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Oct 26, 2016

Adherence to compliance strategies begins at the top

Senior leadership needs to prioritize compliance and ethics and involve the board, study says

Compliance needs to be tied to business strategy, according to a recent report.

PwC’s State of Compliance Study 2016 polls more than 800 executives about compliance and ethics, and while 98 percent of respondents say their companies have ‘senior leadership that is committed to compliance and ethics’, more than half (55 percent) say ‘senior leadership provides only ad hoc program oversight or delegates most compliance and ethics oversight activities.’

There are many things companies can do to urge senior leadership to increase its compliance and ethics activities, says Andrea Falcione, PwC’s compliance and ethics solutions leader. First, compliance and ethics leaders can instigate ways to gauge senior leadership involvement in compliance and ethics activities. ‘This might include a formal scorecard on senior leader performance on various compliance and ethics program elements,’ Falcione says.

Second, communications from executives to employees – emails, meeting materials, video messages – could be used by senior leaders to address compliance and ethics topics or activities, which would increase their perceived commitment to these issues.

Compliance officers can facilitate greater involvement in strategic discussions by participating in several ways, says Seth Cohen, a director in PwC’s risk management and solutions practice. ‘They can demonstrate interest in strategic planning by participating in functional and operational planning meetings and sessions,’ he points out. ‘This will not only raise their profile to functional and operational leadership, but also demonstrate their value by their insights around potential compliance risk and mitigation activity.’ 

Compliance leaders can also be more strategic in their presentations and interactions with the board and/or relevant oversight committees, by proactively addressing potential risk areas and mapping compliance strategy to the goals and objectives of the business, thereby demonstrating their own connectivity to the business, Cohen says.

The report shows that only 20 percent of organizations have boards that have formed compliance and ethics committees. While this percentage appears low, it may actually reflect a positive trend, Falcione explains.

‘It may be that organizations realize compliance challenges may need additional treatment and time that a typical oversight committee of the board (such as the audit committee) may not be able to provide,’ she says. ‘Establishing these committees may take some significant work, most likely by senior leadership as well as the legal and compliance executives.’ 

The report includes five questions a body can ask itself about its state of compliance:

*  Does your organization’s senior leadership make the delivery of compliance and ethics messages a priority?

*  Is your organization’s senior leadership measured in any way on its commitment to compliance and ethics?

*  Does your organization’s existing risk assessment process capture the current state of compliance and ethics risk management with sufficient detail so as to power your planning and execution of necessary mitigation activities?

*  Does the structure of your organization’s compliance and ethics function truly enable and support key activities to address prioritized risk areas?

*  Do your organization’s board and senior leadership provide meaningful oversight and support of the compliance and ethics function?