Getting Your Ethics and Compliance Program off the Ground

When you’re starting at the bottom, the path to compliance can look like a mountain climb, but you’ll get there if you take it one step at a time

Posted by Dawn Lomer in Ethics, Ethics & Compliance on March 29th, 2012

Something is usually better than nothing, especially when it comes to a company’s ethics and compliance program. But the prospect of putting the money, effort and time into implementing a program where nothing currently exists can be daunting. It’s easy to procrastinate. Then something happens. And the argument that you have an ethical culture won’t save you without the proof of a program to back it up.

“Companies always say they have an ethical culture, says Texas attorney Tom Fox, a prolific writer on anti-corruption and compliance. “No-one says ‘we don’t have an ethical culture’. What they resist is the compliance part of it, where you have to put a program in place.”

There are many reasons companies put off implementing an ethics and compliance program, says Fox. “It’s either the cost, or changing the way that they do business, or having more processes and procedures, filling out forms, that sort of thing,” he says. “It takes time, effort and money. They have to create a new position, they have to fund that position and they have to do things differently.”

It’s Not an Option

But the need for companies to implement robust ethics and compliance programs is clear, as more of them come under scrutiny for violations and end up with costly sanctions and even jail sentences. Companies are changing their behavior out of necessity, and the trend looks likely to continue.

“I think that probably the increase in international enforcement by countries such as the United Kingdom, and other countries that may enact anti-corruption laws, will lead to more robust compliance programs by companies simply because they have to,” says Fox.

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The more enforcement actions we see in the media, the more compelling the message will become: ethics and compliance programs aren’t merely an option.

Market Reasons for Compliance

Bust aside from the threat of sanctions and incarceration, there are other forces now compelling companies to implement compliance programs. “We are seeing some market-driven factors for compliance, things like denial of directors’ and officers’ liability insurance and shareholder derivative actions based upon the FCPA,” says Fox.

“Insurance companies are denying coverage if there aren’t best practices compliance programs in place,” he says. “Banks and other lending institutions are requiring a company to have a compliance program as part of their investigation for a potential load candidate, and they’re writing into the loan covenants, if they make a loan, that a company has to have a minimum best practice, and the bank as the lender would have the right to audit that. And those are market reasons now to have a compliance program that didn’t really exist even a year ago.”

Getting Started

So it’s clear that a compliance program is a necessity, but what happens if you don’t have the money for it?

“Simply because you don’t have budget is absolutely no excuse,” says Fox. “The most important thing is to move forward.”

The first step that every company should take is to perform a risk assessment. “Assess what your risks are and then try to remediate your highest risk,” says Fox. “Everyone talks about third party agents. If that’s your sales model, start doing due diligences on your third party agents. Put a contract in place with compliance terms and conditions and then manage that process going forward.”

You don’t have to do everything at once, stresses Fox. The process can take three months, six months, or even a year. The key is to show that you are doing something about it. “If you have a plan in place and you’re moving forward, that’s what the government wants to see.”


Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.