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effective compliance programs

Silos

Prevent The Danger of Silos with Mock Audits

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It’s an easy trap to fall into – becoming immersed in your department’s priorities can be like being engulfed by wheat, corn, etc. in an actual silo.  The result is an inability to see and recognize the other resources harvested at the same “farm.”  When resources collaborate though – they mitigate systemic risks. This is the time of year compliance officers should consider inventorying systemic risks and planning for the year ahead. One approach is to conduct a mock audit to test controls, help breakdown unhelpful silos and adopt best practices, particularly on the higher risk topics.

The Opportunities

Management often does not realize how compliance can contribute to sustainable business growth.  Consider what can happen when compliance isn’t integrated effectively.  If a compliance officer works in an organization where Compliance is not included in strategic initiatives until the last minute when there is not enough time to study the impact of the issues, inefficiencies grow as compliance or independent consultants audit and find control gaps after a new product is designed or new system is launched.  For example, time and money may be wasted marketing new products if a compliance officer is brought in too late to address issues. The product is already baked, so Compliance fixes are more likely to be bolted on instead of baked in. Product developers may not focus on avoiding conflicts of interest, self-dealing, and unfair expense allocations.  Recently, Deutsche Bank offices were searched as part of a money-laundering investigation, in the latest example of an allegedly siloed compliance culture because suspicious activity reports were not allegedly not handled as required.

The dangers of siloed compliance can be avoided with collaborative risk assessments and independent audits of the business including high-risk products and new technology. This approach will arm compliance officers, so they can help grow and sustain the business at the start of 2019. It will also serve as protection against any regulatory investigations into the adequacy of the compliance program.

Changing the Perception and Building Influence

To avoid the inefficiencies and disruptions of silos, the key is for compliance to become an influential participant in the business and develop metrics to illustrate its value-add.  Read my previous post on how to increase influence and play a more integrated role across the company.  Also, learn more about developing your skills and building Sustainable Governance within your organization by visiting www.bethhaddock.com

Legal

Power to the Partnership between Compliance and Legal

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A frequently misused quotation, “The first thing we do, let’s kill all the lawyers,” from William Shakespeare’s Henry VI, isn’t about a disdain for the legal department but is homage to their power. The character that utters the line, Dick the Butcher, knows he can’t get away with murder if the lawyers are watching.

The lesson is this, there is power in the partnership with your law department.

It’s an easy misperception made by many who don’t understand: compliance and legal are one in the same, right?  Not quite. While they benefit from working hand-in-hand, there is a small, yet significant, difference in who these two entities primarily serve that may result in different approaches to the same situation.  Compliance officers’ gatekeeper role is complex and sometimes conflicting, while a lawyer has a more direct and aligned duty to a client: a lawyer’s client is the company (officers, directors, employees, shareholders); a compliance officer’s client is also customers, the board, regulators, investors, and in some cases securities markets (“stakeholders”). Additional insight on the relationship between law officers and compliance officers can be found here.

As a result, the perspective of an organization’s lawyers on issues starts off narrow – with the goal to protect the company. It’s up to compliance officers to collaborate with the lawyers to consider other stakeholders in order to build a Sustainable Governance program which will ultimately offer the company better protection.  Doing so will make compliance programs more effective; a respected and deeply collaborative relationship with the organization’s lawyers will help the compliance officers as they monitor for and help prevent violations of the law, while the lawyers focus on what management can do.  There will be scenarios where a course of action is permitted because the law has not kept pace with business innovation or the law is unclear. In the same scenario, a compliance officer may advise not to take an action because the compliance officer seeks to prevent legal violations which includes looking forward and considering reputational, political and regulatory risks. For example, one could imagine legal and compliance debate about required disclosures and licenses to launch fintech, artificial intelligence and virtual asset products into the market place.  Listen to episode 4 of the What’s Ethical podcast to learn more about opportunities and risks with these new technologies. Reputational risks of undisclosed potential conflicts can be exacerbated when operational procedures are not followed as directed.  DOJ and others recently opened investigations of McKinsey & Company for allegedly failing to adequately disclose and mitigate conflicts when acting as an advisor as well as a creditor in bankruptcy cases where McKinsey allegedly received favorable treatment over other creditors including pension plans.

