Nowadays, compliance is naturally an integral part of any business, and particularly for those operating across borders. But how should you actually set up the compliance department? And who are the best people with the most appropriate background with whom to staff it?
Companies often undergo three broad phases in establishing a robust compliance framework. The first stage is to determine which topics within the broad compliance area require attention. For example, you can use a ‘risk-based’ approach to examine which areas and/or countries pose the greatest potential for risks for the company. The compliance department then develops and designs the compliance policy and strategy, establishing policies and procedures and a code of conduct. The second stage is to roll out the compliance policy throughout the organization. The compliance policies must be properly implemented not only at headquarters, but in the business both at home and abroad. This mainly involves creating awareness, developing and providing training, and gaining support throughout the organization. Influencing behaviour is an important pillar during this second phase. Finally, the third stage involves monitoring the entire compliance programme from that point on, and keeping procedures, systems and control mechanisms up to date. An effective compliance reporting system ensures that management can provide direction or make adjustments relevant to compliance.
We can therefore distinguish between two types of work, both of which come under compliance; strategic and policy compliance work (stages 1 and 2) and operational compliance (stage 3).
In practice, the compliance function is generally either set up as an independent function, is part of the legal & compliance function or comes under risk. During stage one, many organizations choose people with legal backgrounds. For this reason, many heads of compliance are lawyers by trade. These professionals are used to translating often complex subject matter into a practically applicable set of internal rules and regulations. Of course, there are also many heads of compliance without a legal education, but a lawyer is often a safe choice. The first stage may also include determining whether specific topics deserve additional attention. If this is the case, then a ‘subject matter expert’ may also be a valuable addition to the team.
In practice, the second stage offers opportunities for employees from a variety of backgrounds. Lawyers, business economists, people with an auditing background or occupational and organizational psychologists can do well during this stage involving behavioural influencing. In the third stage, most organizations prefer to use employees with an auditing background. Perhaps some or all of the work is already being performed by the internal auditing staff.
Of course, it also depends on the size of the organization as to whether using so many different employees is an option.
Compliance continues to be a rapidly evolving field. In our experience, we encounter a wide variety of compliance departments. This makes this relatively new field exciting and challenging for a company’s executive level. If you would like to discuss this, please contact me at email@example.com or on 0031 (0)20-589 16 07.