Michael Volkov

Michael VolkovCorporate Excuses to Avoid Compliance and Ethics Programs

Change is difficult. I understand that. Business leaders know the importance of change, adaptation and innovation. However, when it comes to compliance and ethics, senior managers slowly embrace change.

With all the recent press on spiraling anti-corruption investigations and risks, you would think that business leaders would redouble their efforts to improve their anti-corruption programs. Survey after survey confirms that business leaders recognize corruption risks as one of the top 3 risks they face each day.

The C-Suite suffers from a narrow perspective, one which is focused on short-term financial benefits to the detriment of longer-term benefits and improvements. The C-Suite has become addicted to short-term quarterly reports and bonuses which guide their decision-making and resource allocation decisions.corporateexcuses3

When it comes to “support” functions which do not directly contribute to the bottom line by increasing revenues or reducing costs, compliance and ethics is unfairly brushed aside and ignored. In fact, forward-thinking business leaders recognize the importance of compliance and ethics as a positive contribution to revenues. A company with a strong compliance and ethics culture is more likely to succeed financially in the long run.

As more companies get tripped up by aggressive enforcement actions, business leaders need to take a deep breath and begin to reassess where they are on the scale of risk management, compliance and ethics, and improving the culture of compliance within their companies. It is an insurance policy which comes at a low price. The benefits far exceed the costs, yet we continue to read about how companies have failed to implement adequate compliance programs.

The cost of a robust compliance and ethics program is far below the cost of insurance against an enforcement action or the cost of an enforcement action. The opportunity cost of an enforcement action can be devastating to a company – everything in a company is put on hold during the time that the company devotes resources and attention to fending off a dangerous enforcement action.corporateexcuses2Given the relatively low-cost involved in designing and implementing a robust compliance program, there is no excuse for ignoring the needs of a compliance and ethics program. The list of corporate excuses goes on and on – starting with financial bottom lines, and devotion to quarterly financial reports and skewed incentives for bonuses.

It is hard to push aside projects which appear to be more important and critical to senior management. It is also hard to justify compliance and ethics program spending based on fear of an enforcement action and the collateral consequences of such an action. However, if you look at some of the more innovative companies which are dedicated to a culture of compliance and ethics, there is a frequent correlation with financial success – one goes with the other.