Building a Culture of Compliance Through Governance

At Core Compliance, we encourage our clients to build a culture of compliance and to set the “tone from the top.”  This is, of course, common practice in the financial services industry, but recently we were asked, “what happens after that?”

We were left a bit puzzled by the question because typically, we’d see the expected trickle-down effect after setting the tone from the top. Usually, setting that tone creates a clear vision for the firm and its employees to follow, as well as an expectation as to how the firm will live up to its commitment to compliance.

One of our recent articles, “Setting the Tone from the Top: Getting Executive Buy-In,” covers the value of building this comprehensive approach and getting buy-in from executive management, but how does a firm maintain that buy-in going forward? That question left us eager to share other methods to building a culture of compliance, in particular, through effective governance.


Five Best Practices Through Governance

Having executive buy-in and an effective means of communicating the firm’s expectation, methodology and practices for executing on its compliance commitment is only scratching the surface when it comes to “tone from the top.” Afterall, there are multiple “tops” at multi-level and cross-departmental businesses, especially if your firm offers a variety of services and offerings as part of your business model.

With that in mind, below are five best practices to start the implementation of compliance governance at multiple levels of leadership and corporate structure.

1. Establish a Mission Statement that includes the Firm’s approach to compliance and ethics. An organization’s Mission Statement serves as the crux of how and why your firm does business. By simply including your company’s ethical approach to service in the Mission Statement, your firm will further cement for your employees (and clients) how pivotal their commitment is to compliance.

In order to live up to the Mission Statement, a strong ethical governance structure will also need to be established and documented as part of the company’s formal charters, which can further emphasize the importance of compliance at your firm. Seeing it woven throughout your operation further engrains its significance to the fiber of the firm.

2. Create a committee specific to compliance and ethics. This committee should provide compliance and ethics oversight throughout your organization, as well as create a forum for an ongoing open conversation about compliance and ethics. While the committee should include C-suite executives, it should also include representation from other functional departments to create an inclusive and comprehensive framework to assess operational impacts and policies. This broader representation will help ensure that compliance is echoed at all levels of the business and provide personnel with an opportunity to grow and collaborate.

3. Ensure compliance is part of the onboarding process. Any firm will tell you that successful onboarding of talent doesn’t last a week, but realistically a year or more. Joining a firm, understanding the components of the position, knowing department functions and structure, and getting to know the culture and your fellow teammates is already difficult to manage. Now try fitting all of that into a week or a month and then adding compliance training – this would be difficult for any new employee to manage. Thus, successful onboarding is managed over time and assessed periodically.

To ensure that compliance is effectively incorporated into the onboarding process, firms should collaborate with Human Resources to build and/or implement ethics and compliance as part of job training and continuing educational/developmental opportunities. Compliance isn’t a ‘set it and forget it’ aspect of a business, it needs to be assessed regularly – the same should be true for compliance training, which needs to be kept up to date in the face of evolving business practices and regulatory landscapes.

4. Use compliance as a career development tool. Mangers are constantly asked by their employees “what can I do to improve?” or “how do you see me growing at the firm?” These questions tend to come up around individual annual performance reviews or when assessing raises and promotions.
Incorporating the concept of compliance into these discussions can enhance an employee’s direct impact to the company by giving them the chance to understand and reflect upon key questions, such as…

  • What day-to-day responsibilities and tasks am I responsible for that may put the company at risk?
  • How knowledgeable am I about the expectations of my job and the procedures it takes for me to be effective?
  • Have I documented and attested to all trainings, reviews, communications, and transactions with me, my team, our partners, and – most importantly – our clients?

These questions not only contribute to the self-assessment process, but also to career growth and development, all with compliance at the root of personal and professional improvement.

5. Include and collaborate with executives and managers in the on-going compliance conversation. It goes without saying, but when a regulator conducts an examination of your firm, they will want to interface with a number of employees at your company, especially your executive team. These discussions will no doubt venture into assessing your firm’s culture of compliance, at all levels.  C-suite executives should be involved and participate in any discussions regarding compliance at your firm.  You should also be prepared for other functional department heads to be included in some of these discussions, so it’s important to ensure that a wide array of personnel can speak to the firm’s culture of compliance.

Compliance should never be approached as a ’set it and forget it’ part of your business. At Core Compliance & Legal Services, Inc. (“Core Compliance”), we’ve assisted firms with not only establishing a “tone from the top” and enhancing policies and procedures, but we’ve also been a critical ingredient to establishing and enhancing a defined culture of compliance for our clients.

We’ve seen many success stories come from effective compliance governance, which can be difficult to duplicate and implement as every firm is unique in terms of talent, service offerings and structure. The team at Core Compliance has assisted firms in identifying their opportunities to build, their areas to enhance, and how to leverage and develop the compliance knowledge of their personnel.

For more information or to discuss your firm’s approach to compliance, governance, and/or establishing a culture of compliance, contact the team at Core Compliance today.