The Case For The Global Compliance Function

March 2, 2021

by TRANSEARCH International

Corporate compliance helps companies avoid and detect violations of company rules and norms, and it brings the capacity to protect organisations and individual leaders from costly lawsuits, and worse.

When red flags escalate into a full-blown crisis!

There comes a time in the history of every global company when its executive leaders wish they had seen something coming. It might have been a warning about potential trouble ahead. It could have taken the form of a complaint from a customer, employee or business partner. And it may have sounded like something trivial the first time it surfaced, only to expand in impact and create unforeseen challenges.

Whatever the case, particularly when red flags escalate into a full-blown crisis, hindsight always serves up important management insights and, occasionally, even some humble pie. In the best of cases, hard lessons are learned and leaders evolve. In the worst, people can get hurt, reputations can be damaged and profits can really get squeezed.

This is why it is important never to underestimate the value of the corporate compliance function.

The critical role of the compliance function

In the world of public, exchange-listed companies, the compliance function plays an essential role in the governance structure, ensuring alignment with the law, and providing a framework for managing matters of organisation culture. But, that is, only on one condition.

The act of consistently enforcing compliance gives a company the canary in the coalmine signal – and system – to prevent, identify and mitigate the impacts of violations of company policy.

The compliance function is even more critical for privately owned companies. And in the realm of globally distributed family-owned businesses, it may be the very key to determine enterprise success or failure.

Executives who have worked for family-owned businesses already know just how lacking these companies are when it comes to investments in corporate governance. In some cases, these global enterprises completely lack any effective governance or governance structure.

In these environments, two types of leaders are revealed: those who are appointed for political reasons, and those who are promoted purely on their merit and fit with the culture.

This ultimately results in the concentration of real power and authority in the hands of those who are politically aligned with one another, while the actual owners of the family-owned business never gain access to the truth of what’s happening within their own business.

Compliance is important business

Think about it. If there are no whistle-blower protections, or if the compliance function is owned by a leader who also owns, for example, the finance function, how can serious, evidence-based concerns about the conduct of the business and its management team ever be properly exposed to the light of day?

Corporate compliance turns the heads of leaders with something to hide or a politically driven atmosphere. Its purpose is to help companies avoid and detect violations of company rules and norms, and it brings the capacity to protect organisations and individual leaders from costly lawsuits, and worse.

Taking compliance more seriously is important business, and creating and sustaining the system that can trigger warnings about major risks and problems for the organisation is something for which every global leader should advocate and take seriously in good times and bad.

This article is © TRANSEARCH International and was originally published on the TRANSEARCH International website.

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