Organizational intelligence does not come solely from reports or people, but rather the combination of human and artificial senses, data insights and personal interactions.
Champions of ethics and compliance have proved to be indispensable, but who are they? They are often not full-time compliance officers; they are controllers, local area managers, human resource professionals or in-house counsel. Executive management teams and boards of directors often depend on them to be the extensions of all things ethics and compliance in business units around the world — understanding country risks, intuiting office cultures and pressures, adapting corporate policies to local needs, helping managers to make the right decisions and escalating potential issues for action. Most of all, as the word signifies, ethics and compliance champions are walking symbols of a company’s commitment to its code of conduct.
THE RIGHT USE OF TECHNOLOGY
Have technology and metrics diminished the inherently personal role of the champion? The answer is that they extend the champion’s reach. Forty percent of fraud, waste and abuse issues are discovered through tips or by accident; whistleblower reports to the Securities and Exchange Commission continue to rise year over year. A trusted champion can encourage more people to speak up internally, early and often. When data indicates a pattern of misbehavior or an employee raises a compliance concern, human judgment can be critical for issue assessment and triage.
THE CHAMPION’S CHALLENGE
Neither technology nor metrics reporting changes the champion’s mission. Integrity is the foundation of great companies. The lack of integrity can lead businesses to fail, or at a minimum can result in brand reputation loss, investigations, litigation and expensive remediation.
Both the champion and the organization must understand the obstacles to success. There are three primary challenges that will test the authenticity of the compliance champion:
Out of sight, out of mind — A business unit is likely remote from headquarters and it is the champion who must be the rock on which the local ethics and compliance program depends.
One foot in, one foot out — Corporate messages — including values statements, codes of conduct and policies — may not be greeted with open arms. The champion will “lean in” and look to adapt and translate (literally and metaphorically) the messaging to meet the needs of local teams.
Tension of the deal vs. corporate rules — The champion stands in the middle of local and corporate obligations. An effective champion must provide objectivity and not bend the rules.
THE INTEGRITY AGENDA
A company’s integrity agenda is designed to reduce the gap between an organization’s stated objectives and its actual behavior. The elements are the ethics and compliance program’s governance structure, organizational culture, compliance controls and data insights to measure and improve effectiveness. The elements complement each other; a champion can use them all, integrating technological and human attributes.
1. Governance – The structure of integrity management, encompassing board, line management and policies that guide behavior.
The champion takes on a personal leadership role to activate an ethics and compliance governance structure in a business unit. The champion knows the local team — its strengths, weaknesses and ability to integrate commercial and compliance objectives in decisions. The champion does not let local integrity concerns stay out of sight, out of mind. The champion also knows how to mediate corporate and local perspectives, and how to use the authority of an independent reporting line.
2. Culture – The commitment to integrity that guides decisions across the extended enterprise.
A champion should probe for the root causes of ethics gaps and work with local management to address them (as only a local leadership team can), with the assistance of corporate ethics and compliance resources for education and communication. A champion can draw on metrics of business performance, helpline calls and compliance failures. Technology can enable data analysis around risks and controls effectiveness, provide key risk and performance indicators and yield insights about employee attitudes, ethics breaches and controls effectiveness.
3. Controls – Procedures that embed integrity into day-to-day operations, preventing and detecting violations of laws and policies.
Technology increasingly shapes compliance and operational controls. More companies are centralizing compliance controls (e.g., third-party due diligence and monitoring, expense approvals or trade association memberships), taking the operational burden off business units and providing data that management can use to assess performance and outcomes. The champion must be aware of the gaps: warning about false confidence in controls implementation or effectiveness and advising business unit and corporate management about needed improvements. The champion should also point out a risk in centralized, automated control processes that are too mature — so mature that local employees find them inflexible or slow.
4. Insights – Data-based insights about emerging risks and integrity performance, driving program effectiveness and enriching employee knowledge.
The champion can draw on corporate accounting, internal audit and the general controls functions to manage and monitor information. The champion’s human attributes are required when data is collected and analyzed, or even earlier, when decisions are made about what data to collect. A human review system in business units and local offices where risks occur is one of the biggest opportunities for an organization. It can offer early warning of problems that should be nipped in the bud. The champion should be on the pulse of events, monitoring for controls that are overridden, aberrations in normal data flows and transactions outside the normal course of business.
The full article in its original form can be found here.
EY is a founding member of the Advisory Board for Temple Law’s Center for Compliance and Ethics
Dan Torpey is an EY Americas Forensic & Integrity Services Partner. Dan helps clients with compliance programs including investigations and complex forensic accounting matters.
Andrew Reisman is an EY Americas Forensic & Integrity Services Senior Manager. Andrew leads ethics, compliance, antitrust and fraud engagements for clients in diverse industries.