Ensuring compliance depends on the individual actions of employees. That is why businesses that want to comply with changing laws and regulations should focus on building a compliance culture, where employees understand why compliance matters as well as their roles in ensuring that it happens.

How do businesses build a compliance culture? Here are some guidelines.

Make sure executives buy into the process. For compliance to matter in the employee ranks, it must matter to executives. To send the appropriate messages regarding compliance, the executive team must talk about it often. Whenever appropriate, executives should pepper their verbal and written communications with topics relating to compliance. Make sure executives can make the case as to why compliance is an important goal for the company to pursue. For example, they should be able to explain the financial benefits of compliance in terms employees readily understand.

Invest in education. For a compliance culture to exist, everyone must understand the types of regulations the company must comply with, including ever-changing regulatory expectations. To make sure they remain up to date on the latest regulations, some companies assign certain employees with the responsibility of keeping pace with changes in the regulatory environment. Others rely on suitably qualified third parties such as law firms or consultants to provide updates. Regardless of who keeps track of the changes in regulations, make sure the mechanisms exist to communicate changes in regulations throughout the organization before they take effect, which allows your employees time to adapt their approach to ensure compliance.

Provide a financial incentive. To make sure executives commit the appropriate time and resources to compliance, executive performance should also be determined in part by the ability to comply with relevant mandates. Furthermore, consider extending the payment of financial incentives to the employee ranks in the form of spot bonuses that reward behavior that helps the organization achieve compliance.

Clearly define roles and responsibilities. To foster a compliance culture, there should be clear lines of responsibility and ownership from the top of the organization to the bottom. Everyone must know their roles in ensuring compliance and be able to explain the ramifications of failing to do so. Set expectations early, as soon as employees join the organization. Make sure you impress upon them the importance of compliance. To that end, new hire and recurring employee training should include sections dedicated to compliance.

Make sure policies and procedures exist. The appropriate policies and procedures must be in place and frequently circulated, read, and acknowledged by everyone in the organization. As the compliance environment changes, there should be a process in place to update every document relating to compliance as appropriate. To support a compliance culture, internal controls must exist and be highly publicized. Furthermore, employees must know when and how to raise concerns regarding a failing control or alleged violation of the program. If someone violates a policy or procedure, companies must hold those individuals accountable.

Track and report violations. The effectiveness of your compliance efforts hinges on your ability to track where the program excels and where it falls short. Creating a centralized compliance case management system allows your organization to develop a granular understanding of the compliance program strengths and weaknesses. The appropriate technology can also help track compliance failures and ensure consistency regarding the associated employee disciplinary decisions.

A Sustained Effort

In a compliance culture, compliance becomes part of everyday tasks instead of an afterthought. And while establishing and maintaining an effective culture requires a sustained effort, by doing so, your business can minimize compliance violations and the associated financial penalties and distractions they create.

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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.




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