Corporate compliance programs are a statutory requirement for public firms. Big private firms are following the trends and implementing compliance programs in their organizations. The main aim of corporate compliance programs is to ensure that employees follow the stipulated code of ethics. A good compliance program assists in mitigating the risks arising from unethical practices like malpractice lawsuits. A clear company hierarchy is vital for the compliance programs to work. It should be clear who every employee reports to, who is responsible for operations in a certain area and who cross-checks employee activities. The person who is responsible to ensure the code of ethics is followed is called a compliance officer.
Duties of a compliance officer
- The position of a compliance officer is very critical in an organization. A corporate compliance officer is in charge of implementing and administering the corporate compliance programs. The officer reports to the management or the board of directors of a company. The following are the duties of a corporate compliance officer.
- Prepare and report to the directors or management on the compliance status of the organization. Compliance should produce periodic reports on the activities of the organization and whether there is any new risk.
- Train employees on the purpose and importance of the corporate compliance programs in the organization. Employees should be in a position the purpose of the requirements in the code of ethics.
- Ensure that all employees have received, read and understood the code of conduct and acknowledged in writing that they will follow the code of conduct.
- Follow up on suspicious activities in the organization and report the same to the board of directors. A compliance officer is an organization watchdog over the code of ethics.
- They should monitor and evaluate the current risks in the organization to assess the level of exposure. They should make recommends on the appropriate reviews when there are changes in the internal and external business environment.
- The officer recommends the appropriate action for disciplinary cases in case of noncompliance.
- All reports of suspicious activities in the organization are under the custody of the compliance officer. He or she should ensure that the information remains confidential.
- Conduct training for newly hired employees. The officer will train the employees on the compliance program and the company’s code of ethics.
- Follow the corporate compliance emerging trends and recommend changes to adopt new technologies and policies.
Importance of a corporate compliance program
- A corporate compliance program is made to the specifics of a company’s risk factors. It aims to prevent, avoid, reduce and mitigate those risks. It keeps the company protected by ensuring it doesn’t incur unnecessary losses due to employee fraud.
- It communicated the importance of avoiding and mitigating current and potential risks. Every employee understands the effects of the potential risks. In addition, each person in the company understands their role to mitigate current and potential risks. This further enables for an easy implementation process since each person understands what they are expected to do.
- The compliance guidelines require a comprehensive risk assessment of an organization before establishing controls and policies. The risk assessment on most occasions uncovers risks that the organization was not aware of. The assessment brings the risks of the company to a clear view of the management and the board of directors.
Elements of a corporate compliance program
- Policies and procedure
Companies must establish clear policies and procedures that should be followed to prevent risk and fraudulent activities. Companies need to stipulate in writing what exactly is expected from their employees and how it can be done.
There should be a body that oversees and enforces the overall compliance program. The board of directors is mostly the suitable choice. However, unit manager is responsible for overseeing that their juniors comply with the programs.
This involves education and training of employees on how to meet the requirements of the compliance program. The company needs to seek training professionals and do thorough training on the complex situations and challenges employees face daily. Adequate training will equip employees with the necessary tools to identify and deal or avoid risks.
- Monitoring and evaluation
A corporate compliance program should be periodically assessed to ensure it is still effective. Necessary reports should be forwarded to the board of directors together with the recommended course of action.
- Discipline and incentives
Human beings live in a reward system. You do something nice and get a reward and the opposite gets punished. This system should also be implemented in the compliance program. Incentives should be provided to exemplary employees and disciplinary actions are taken to those who do not comply.
- Corrective action
In cases where misconduct has occurred, the necessary steps should be taken to prevent a repeat of the same.
Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT. Learn more at Reciprocity.