McKinsey’s lawyers may have relied on a separation – ethical walls – between the investment and advisory businesses to manage any conflicts of interest as well as an interpretation that the law does not require third-party bankruptcy advisers to be disinterested.  Compliance officers looking at the same scenario may focus more on operational controls and add-value by collaborating with lawyers to test the strength of the ethical walls.

A Meeting of the Minds: Holding One Another Accountable

The key is for both lawyers and compliance officers to recognize their role and how they can help each other achieve their goals more effectively. Ultimately, collaboration and unified responses from Compliance and Legal will greatly contribute to delivering Triple Bottom-Line Compliance of protection, productivity, and impact.  Learn more about fostering a successful compliance dynamic within your organization by visiting www.bethhaddock.com.

organization

3 Ways to Change Organizational Dynamics Through Compliance

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Think about the organization you work for today.  How many employees know what you do?  How many understand how critical compliance really is?  Consider why that is the case and how it has impacted the company.  As I’ve addressed in previous articles, the integration of compliance within the fabric of a company’s culture and process is important.

The Why of Compliance

You know compliance is important – but does your organization?  Ultimately stakeholders and employees need to understand what compliance is there for and why it’s important to care – there are three major reasons: avoid liability or prosecution, meet legal or regulatory requirements, and set internal expectations for ethical conduct and shared values.

These reasons have been well-accepted as reflected in a 1999 Harvard Law Review article advocating for more corporate disclosure and sustainable governance that promotes management integrity as well as business acumen.

“Shareholders should have information on the overall pattern of management’s compliance with applicable federal statutes for an additional reason: compliance with the law bears on management integrity and honesty, and ultimately on the quality of management generally. Management integrity may be of particular concern to social investors, but the honesty and integrity of management is information of potential interest to economic investors as well. Indeed, the SEC evaluated the materiality of management integrity from the perspective of the economic investor during the discussions about corporate accountability in the I970s.”1

When a company adopts an effective compliance program, it shows investors, consumers, potential recruits, and donors that the organization is well-run. Compliance programs can be used like an insurance policy (against liability or prosecution), it can be treated as a requirement, or it can be leveraged as a business differentiator. When an organization leverages its compliance program as a competitive advantage, that fuels its ability to truly impact culture and results, changing the way we look at its cost and value.

Changing the Dynamics

Helping your organization reap the benefits a “compliant company” may seem overwhelming – but it’s entirely possible. Regardless if you’re fresh on the scene, or a veteran in the organization, it’s never too early or late to make changes for the better.  Considering trying these three ways to change your organization’s dynamic:

  1. Invite someone from the business to speak at a Compliance staff meeting about “What Compliance does well and what can be done better.”
  2. Make it clear that employees will be rewarded for helping and being cooperative. Partner with Human Resources to change how employee performance is calculated and include a Compliance grade for identifying and reporting issues, helping implement policies, and responding in timely ways to requests for needs, such as certification or training.
  3. Give credit during audits to the business for cooperation such as self-reporting and expediting surveillance and testing.

You can be a force for change that will have a positive impact on your company.  Get more constructive strategies on how to achieve this by getting your own copy of Triple Bottom-Line Compliance.

  1. The Securities and Exchange Commission and Corporate Social Transparency, Cynthia A. Williams, Harvard Law Review, Vol. 112, No. 6 (Apr., 1999)
business

How to Avoid Easy Compliance Mistakes in Business

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Mistakes happen in every discipline and industry of business – we are after all, human. However, the thought of mistakes is not a reality we, as compliance officers, want to experience.

As individuals, we have a certain amount of control in preventing mistakes. With critical self-analysis, we can find a problem before someone else does. As compliance officers, finding an issue before a customer, regulator, or the public becomes aware of it is the key to providing not only protection but also value for the organization.

However, because we are human, it is difficult to take on the task of protecting the entire company as an individual (or Compliance team).  Which is why the avoidance of many compliance-related mistakes can be solved with one major focus: building solid relationships throughout the company.

A compliance officer must be a diplomat, understanding many different stakeholders, and must be someone who doesn’t just find problems but fixes them and proactively avoids them. To do this requires an understanding of who we’re working with.  Earlier in my career, a brilliant businessperson with extraordinary people skills taught me to know my client and adjust accordingly. She taught me an important starting point for understanding clients is to expect differing views of Compliance and its ability to incentivize good business judgment. With a smile and a curious mind, she helped the Compliance team build rapport and reminded us that a compliance officer who doesn’t understand varying behaviors and simply announces edicts will have a tough time making a sustainable impact on anyone’s business judgment.

