Understanding the requirements for a compliance culture
1. Understanding why it is required
What is a ‘Compliance culture’ and why is it necessary? A compliance culture is required for many reasons. Over time, the
reasons appear to be changing from being required to comply with regulation, to realising the value of the benefits that can be
the result of complying with regulation.
Three examples given below illustrate the drivers for a firm’s compliance culture.
The simple bottom line (cost avoidance) – ‘compliance is especially important because the risk of detection and punishment
has never been higher’ (Brent Snyder, Deputy Assistant Attorney General, US Department of Justice, September 2014).21
Avoiding the adverse consequences of breaches – The UK’s now defunct Office of Fair Trading (OFT) proposed that the
principal benefit to be gained from a compliance culture is mainly avoiding the adverse consequences of law infringement. This
was contained in their old guidance on achieving compliance with competition laws.22
Driving the behaviours of firms – ‘Culture is like DNA. It shapes judgements, ethics and behaviours displayed at those key
moments, big or small, that matter to the performance and reputation of firms and the service that it provides to customers
and clients’ (Clive Adamson, FCA, April 2013).23
Jonathan Bowdler suggests that demonstrating the positive benefit of effective compliance in simple terms, rather than merely
communicating the need to avoid regulatory action, encourages buyin. Senior management focus is on how compliance saves
costs and can increase revenue, promoting the benefits to
the firm as a whole, while frontline staff may be more directly concerned with immediate personal benefits.24 Obtaining buyin
for compliance at all levels, where a compliance culture is seen as a good thing in and of itself, will produce dividends in
terms of the reputation of the firm and the firm’s capacity to safeguard the interests of its customer.
Nevertheless, a report from the Economist Intelligence Unit raises a worrying concern. It appears that although industry
executives champion the importance of ethical conduct a large majority continue to take a relaxed attitude when it comes to
personal standards of behaviour and the impact of ethics on competitiveness.
22. https://www.gov.uk/government/uploads/system/uploads/attachment_data/ le/284402/
24. Jonathan Bowdler, ‘What is a ‘compliance culture’ and, more importantly, how do
you achieve it?’, ICA Blog (30 December 2011). http://www.intcomp.org/BlogEngine/ post/2011/12/30/WhatisaComplianceCultureandmoreimportantlyhowdoyouachieve
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