Skyrocketing compliance risks and costs are exposing many businesses to crippling regulatory penalties, reputation damage and lost revenue opportunities.
Little wonder many managers view compliance as a millstone about their necks rather than something that adds value.
But what if we could turn this negative mindset around? What if we could transform business compliance into a competitive advantage?
The first thing we’d notice is that managers would no longer view compliance as an unavoidable encumbrance but something that requires their careful attention and planning.
This includes hiring dedicated compliance personnel, making sure they are supplied with the tools and resources needed to properly carry out their roles and are incentivised and rewarded for generating business value just like everyone else.
As challenging as this may sound the foundations for undertaking this paradigm shift have already been laid through the poor compliance performance and shoddy work practices of competitors.
According to the Edelman Trust Barometer 2021, consumer trust in the corporate world has fallen to an all-time low, especially in highly regulated industries such as banking, health and aged care.
Accordingly, for smart businesses seeking to differentiate themselves from their competitors, there has never been a better time to do this than through a demonstrated commitment to doing what is right by their customers and the public including best practice compliance.
Here are 6 building blocks to get you started.
Culture
If your board and managers are cynical about the benefits of compliance then it’s likely this attitude is producing negative compliance outcomes that will ultimately be destructive to your business.
Accordingly, the first step towards transforming your business into a compliance leader starts by creating a conducive compliance culture.
Begin by establishing a top-down line of responsibility based on a clearly articulated compliance vision, policy and measurable objectives supported by proactive governance, planning and compliance systems.
Incentives
Without appropriate incentives, monetary and otherwise, employees are likely to prioritise their own self-interests and competing business objectives over their compliance responsibilities.
To overcome this problem implement measurable compliance objectives at individual and team levels making sure they are linked to incentives and rewards consistent with other parts of the business.
This simple step will help encourage the right type of compliance behaviours and help establish your compliance credentials with regulators, customers, suppliers and the public in general.
Integration
One reason why so many businesses end up with a poor compliance reputation is they continue to manage their compliance in siloes i.e. divisions, departments, branches, units, etc.
This fragmented approach to compliance management often leads to high process duplication, inconsistent reporting and worse still – suboptimal compliance outcomes.
A more efficient and effective approach is to create an Integrated Compliance Management Framework (ICMF) where business compliance is centrally monitored and assessed and improvement recommendations are reported to the board and executive for action.
Read more about how to create an ICMF here.
Technology
The most efficient and effective way to implement a successful ICMF is to invest in appropriate compliance technology.
As highlighted by a 2017 Deloitte report into compliance modernisation;
Improvements in compliance management processes and IT systems can reduce compliance costs by up to 15%.[1]
Compliance technology also provides boards and managers with the flexibility to quickly grow their businesses without the delay of having to create new solutions to monitor and manage additional compliance risks.
People
Transforming your business’s compliance performance into a competitive advantage is not going to be possible without the full-time support and input of dedicated compliance personnel.
For managers concerned about the benefits of hiring additional compliance personnel, a 2011 survey by the Ponemon Institute, USA, helps put this decision into perspective.
For many businesses, the cost of compliance is less than half the cost of non-compliance.[2]
Conversely, just throwing money at your compliance risks won’t necessarily make them go away. This is why a balanced approach is recommended.
Training
Superior compliance performance can only be achieved and maintained with the buy-in and ongoing support of your employees. This is why regular compliance training is so important.
Compliance training helps employees understand that their compliance with regulations and standards is not only required because the law demands it, but because this is what the board and management believe to be right, and what they expect from them.
The biggest benefit of regular compliance training is employees become aligned with a business’s compliance goals and objectives, which reduces the likelihood of them falling out of compliance.
Communication
There is little benefit in becoming a compliance leader if no one knows about it. This is why regular communications are so important for ensuring your business’s compliance stands out from its competitors.
Advertising, news releases, newsletters, websites and direct emails are some of the best techniques for getting this message out to customers and the public, but be sure to include examples of how your business’s superior compliance contributes to their well-being and everyday lives.
It’s also a good idea to lobby government departments and regulators to require the same level of compliance from your competitors, and that there is full transparency when reporting compliance assessment results.
Conclusion
For smart businesses seeking to differentiate themselves from their competitors, there is no better place to start than with a demonstrable commitment to best practice compliance.
To achieve this objective boards and managers have to start treating compliance with the same level of importance as other business goals and objectives, including investing in suitable compliance technology and human resources.
The reward will be a fully focused business that is committed to doing the right thing by its employees, customers and the public in general, with the added benefit of higher sales, bigger margins and lower net compliance costs. A win-win for everyone.
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[1] Deloitte publication, Compliance modernization is no longer optional, 2017, https://www2.deloitte.com/content/dam/Deloitte/us/Documents/regulatory/us-compliance-modernization.pdf
[2] The True Cost of Compliance, PONEMON INST., LLC 2 (Jan. 2011), http://www.ponemon.org/local/upload/file/True_Cost_of_Compliance_Report_copy.pdfe