When we accept that understanding behavioral drivers and incentivizing behavior is more effective than dictating rules and expecting adherence simply because we say so, there will be a culture of compliance. When the culture encourages engagement with Compliance, where self-reporting to Compliance is valued and rewarded as a form of leadership, issues can be addressed more easily and resolved earlier.

This approach takes time.  It’s a long-term approach, changing the way people work together by aligning interests and relying on incentives to win wider engagement that helps avoid problems. This kind of sustainable compliance develops its own momentum – allowing compliance officers to almost step back and only calibrate improvements as needed.

The more awareness and involvement you instill within your organization, the less likely your company will find itself making compliance-related mistakes.  Learn more about strategies to effectively incorporate compliance within your organization by visiting, www.bethhaddock.com

compliance

Compliance Question: What Would You Do with a Rogue Tweeter?

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Imagine if you were the compliance officer for Tesla. What would you do?

In light of Elon Musk’s (the CEO of Tesla) recent string of tweets – – the tech genius’ uncontrolled social media posts have highlighted the importance of social media governance and how difficult it is to eliminate the risk that emanates from executives’ individual conduct.

The question becomes, can you really control a founder, CEO or a favored executive of a company? The short answer, no, but you can influence and have safeguards in place to protect your organization and its stakeholders including clients, investors, and board. Those who have founded and built successful companies likely feel entitled to speak their mind about the company they have created.

What would be your first order of business if you were the new compliance officer at Tesla implementing social media and other governance controls?

First, do what is necessary to understand what the company has in place currently, what it doesn’t, and why.  Understand why certain protocols are missing or if they are in place, why have they been ignored.  You will earn the trust of the business and others by assessing the current state before making changes. Then start to build trust by explaining and implementing controls that facilitate marketing and promotion by the company’s leaders and proactively protect the company for liability and any reputational crisis.

Most often, public companies like Tesla have controls guiding executives and PR agents who speak on their behalf. The SEC alleged there was not enough of both.  Following Musk’s “$420 per share tweet,” SEC Chairmen Jay Clayton stated, “Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings.  Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete.”

This situation is a good reminder to consider whether your company has the following best practices in place when it comes to public statements about the company:

  • Limit who may publicly speak or represent the company in the media, so the company can control the message,
  • Require pre-approval of content to ensure any message is fair and balanced and accurate, and
  • Create “rules of the road” for social media posts, public appearances etc. — such as communicate what is true, already verified and fair and balance. Do not communicate feelings, beliefs or hopes – unless pre-approved to confirm there is no bias, conflict or misrepresentation.

Now, instead of imaging “what if I were at Tesla,” take the time to consider the “what if” in your current organization and do everything you can to influence leaders, implement protocols, and prevent a similar reality from happening to your company.  Learn more about best compliance practices by visiting www.warburtonadvisers.com

compliance

Compliance Best Practices: Focus on The Means, Not Just the Ends

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Focusing on the end result is often what many compliance officers are concerned with.  If you get the result you want, that’s all that matters in the end – right? Not quite.  After all, so much rides on how you achieve the end result.

As a compliance officer, you likely wear a number of “hats” within your business. From change agents and business managers to quality assurance representatives, project managers, and therapists – each role plays a critical part in successfully doing your job of ensuring successful “end” results for the company.

A strategy for mastering these different roles – or for achieving any goal – is to focus on how it is to be done and done effectively.  As a compliance professional, consider how you advise, support, and contribute currently – are you maximizing your influence to get things done?

Ask yourself the following questions to see if you are leading with a focus on the “means” or the “ends”:

  1. Do you use fear of enforcement or fear of the government when challenged?
  2. Do you think what you say is more important than how you say it?
  3. Do you think Compliance issues are more important or more serious than business issues?
  4. Do you feel as though you are siloed or alone in your work?
  5. Do you identify issues that are “out of scope,” distancing yourself?
  6. When you innovate to support the business, do you exclude business ethics considerations?

If you’ve answered “yes” to any of these questions, consider whether you are losing an opportunity to be influential and make a more meaningful impact.

Becoming an Influencer

Building influence takes time. A fantastic place for compliance officers to start is with building trust by excelling as a project manager, tailoring surveillance to material business risks, and connecting with clients and those associated with your regulatory duties as a gatekeeper.

