I realize that the title of this blog is a little provocative. The role of the Chief Compliance Officer is not to increase profit. The CCO’s role is to ensure that company business is conducted with complete respect for relevant laws.
I understand that the relationship between the CCO and top management can be challenging. Too often the CCO is perceived as the person who inhibits growth in the business. And yet I am convinced that the quality of the relationship between the CEO and the CCO has a direct impact on the sustained growth of the company and the solidity of its profits.
In this post, I would like to explore the conditions that allow the exchanges between a CEO and an CCO to grow into a profit-making relationship.
For the CEO, the necessity to carry out business legally goes without saying! But it is necessary to go further….
When I meet chief executives, and this is the case the world over, I am struck by two things.–
The first is their ability to get to the heart of the matter and make decisions quickly, even in complex situations. And the second is that, for CEOs, conducting business legally is a given and includes the requirement that every employee conducts him or herself in an ethical manner. Thus, for a CEO, the importance of the role of the CCO is not necessarily self-evident. (see Five reasons CEOs give to avoid addressing corruption prevention).
It is not easy for a CEO to understand that it is one thing to believe that respect for the law is fundamental, but another to ensure that all laws are respected. In other words, when the law states what it is necessary to do, it is easy to follow instructions. But when the law states what must not be done, things become more complicated.
Let’s look at corruption: it is forbidden to confer, directly or indirectly, anything of value to obtain an undue advantage. What is “anything of value”? What is “indirectly”? What is “an undue advantage”? It is the Compliance Officer’s role to clarify these questions and to implement procedures which will ensure that everyone understands the stakes and respects the ban on corrupt activity.
Thus, the CEO should consider the Compliance Officer the one whose expertise will ensure that the CEO’s desire to conduct business with integrity is understood, respected and executed throughout the company regardless of activity or geographic location.
For the CCO, the risk of corruption is omnipresent! But it is necessary to go further…
Compliance Officers are made aware of new cases of jurisprudence on an almost daily basis. They see the sanctions, the prison sentences and, most importantly, they see the growing complexity of the mechanisms used to corrupt and the harsh judgments on practices that had been, until recently treated as insignificant: internships to the children of public officials linked to the attribution of a contract, trips for prospective clients, etc.…
In addition, daily, compliance officers see just how many grey areas there are in every commercial operation as well as how these grey areas are perceived by different staff members depending on their history and experience.
It is tempting to implement a very strict policy and to avoid situations considered high risk. However, to paraphrase a proverb, just as it is easy to have clean hands if you have no hands, it is easy to avoid corruption risk if there is no sales activity.
The first responsibility of the Compliance Officer is to identify corruption risks as precisely and with as much detail as possible (see Compliance Officer: how to limit your liabilities). The second responsibility goes further: what needs to be implemented to control these risks in an appropriate manner?
The following illustrates the point: if you are going to drive in an area where there is a high likelihood of snow, you equip your vehicle with snow tires. With this precaution, and by adapting your driving habits, it is possible to travel safely. If 50 centimeters of snow fall overnight, the driver, made aware of the conditions, will wait for the snow plough to pass.
It is the role of the Compliance Officer to support those in operations by furnishing them with the tools necessary to conduct business with integrity even in challenging environments. The CCO should endeavor to hone the ability of operations staff to evaluate risks autonomously and determine when they are too high to control reasonably and thus necessitate a withdrawal from the project.
In this sense, the CCO facilitates the CEO’s objective of company growth even under difficult conditions. If you consider the impressive growth of emerging markets, where risks are higher, (see Is corruption a cultural issue?), it is obvious that compliance is an essential function in the healthy development and expansion of any business.–
CEO – CCO: building a profit-making relationship
The CEO and the CCO have a common objective: the company’s sustainable growth. The CEO’s success will be as great as his or her CCO’s ability to manage risks which will enable the company to operate in riskier areas where the profits are potentially that much higher.
Beyond mastering business risks, the Compliance Officer provides the CEO with a particular asset which is often overlooked: the Compliance Officer encourages innovation. Traditionally, the higher risks are perceived to be, the more restrictive compliance procedures tend to become. However, most people are drawn to simplicity and a company will be more comfortable working on development and innovation than it will be in bureaucratic management. For this reason, I have seen many companies simplify their sales procedures by reducing the number of sales agents and focusing on a smaller, but highly effective, group of them. I have seen companies leave certain sectors which are known to be risky for less risky areas where they can encourage such innovation and product superiority that the company will not be open to potential acts of corruption.–
Over the past ten years there have been multinationals which, having been convicted of an act of corruption, have paid the fine, undergone the monitoring then invested significantly in compliance and have come out as some of the best in class. What is the secret? These companies always include compliance in their strategic planning and encourage the CEO and CCO to work together. These companies demonstrate that compliance is first and foremost a strategic, not legal consideration! (see Anti-corruption compliance: why it is a Board issue)