In the August edition of One Month to More Effective Continuous Improvement I have considered some of the techniques to create continuous improvement in your compliance program.
Under Hallmark Nine of Ten Hallmarks of an Effective Compliance Program as articulated in the 2012 FCPA Guidance, it stated, “Finally, a good compliance program should constantly evolve. A company’s business changes over time, as do the environments in which it operates, the nature of its customers, the laws that govern its actions, and the standards of its chapter 5 Guiding Principles of Enforcement industry. In addition, compliance programs that do not just exist on paper but are followed in practice will inevitably uncover compliance weaknesses and require enhancements. Consequently, DOJ and SEC evaluate whether companies regularly review and improve their compliance programs and not allow them to become stale.” This insight was carried forward in the Department of Justice’s 2017 Evaluation of Corporate Compliance Programs (Evaluation) lists three types of continuous improvement: (1) internal audit, (2) control testing, and (3) evolving updates; each was category further refined with multiple attendant questions.
You should keep track of external and internal events which may cause change to business process, policies and procedures. Some examples are new laws applicable to your business organization and internal events which drive changes within a company, i.e. a company reorganization or major acquisition. This type of review appears to be similar to the DOJ advocacy of ongoing risk assessments. The FCPA Guidance specifies that “a good compliance program should constantly evolve. A company’s business changes over time, as do the environments in which it operates, the nature of its customers, the laws that govern its actions, and the standards of its industry. In addition, effective compliance programs, meaning those that do not simply exist on paper, but are operationalized will inevitably uncover compliance weaknesses and require enhancements. Consequently, DOJ and SEC evaluate whether companies regularly review and improve their compliance programs and not allow them to become stale.”
Continuous improvement requires that monitor whether employees are staying with the compliance program. In addition to the language set out in the 2012 FCPA Guidance, two of the seven compliance elements in the US Sentencing Guidelines call for companies to monitor, audit, and respond quickly to allegations of misconduct. These three activities are key components enforcement officials look for when determining whether companies maintain adequate oversight of their compliance programs.
One technique that is extremely useful in the continuous improvement cycle, yet is often misused or misunderstood, is ongoing monitoring. This can come from the confusion about the differences between monitoring and auditing. Monitoring is a commitment to reviewing and detecting compliance variances in real time and then reacting quickly to remediate them. A primary goal of monitoring is to identify and address gaps in your program on a regular and consistent basis across a wide spectrum of data and information.
Your company should establish a regular monitoring system to spot issues and address them. Effective monitoring means applying a consistent set of protocols, checks, and controls tailored to your company’s risks to detect and remediate compliance problems on an ongoing basis. To address this, your compliance team should be checking in routinely with local finance departments in your foreign offices to ask if they have noticed recent accounting irregularities. Regional directors should be required to keep tabs on potential improper activity in the countries in which they manage. These ongoing efforts demonstrate that your company is serious about compliance.
Over the month of August I have presented a variety of specific tools and techniques for the compliance practitioner to utilize. They include financial audit, the culture audit, continuous controls monitoring, various risk management strategies which can become continuous monitoring. The tools are both quantitative and qualitative. Pick and choose the right tools for your company’s business and compliance profile.
Continuous improvement through continuous monitoring or other techniques will help keep your compliance program abreast of any changes in your business model’s compliance risks and allow growth based upon new and updated best practices specified by regulators. A compliance program is in many ways a continuously evolving organism, just as your company is. You need to build in a way to keep pace with both market and regulatory changes to have a truly effective anti-corruption compliance program. The 2012 FCPA Guidance makes clear the “DOJ and SEC will give meaningful credit to thoughtful efforts to create a sustainable compliance program if a problem is later discovered. Similarly, undertaking proactive evaluations before a problem strikes can lower the applicable penalty range under the U.S. Sentencing Guidelines. Although the nature and the frequency of proactive evaluations may vary depending on the size and complexity of an organization, the idea behind such efforts is the same: continuous improvement and sustainability.”
Three Key Takeaways
A big shout out and thank you to this month’s sponsor Affiliated Monitors. They use a variety of the tools and techniques I have described over the month in their services. I hope you will check them out. For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit this month’s sponsor Affiliated Monitors at www.affiliatedmonitors.com.