Compliance officers within the financial services industry are aware that it is becoming increasingly difficult to replicate the resources and reputation of an organisation. This is mainly due to the complex environment within which organisations need to operate in the current scenario.
Corporate reputation has clearly become a topic of concern within our society and is, in many ways, intertwined with corporate responsibility. There is little doubt that no compliance officer is keen to be associated with an institution that is in some way engaged in irresponsible business conduct, questionable accounting practices, deception of customers, and so on.
It is therefore imperative that organisations not only operate responsibly but are also seen to be doing so. Generally, the contributing elements to a good reputation are compliance at the right standards with a legal and ethical framework. The institution also needs to act proactively according to the expectations of stakeholders.
Ultimately, this also boils down to corporate values at a collective or societal level. If we are convinced that values are important to our business, then we need to know how to measure them in order to identify and ratify any ethical dilemmas.
This is why compliance officers need to identify and measure any risks that the institution might be exposed to. This is necessary in order to develop and implement effective codes of ethical practices to not only capture the legal concerns that normally take priority in the development of codes but to also to: include the mission and values of the institution that trigger mutual endorsement among management and all employees with the institution; and help leaders and management within the institution to willingly embrace the codes.
The codes must therefore reflect critical functions in the eventuality of impact scenarios which may include sanctions for non-compliance.
They must also include roles and responsibilities and reporting lines of designated employees who are entrusted with the mitigation of any breaches at an internal and/or external level.
Succession management processes must also be included to ensure that the processes of each key role within the organisation ensure the necessary continuity. Similarly, supportive provisions are required to reflect the process for identifying issues and raising an investigation, in line with the provisions of the code that should ultimately mirror applicable legislation.
In both the development and implementation of the codes it is vital that these are widely circulated within the organisation and are accessible and user-friendly. Therefore, a compliance officer should provide interactive training and support where necessary, draw up detailed and updated internal procedures for client onboarding and ensure ongoing monitoring of client relations and records.
If necessary, the codes should also be simplified or translated to enable as many people as possible within the institution to understand and commit themselves to the codes both in theory and in practice.
There are very obviously a number of risks if these codes are taken lightly and if maintenance is not supported by key stakeholders within the institution. In such cases, inconsistent messages will be sent out to both internal and external stakeholders. We may encounter situations where employees pretend that certain situations do not exist because they are politically charged or a situation is too painful to handle.
Reputation should not be seen as an end in itself but as being driven by the behaviour of all stakeholders. The consequences, and hopefully the benefits, of good reputation could lead to the institution being able to:
• enhance relationships with various stakeholders within the industry both locally and internationally;
• secure sustainability;
• attract good employees and retaining the best staff;
• attract new customers and new business partners;
• help to protect the country’s image and brands during a crisis.
This scenario may be deemed to be surreal and slightly utopian as more often than not, compliance officers can be seen as game stoppers or even an expense to the institution.
In reality, however, the days when compliance officers were occasionally asked to come out of their comfort zone are pretty much history.
Contingency management and adopting a risk-based approach has become the norm for compliance officers in today’s complex working environments. Balancing trade-offs is a daily challenge to compliance officers given that senior management needs to demonstrate to stakeholders that the institution has to continually embrace sound values that incorporate fairness, integrity and ethical behaviour along all of its operations while ensuring, at all times, sustainable operations.
This article was published in The Times of Malta (21 April 2016).