Trust won’t come automatically with your job title as a compliance officer; instead, an influential compliance officer makes an impact by earning the trust of the business while maintaining his/her gatekeeper role. Trust will be earned has you show knowledge of the regulatory landscape, listen to colleagues and develops approaches that meet current and future commercial or organizational needs.

The goal is to become more than just an advisor on legal issues. As MaryJean Bonadonna, CCO at AXA Advisors, believes: “Compliance has to be embedded—not just inserted.” When you become a true influencer, you’ll find yourself engaging on non-compliance issues such as business products, internal controls, or any number of other topics.

When we become influencers in our organizations, we can more effectively insert compliance within each element of the business – applying our knowledge, expertise, and anticipation of business or legal challenges, ultimately allowing the company to be effectively proactive.

In the end, ironically, it’s “the means” – how we achieve results through influence – not “the ends” that will create successful compliance within your organization.  The how is done with earned influence.  Learn more about becoming an influencer who focuses on “the means” by visiting, www.Bethhaddock.com

African American Businesswoman Giving Presentation To Executive

8 Elements for Effective, Sustainable Compliance Programs

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The end of summer and the arrival of fall marks a return to school and a regular schedule for our country’s youth. It also marks a return to a more traditional work schedule for many adults and perhaps most compliance officers.

And not unlike the turn of a new year, the return to school and work can be viewed as an opportunity to review, reconsider, and retool one’s approach to life, and to managing compliance.

With that in mind, compliance officers returning from summer vacation might consider taking a pause and consider ways to increase effectiveness and efficiency.

The following eight strategies, the core of my book Triple Bottom-Line Compliance: How to Deliver Protection, Productivity, and Impact, can be a catalyst for more effective and sustainable compliance programs. The present time is a great opportunity to learn about and apply the following eight key elements.

  1. Align – To achieve sustainable governance, take a longer-term approach. Look to align interests and incentives to win wider engagement and avoid repeated compliance deficiencies.
  2. Verify – Build trust-but-verify cultures using a Triple Bottom-Line Compliance System including
    • Protection: Surveillance to search for and find red flags
    • Productivity: Being analytical, looking at things holistically, connecting the dots, and knowing business patterns as well as individuals’ traits
    • Impact: collaborating with others in the organization to double-check any findings to make sure they reflect a real or potential compliance breach and if so, going directly to the source of the risk as an advisor and an educator
  1. Serve your Client – Build strong relationships and possess superior communication skills. Compliance Officers that are also business leaders, strategists, project managers, and influencers are able to get more done for their clients.
  2. Network – The day-by-day workflow of questions, issues, projects, and resolutions may lead to conflicts of interest and a crisis. Manage your professional brand and reputation.
  3. Build legal alliances – The Legal department can provide important and strategic relationships but it’s up to the compliance officer to keep them on board with Triple Bottom-Line Compliance. A compliance officer must think ahead, educate lawyers, and advocate for taking a longer-term view when needed.
  4. Master diplomacy – Master be diplomacy and understanding many different stakeholders. Be the resource not only finds problems but fixes issues.
  5. Be your true north – “True North Ethics” means there is an authentic fit for a compliance officer within an organization. Align with and believe in the culture, the organization, and the business efforts you serve. Without such an alignment the compliance officer may be too focused on protection and may struggle to lead the rest of the organization regarding positive business ethics when faced with conflicts of interests.
  6. Brand yourself and contributing – Act like a leader and be perceived as one who builds relationships with FOCs, lawyers, and regulators while delivering Triple Bottom-Line Compliance. A strong compliance officer should be clear, definitive, and decisive but may only be so after listening to, collaborating with, and explaining why the regulatory requirement is as it is.

These eight strategies are part and parcel of the “Circle of Compliance.” The circle demonstrates the way a compliance program can protect and add value.

You can learn more about the Circle of Compliance and how to implement it in your own compliance practice in my book Triple Bottom-Line Compliance: How to Deliver Protection, Productivity, and Impact. Click here to download chapter 5 about the power of Networking, for free.

After you read the chapter, don’t forget to apply what you learn and take advantage of your existing and growing circle of influence at back-to-school events, fall parties, and other environments where your positive influence can be felt.

To learn more about how you can innovate with compliance, contact my office today. If you would like to read about my philosophy and how to support business growth so there is measured and informed risk-taking, here’s a look inside my book.