From the boardroom to the warehouse, ethical conduct and compliance are essential for protecting a company’s reputation and navigating growing regulations. Managing different ethical perspectives across departments while keeping up with complex rules is no small task.
As Warren Buffett famously said, “It takes 20 years to build a reputation and five minutes to ruin it.” Non-compliance or unethical behaviour can lead to financial penalties, legal trouble, and lasting damage to brand trust.
In this blog, we explore how senior leaders can foster a culture of ethics and compliance, effectively report to the board, and strengthen risk management through collaboration between audit and compliance teams.
Building a culture of compliance: A foundation for ethical decision-making
In today’s business environment, where competition is fierce, and trust is critical, organisations must prioritise ethical conduct and compliance to protect their reputation and ensure sustainable growth. Compliance professionals play a critical role in fostering a culture of compliance ensuring adherence to laws and regulations and promoting ethical decision-making at all levels.
Establishing a robust compliance culture requires a concerted effort, with the organisation’s highest echelons — its board of directors and C-suite executives — taking a lead role. This necessitates active support for compliance initiatives, the demonstration of a visible commitment and the consistent enforcement of ethical standards. Clear communication of compliance policies, coupled with comprehensive training and a strict zero-tolerance stance on violations, is indispensable in fostering an environment of integrity.
Engaging leadership for ethical excellence
Compliance leaders cannot be expected to single-handedly foster a culture of compliance. The senior leadership is crucial in setting the tone and establishing an environment that upholds ethical conduct and compliance in the workplace. This requires clear and compelling communication about the significance of compliance, as well as the demonstration of commitment to laws and regulations.
Encouraging a culture where employees feel secure in reporting concerns is also vital. Leaders must further support the compliance team by providing the necessary resources, cultivating a collaborative work setting, and ensuring that compliance is seamlessly integrated across all organisational operations.
Effective compliance reporting to the board
Board members play a critical role in overseeing compliance efforts and ensuring the organisation’s adherence to ethical standards. Compliance leaders must prioritise providing board members with accurate, relevant and consistent information on compliance performance. Board reports should focus on key performance indicators, emerging regulatory issues, policy updates and risk mitigation strategies.
Cindy Moehring, Former COO of Walmart and Current Founder & Executive Chair of Pyxus Inc., emphasises the importance of explaining the difference between a compliance program and legal advice to the board. By presenting compliance information effectively and engaging board members in regular discussions, organisations can enhance decision-making and strengthen their overall compliance posture.
“It’s all about what the numbers say – the story behind the numbers needs to be explained. The story isn’t a one-time event – it’s a book with multiple chapters, and it’s your job to update the board on the chapters and the story. The art of reporting compliance to the board is linking the pieces together.” – Cindy Moehring, Former COO of Walmart and Current Founder & Executive Chair of Pyxus Inc.
The synergy of audit and compliance: Fostering collaboration for stronger risk management
Compliance and internal audit teams must work closely together to protect the organisation from regulatory risks and brand damage. Traditionally, compliance teams focused on preventing legal violations, while internal audit teams specialised in identifying financial misconduct.
However, this siloed approach has become less effective in addressing the evolving compliance landscape. By adopting an integrated risk management (IRM) strategy, organisations can break down silos, streamline processes and enhance collaboration between compliance and audit teams. This integrated approach improves data accuracy, enables comprehensive risk assessments and facilitates better decision-making.
Leveraging technology to empower ethical champions in compliance
Governance technology platforms, such as Diligent, centralise risk and compliance data, automate workflows and provide real-time insights into compliance performance. If getting ahead of ethical conduct and compliance is struggle, the right solution could be the key.
