 

The onus is on compliance functions to tease out these issues, resulting in them taking on broader responsibility for policies, procedures and controls to create a truly ethical business. Together, these factors have created a tension between growing regulatory obligations and the pressure to do more with less.

According to findings from a new report – “Inside the Mind of the CCO” – by Compliance Week, the number one concern for compliance leaders is a lack of support and resources, with some 26 percent stating it was a major factor keeping them up at night. This was followed by keeping up with regulatory policies (19 percent), then data privacy/cyber-security (11 percent).

Despite the budget challenges, there is an opportunity for compliance functions to evolve and adapt in response to the changing nature of business and regulatory expectations. This is especially true as compliance becomes more data and technology dependent in light of regulation evolving into a “show me” culture. Compliance teams are now required to use more sophisticated tools to enhance their monitoring oversight. 

The challenge for compliance leaders now is the gap between current and future state and ensuring their teams have the tools, techniques and learning solutions to close it; building and buying where appropriate – and, of course, picking the right partners with which to do so. In this respect, compliance teams can boost operational effectiveness, adapt quickly to meet new and evolving challenges as well as increase cost efficiencies to continue to provide a value-added service to the business.  

 


Find out more about Compliance Officer Day.

 

 

 

About the Author

Captain Compliance

Confident, smart, and collaborative, Captain Compliance works with her team to achieve #ComplianceSquadGoals of protecting integrity and values while fighting against those who try to break the law, act unethically, and disrespect the people around them.

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