A compliance program may look great on paper. In reality, however, keeping compliance simple and effective can be quite cumbersome and difficult for many compliance practitioners. While the ultimate goal for a compliance program is to create a culture that fosters ethical conduct, many organizations find themselves struggling to get employee buy-in.
According to the 2015 Global Fraud Report by corporate investigations and risk consulting firm Kroll, about three-quarters of companies around the globe experienced fraud in the last year, 81 percent of which were reported to be inside jobs. Overall, the companies surveyed saw a 72 percent increase in fraudulent activity from the previous year. Roughly 69 percent of 768 executives surveyed worldwide said the fraudulent acts resulted in a financial loss, which also increased from 64 percent in the previous period to 69 percent in 2015.
Against this backdrop, in Europe, insider malfeasance remains a top concern at many corporations. The report, which polled about 200 compliance practitioners in the U.S. and U.K. as well, says that 74 percent of European respondents suffered at least one type of fraud within the last year—close to the global level of 75 percent. About 83 percent of the respondents in the U.K. and U.S. believe that compliance is now more complex than it was two years ago.
“Compliance can be seen as a burden to employees because it is easy to view it as creating overheads; sometimes it is also perceived as slowing down the decision process and its purpose is not always very clear,” says Carlos Desmet, professor at the Louvain School of Management in Belgium. “It means that from an employee perspective, they have to fill additional forms, go through new controls, follow additional training, ask new authorizations. So they could feel compliance is dis-empowering them.”
This underscores a tough reality when it comes to managing a compliance program in an ever-changing regulatory environment: change is inevitable, and employees often resist change, even if it is good for them. The key, then, is to make that change as palatable as possible, and this is where many companies can fall down.
A big error any compliance program can make is to announce some new initiative without carefully thinking it through. Desmet said that layering on more compliance policy and procedure because a few employees broke the rules is not always the best way to guide a whole workforce out of a compliance dilemma.
Marc Leu, former chief compliance officer at Philip Morris International and now head of his own consulting firm, says, “Often, if not done right, compliance can be seen as a heavy weight to employees because they get told what not to do—but rarely do they get practical alternative solutions.”
Another issue Leu points out is that too often, compliance programs draw a line between the organization and its employees. “Compliance programs should make employees feel inclusive in order to achieve its goals. Employees should feel that the ‘company’ is them too because one attaches more importance to an ethical dilemma if he/she is aware of the entourage effect instead of a remote concept of ‘the company.’”