Managing compliance and mitigating risk in financial services firms today, in an ever-changing regulatory environment, is no easy feat. Most firms recognize that they can learn from each other, as well as from industry organizations and groups dedicated to helping firms improve the effectiveness of their compliance programs. That’s why attending industry conferences and networking events can be beneficial.
Those industry professionals who attended the ComplySci Summit 2019 in New York on September 9, 2019 had an opportunity to interact with their peers and hear from leading voices in the regulatory compliance space. Presentations on compliance technology, compliance culture, and ethics were geared toward Chief Compliance Officers (CCOs) and their teams, risk management professionals, and other executives with compliance oversight responsibility for financial services firms.
One of these presenters was Erica Salmon Byrne, Executive Vice President and Chair of Ethisphere’s Business Ethics Leadership Alliance. Erica provided a compelling presentation titled “A Culture of Compliance: Why It Matters and How to Sustain One.” This blog post covers some of the high points of that presentation.
The Ethisphere Ethical Culture Survey
Much has been written in recent years about how to create a strong culture of compliance and why doing so can generate long-term value for shareholders. Invariably, the advice that firms are given includes ensuring the tone from the top supports compliance efforts and initiatives. During the ComplySci Summit, Ms. Salmon Byrne’s presentation drove that point home with industry survey results and compelling statistics.
Ethisphere’s 2019 Ethical Culture Survey data was based on responses from 475,000 individuals at over 50 companies around the world, representing the views of over three million employees. The survey’s 50 questions covered a range of topics, including the following:
- Awareness of the firm’s compliance program and resources
- Perceptions of the ethics and compliance function
- Observing and reporting misconduct
- Pressure to commit misconduct
- Organizational justice
- Perceptions of supervisors
- Perceptions of leadership
- Perceptions of peers and the corporate environment
Understanding That Managers’ Influence Is Key
The April 2019 rollout of the U.S. Department of Justice “Evaluation of Corporate Compliance Programs” manual reminded firms of the need to build and maintain effective and responsive compliance programs that are tailored to address each firm’s specific risk factors. While strong policies and customized training are important elements of effective compliance programs, strong leadership is also a critical element.
When asked whether they would report observed misconduct, and if so, why they would be likely to do so, 92.2 percent of respondents indicated that they would do so. Of those, 49.3 percent said they would do so knowing that their manager would support them, while 40.9 percent said that senior leadership would support them.
The survey also showed a dramatic difference in employees’ perception of their firms’ cultures of compliance based on how well respondents’ managers communicated about ethics and compliance.
Training Programs for Managers Can Improve Firms’ Compliance Cultures
Given that tone from the top is such an important element of firm culture, it stands to reason that managers who are in regular contact with front-line employees should be trained on compliance and ethics matters.
Many firms are doing this well already. In firms with established and mature cultures of compliance, manager training covers a range of topics, including how to promote the firm’s compliance program, how to respond to and address issues raised by employees, identifying and preventing retaliation, maintaining an “open-door” environment, understanding when to escalate issues, incorporating ethics into the decision-making process, how to communicate culture issues with the employee base, and much more.
While 98 percent of survey respondents indicated that managers in their firms receive compliance training covering some or all of these elements, only 73 percent said that such training is provided to all managers. In other firms with ethics training programs for leaders, only some managers are exposed to compliance and ethics training, leaving a clear gap in their training programs.
Do Your Firm’s Managers Have the Tools Needed to Help Foster a Strong Compliance Culture?
How do you think your firm’s employees would rate their willingness to report observed misconduct? How does your firm’s compliance and ethics training stack up? If your organization’s managers feel supported by their leaders, and if the firm is committed to transparency with respect to its compliance and risk management program, you likely have at least the foundational elements of a strong culture.
Another element that helps improve managers’ effectiveness is regulatory technology designed to make compliance oversight and supervision more streamlined and accurate. Effective RegTech includes real-time visibility and customized reporting options that make it easier for managers to understand requirements and spot potential issues before they become major problems.
At ComplySci, we offer customizable solutions designed for large, complex organizations as well as smaller firms that need reliable, cost-effective compliance technology. To learn more, contact us today to request a demo.