Loyola University Chicago School of Law, JD 2020
Regulatory compliance requires investment, but it can also mean opportunity. The level of investment looks different depending on the industry. One consistency covering all industries impacted by regulation is the potential benefit resulting from relationships with compliance officers and regulatory officials. Embracing compliance means embracing the relationships that follow.
Corporate compliance is an overly broad term, leading many industry insiders to question where to start. Best-practices in regulatory compliance should start with relationships. Building and managing relationships with compliance officers and regulators might sound time-consuming and unnecessary. With thousands of regulatory agencies across the country, however, it is quite the opposite. In addition to regulatory agencies, the compliance field is booming in all industries. In 2014, The Wall Street Journal named compliance officer as the hottest job in America. Positions on all sides of regulatory compliance are filling up, meaning it is increasingly important to get behind the trend, starting with relationships. Take the importance of relationship-building in the banking industry. The financial services sector is bound by a strict protocol of lengthy regulations. The industry is ultimately exposed to a high number of compliance officers and regulators. While one industry may have more contact than the next, all companies could benefit from investment in these relationships.
When Should a Relationship be Formed?
Depending on how regulated the industry is, companies will have more or less interaction with its compliance officers and outside agencies. Relations should be facilitated in the ordinary period when things are quiet. As in all relationships, it is difficult to get to know your compliance officer or regulator in a time of turmoil. Tensions are high during these periods and transparency might be compromised as a result. Transparency is, however, a key to compliance and regulatory success.
A Two-Way Street
These relationships go both ways. While compliance officers and external regulators gain access to internal information and data, the day-to-day activities of a company often lie in the shadows. In addition, regulators are government workers who typically do not benefit from the same systems and technologies as the organizations they investigate. Further, in today’s modern world, it can be difficult for regulatory agencies to keep up with quick advancements. Regulators and compliance officers rely on insights that data alone sometimes cannot articulate. The fourth element of the Office of Inspector General’s (OIG’s) Elements of an Effective Compliance Program is developing effective lines of communication. Management could devote efforts to improving communication and exposure with compliance officers and regulators alike. In turn, relationships will be improved, and transparency will follow. Strong relationships will benefit the corporation in the future if, or when there is a threat of noncompliance. Not only is there a benefit in the prompt resolution of issues, stronger relationships can help to foster improved policies and procedures, minimizing the threat of a breach in the future.
Compliance Officers and Regulators as a Benefit, Not Burden
While transparent relations can lead to industry success, run-ins with regulatory agencies may do the same. Business magazines like Forbes have suggested viewing compliance as not only an investment, but an opportunity. Encounters with regulatory agencies can be time-consuming and tedious, however, the information resulting may be useful to companies, resulting in better insights and understanding into its own systems and challenges. Following the OIG’s seven elements, information gained can be used to alter an organization’s training and education procedures. Alternatively, the information can be used to restructure ambiguous policies and procedures that resulted in noncompliance.
Better Business Outcomes
Information obtained through an internal or external audit may also be used to improve business outcomes as a whole. Deloitte and Forbes Insights suggest technological innovations used by regulators and compliance officers to gather regulatory data can ultimately be used internally to improve data accuracy. This is just one example as to the way regulatory compliance efforts can be both preserving and valuable to the corporation.
Direct and Indirect Incentives
In an increasingly regulated age, thinking of ways compliance can be used as a benefit rather than a burden is critical. Avoiding costly fines, penalties, and litigation associated with noncompliance are direct incentives to forming strong relationships. A better-connected culture and improved delivery of services may also indirectly incentivize corporations to embrace and facilitate relations with its compliance officers and industry regulators.