Companies across Europe, Asia, and Africa are increasingly making ethics and integrity a top priority, but inconsistencies between ethics and compliance program goals and actual activities they plan to undertake may hinder progress.
That finding comes from NAVEX Global’s “2017 EMEA & APAC Culture & Compliance Program Benchmark Report,” which polled 256 key decision-makers and ethics and compliance professionals to better understand their top ethics and compliance (E&C) priorities and challenges. This is the survey’s second edition, with the first published in 2015.
The first part of the survey asked respondents to identify their most important (E&C) program objectives over the next several months, and 85 percent answered that “evolving a culture of integrity, ethics, and respect” was their highest priority. This is a significant uptick from 69 percent of 247 respondents from its 2015 report, indicating that an increasing number of companies place value in developing a strong ethical culture.
That’s the good news. That finding doesn’t necessarily align, however, with what many respondents have identified as their top planned E&C program activities over the next few months.
For example, ranking as the second-to-lowest priority, only 32 percent of respondents said they plan to conduct a culture assessment, an important measure that complements the goal of fostering workplace ethics and integrity. “[I]f you really want to know the effectiveness of your program, it’s really important to ask the end-users, which are, in fact, your employees,” Carrie Penman, chief compliance officer and senior vice president of advisory services at NAVEX Global, said during a recent webcast discussing the results of the report.
Improving corporate culture will be difficult to accomplish without an understanding of where barriers exist and where perceptions differ between senior management and employees. If the company implements a whistleblower hotline and conducts training on ethics and compliance issues, but employees don’t know where to report concerns or don’t fully comprehend the training, the E&C program won’t be successful, Penman said.
Further concerning is that “undertaking activities to help prevent retaliation against employees” received the lowest amount of attention, with only 19 percent of respondents identifying this as a planned E&C activity. “Our culture assessments show that fear of retaliation is a top reason why employees do not speak up about unethical behavior,” the NAVEX report stated.
Thus, ensuring employees are regularly made aware that retaliation will not be tolerated should be a high priority. “Further, managers should be trained to recognize retaliation in their organization and to make sure it is addressed,” the report stated.
The top E&C-planned activities mentioned were “increasing awareness of E&C policies and regulations,” cited by 80 percent of respondents, followed by “improving or increasing ethics and compliance training,” cited by 68 percent of respondents. Other planned activities, each cited by 50 percent of respondents, were “increasing board awareness and involvement in compliance” and “conducting risk assessments.”
The key message here is that disconnect between E&C program priorities and planned actions may warrant further attention and review by ethics and compliance professionals.
E&C program challenges. Several obstacles continue to confound ethics and compliance professionals in the EMEA and APAC regions. At the top of the rankings, “measuring program effectiveness” was cited by 45 percent of respondents.
The challenge for ethics and compliance teams is that they have to not only identify the right combination of key metrics and capture them consistently, but they also need to know how those metrics relate to the overall culture of the organization, said Ian Painter, senior manager, EMEA, at NAVEX Global. This raises some hard questions: “How do you measure something as intangible as culture? How do you measure the value of avoiding an incident?”
Penman notes that no single magic bullet exists for measuring and monitoring E&C program effectiveness. “It takes a combination of metrics,” she said.
“[I]f you really want to know the effectiveness of your program, it’s really important to ask the end users, which are, in fact, your employees.”
Carrie Penman, Senior Vice President, Advisory Services, NAVEX Global
According to the NAVEX report, the most common approaches included:
Tracking employee breaches of the Code of Conduct, internal policies, and expenses (51 percent);
Tracking whistleblowing reports, retaliation and substantiation rates (50 percent);
Tracking E&C training and policy attestation rates (49 percent); and
Conducting employee surveys (48 percent).
Tracking retaliation of employees is another key metric. One way to achieve this is by tracking HR-related metrics against individuals who have in the past either raised an issue or participated in retaliation, Penman said. It’s also important to track cases of alleged retaliation and report those to the board of directors.
Overall, the most effective way to measure E&C program effectiveness is to “identify your goals,” Penman said. “Begin with what it is you’re looking to achieve.”
From there, determine what key metrics are most applicable to your organization, Penman added. She also recommended identifying possible barriers that may prevent you from achieving certain metrics and finding ways to overcome those barriers.
In addition to measuring program effectiveness, other common challenges cited were “insufficient staff” and “managing regulations across different jurisdictions,” each cited by 39 percent of respondents. These results were also in line with the 2015 report.
“Organizations seem to be struggling more with a lack of staff than they are a lack of budget,” Painter said. One solution, he said, may be for companies to look to areas where they can automate certain tasks: What flexibility is there to move compliance staff around to focus on activities that require expert compliance skills and decisions-making, and invest more in automating the administrative tasks?
Automation can provide myriad benefits to compliance teams. Essentially, it can free ethics and compliance professionals from having to do mundane and tedious tasks, “allow[ing] you to get out of the office and focus more on culture,” Penman said. Automating routine operational functions also allows compliance teams to focus more on strategic and risk-based program decision making.
TOP ETHICS & COMPLIANCE PROGRAMME OBJECTIVES
Respondents to the NAVEX Global survey were asked to select their top three most important ethics and compliance programme objectives over the next 12 months.
According to the report, 46 percent of respondents said their company will invest in at least one specialized E&C software tool, particularly for e-learning’ (18 percent); third-party due diligence platforms (15 percent); and policy management systems (14 percent). Companies with advanced programs are more apt to utilize technology and automation to improve program effectiveness.
Incidents avoided. The value in preventing even one major incident can be incalculable. “In fines alone it can often pay for the entire compliance budget many times over,” the report stated.
Thus, it is an “extremely positive sign,” the report noted, that 73 percent of respondents identified at least one major incident that was prevented in the last two years due to their E&C program. The plurality of respondents (36 percent) said they avoided between two and five incidents. One percent of respondents said they have identified between 50 and 99 incidents, while six percent said they have identified as much as 100 or more incidents.
The findings of the NAVEX report show that the number of incidents avoided increases as program maturity increases. This demonstrates that when a program incorporates certain elements—such as compliance tools, training, culture and risk assessments, and has a high level of board engagement—it is likely to prevent more incidents of misconduct, according to the report.
Priorities by functional area. The NAVEX report also assessed how companies are prioritizing the various functional groups within their company. In this regard, supervisors and frontline managers are most likely to receive increased attention from E&C programs over the next few months, cited by 37 percent of respondents.
“One of the areas where we can get the most value from our programs is to help our managers and supervisors on the front lines,” Penman said. It’s important to give managers and supervisors the tools, resources, and confidence they need to be able to respond to issues, she said.
Other functional areas that are expected to receive greater attention are third parties (29 percent), and board and C-Suite executives (29 percent), according to the report.
In addition to supervisors and frontline managers, companies should also pay close attention to how their board is integrated into the E&C program to drive buy-in from the highest echelon of the company. “There are opportunities to take board engagement to the next level,” Penman said.
Conducting training relevant to roles is another hallmark of an effective E&C program, and “will yield far better results than a one-size-fits-all approach,” the report stated. It’s a respectful way to demonstrate to employees that the company has taken the time to provide training that is applicable to their role.
In conclusion, it’s promising that more and more companies headquartered in the EMEA and APAC regions are putting greater focus on a foster a corporate culture of integrity, ethics, and respect. Important it is to keep in mind, however, that any upcoming activities of the E&C team need to complement these program goals, and most especially in the areas of employee engagement and anti-retaliation issues. Any ethics and compliance program, after all, is only as strong as its weakest link.