What is Compliance in Business?
The definition of compliance is “the action of complying with a command,” or “the state of meeting rules or standards.” In the corporate world, it’s defined as the process of making sure your company and employees follow all laws, regulations, standards, and ethical practices that apply to your organization and industry.
Corporate compliance covers both internal policies and procedures, as well as federal and state laws. Enforcing compliance helps your company prevent and detect violations of rules, which protects your organization from fines and lawsuits.
The compliance process should be ongoing. Many organizations establish a program to consistently and accurately govern their compliance policies over time.
The Purpose of a Corporate Compliance Program
The purpose is to protect your business. It’s as simple as that. But the return on investment could be significant, helping you avoid waste, fraud, abuse, discrimination, and other practices that disrupt operations and put your company at risk.
Your corporate compliance program needs to be integrated with all compliance efforts enterprise-wide, from the management of external regulations and internal policies to comprehensive employee training. By making sure all departments and staff are working together to maintain standards, you can mitigate the risk of major failures and violations.
An effective program improves communication between leadership and staff. It should include a process for creating, updating, distributing, and tracking compliance policies. After all, employees can’t be held responsible for rules and regulations they don’t know exists.
But once they understand expectations, your staff can stay focused on your organization’s broader goals and help operations run smoothly. What’s more, when employees are properly trained on compliance requirements, they are more likely to recognize and report illegal or unethical activity.
Maintaining compliance equips your employees to do their jobs well, reach their career goals, and keep customers happy. In turn, your company can achieve its goals and grow faster.
In the unfortunate event that your organization faces a lawsuit, your corporate compliance program will help in court.
As one report from Rutgers School of Law explained, “An organization that has made a robust effort to prevent and detect violations of the law by its employees and others acting for it will be treated less harshly than one that was indifferent to complying with the law.”
How to Create a Successful Corporate Compliance Program
Very few businesses can afford to procrastinate on a corporate compliance program. Don’t let hindsight be 20/20 for your organization. Have the foresight to take action today.
Your program should be carefully planned and implemented, with coinciding training programs to guarantee personnel are well-versed in all areas of compliance.
Here are a few steps to establish or refine your corporate compliance program:
Get Your Leadership on Board
Your corporate compliance program won’t run itself. One person should be assigned the responsibility of managing the program day-to-day.
Depending on the size of your organization, you could have one compliance officer or several. Regardless, those in charge of the compliance program must have the authority to enforce the rules and hold staff at all levels accountable.
They also need direct access to the company’s governing body, which may include senior management or the board of directors.
Access to senior management and authority to enforce rules is essential when potential compliance issues come up, empowering your officers to respond quickly.
But communication goes both ways. It’s important for the governing body to regularly assess the effectiveness of the corporate compliance program.
Corporate compliance is about fostering a workplace culture that values integrity and ethical conduct.
This starts at the top.
In order for the program to work, your leaders need to follow the rules first. They should encourage ethical behavior and openly talk about the importance of compliance.
Company leaders should encourage employee input, emphasizing that they won’t be punished for reporting unlawful or unethical behavior.
The Department of Justice created a checklist for evaluating corporate compliance programs and suggest asking the following questions:
- How have senior leaders, through their words and actions, encouraged or discouraged the type of misconduct in question?
- What concrete actions have they taken to demonstrate leadership in the company’s compliance and remediation efforts?
- How does the company monitor its senior leadership’s behavior? How has senior leadership modeled proper behavior to subordinates?
Conduct Risk Assessments
Corporate compliance is about managing risk.
To build an effective program, you need to know what compliance areas pose the highest risks to your organization. Once you have identified these areas, you can focus your resources on addressing them.
Federal and state regulations, as well as industry standards, are constantly evolving. To avoid risk of noncompliance, it’s important to conduct regular assessments. The Association of Corporate Counsel (ACC) suggests conducting a risk assessment once a year.
A formal assessment process, like this one recommended by the ACC, can help your organization be proactive about preventing corporate compliance violations:
- Audit results
- Recent litigation
- Compliance complaints
- Employee claims
- Industry enforcement trends
- Compliance policies in each risk area
Establish and Maintain Your Code of Conduct, Policies, and Standards
Your corporate compliance program needs a well-defined code of conduct. Why? Because it can help define your program’s purpose and set expectations for behavior.
The code of conduct acts as a foundation and should explain the following key points:
- Who is responsible for managing the program
- How employees should report misconduct
- Disciplinary measures for violating of the code of conduct
Your corporate policies should build on top of that foundation by providing guidelines for specific areas of compliance. For example, they may address common corporate compliance violations:
- Corporate corruption
- Tax practices
- Conflicts of interest
- Record retention
The list goes on. But the exact areas you need to address will depend on your industry.
Once risk areas have been identified and policies created, you should establish procedures to help employees carry out policies correctly. Creating step-by-step guidelines makes it easier to follow procedures and identify noncompliance.
Risk areas in certain industries may require additional standards. For example, the Foreign Corrupt Practices Act may require you to keep detailed protocols for screening third-party business partners.
Properly Train All Employees
Compliance policy and standards are useless if employees don’t follow them.
After establishing the policies and procedures for your corporate compliance program, you need to disseminate them to every member of your staff.
Make sure company officers, employees, and third-party vendors read and sign off on all compliance policies and procedures.
All employees and relevant vendors should be trained on laws, regulations, corporate policies, and prohibited conduct. Depending on the size of your organization, you may want to conduct training tailored to specific employees in high-risk areas.
The ACC recommends that you track, document, and follow up on training. By implementing a compliance policy and training management tool, you can accomplish this and automate many of your manual processes. The right software lets you distribute policies, conduct online training, create custom tests, and more.
Improve Your Program With Compliance Management Software
Creating or revising your compliance policies and training takes a lot of work. It’s an ongoing process, requiring consistent monitoring and updates. But don’t wait until an incident has occurred to take action.
If you and your compliance officers are already busy and time constrained, it can be hard finding the right time to implement a new program. The trick is finding compliance management software that manages it for you.
As a cloud-based compliance management platform, PowerDMS lets you manage policies, training, and accreditation in a single, interconnected system. With PowerDMS, you can create, revise, disseminate, and track compliance policies. You can create automated workflows and collaborate on documents across departments.
If you’re ready to take control of compliance and protect your business from risk, learn more about PowerDMS today and discover how we can help your corporate compliance program.