Effective Compliance Program Hallmark 2 – Program Oversight
Today we continue our seven-week blog series on the seven hallmarks of effective compliance programs. If you haven’t already, be sure to check out the first hallmark on written policies and procedures.
According to the Federal Sentencing Guidelines for Organizations (FSGO), the seven compliance hallmarks are the minimum amount required to create due diligence and promote an organizational culture that encourages ethical conduct and a commitment to compliance. The promotion of an organizational culture is the reason our second hallmark, program oversight, exists.
Essentially, program oversight means board-level involvement in compliance, with a commitment to a “tone from the top,” as many experts say. Today, using content from our interview with industry expert Hui Chen and various official guidelines such as the FSGO, we’ll explore this second hallmark in depth.
When it comes to program oversight, the FSGO guidelines suggest that:
- The organization’s governing authority should be knowledgeable about the content and operation of the compliance and ethics program.
- Specific high-level personnel should have overall responsibility to ensure the compliance program is effective.
- Specific individuals tasked with day-to-day operations must be given appropriate resources to demonstrate effectiveness to the board.
These guidelines raise some interesting points of conversation. Particularly in its description of how to demonstrate the effectiveness of and allocate resources to a compliance program.
Many organizations mistakenly convince themselves that just by proving policies and procedures exist and training occurs they have an effective compliance program. That just by demonstrating knowledge transfer to employees, they’ve done enough to tick boxes off the compliance checklist.
Former Department of Justice (DOJ) Counsel Expert Hui Chen takes a different approach. Chen highlights the importance of understanding the objective of your compliance program and what it needs to accomplish.
“The problem is not with knowledge. The problem is with behavior. You should be measuring [employee] behavior,” Chen says.
However, conducting this type of analysis presents a host of challenges. Many organizations simply lack the tools, technology or resources to measure their compliance program’s effectiveness.
This leads us to the guideline on resources — that people tasked with day-to-day compliance operations need enough resources to do their jobs properly. While some organizations argue they allocate resources because they have a compliance program, simply having a program is not enough.
Chen argues that to truly create a culture of compliance, leadership needs to put their time, money and action where their mouth is.
“When you pause and think about it, it all comes down to the choices that are made, how time is spent and how resources are allocated. These answers are what ultimately convince you of a manager’s or company’s commitment–not what they say,” Chen explains.
The DOJ’s 2017 whitepaper, “The Evaluation of Corporate Compliance Programs,” provides insight into what proper resource allocation should look like. According to the whitepaper, when determining proper resource allocation, regulators search for answers to several questions. First, regulators want to know how companies decide to allocate personnel and resources for compliance functions. Second, they check whether a company denies resources in response to requests from company compliance and control functions.
Throughout the whitepaper, regulators acknowledge that, to achieve the guidelines in place, companies need resources.
When it comes to program oversight, the message is clear. Regulators look to board members to create a culture of compliance and ethics. Not only is leadership responsible for ensuring they have a compliance program, but they must also demonstrate its effectiveness and make resources available to empower their compliance team and drive ethical behavior. A company cannot achieve this level of commitment simply by ticking a box.
Check back next week as we cover the third hallmark of effective compliance – Ethical due care. Until then, please visit our website for information on how Mitratech can assist you implement an effective compliance program.