Managing a business is challenging both legally and organisationally. It is very important to develop appropriate mechanisms to avoid various risks. The following can help in this respect compliance procedures. By reading this article, you will learn what the term means and the benefits of introducing appropriate procedures in your organisation.
Compliance - what is it?
In Polish compliance means "compliance, conformity." In the simplest terms, it is therefore a field of knowledge concerned with minimising the risk of a company's actions not complying with:
- legal provisions,
- internal regulations,
- standards of conduct adopted by the organisation.
In practice, this is ensuring that the company's operational activities comply with national and international legal requirements and industry regulations, internal regulations and standards, as well as ethical principles.
In a synthetic manner compliance can also be explained using a definition from the book by Bartosz Makowicz ("Compliance in the enterprise", Wolters Kluwer Polska, 2011), which assumes that:
"compliance is a way of organising a business that reduces the risk of any irregularity to a minimum."
The purpose of introducing procedures of this nature is primarily to prevent financial loss to the company or damage to its reputation. They should be looked at from an internal as well as an external perspective. It boils down to the fact that it operates on two levels:
- Internally:
- means a number of codes and regulations that every employee or colleague is obliged to comply with,
- education in the form of training to raise awareness of the legal consequences of their decisions,
- introducing internal organisational rules and procedures.
- Outside the organisation:
- good practice towards counterparties, legal institutions,
- contractual loyalty,
- data protection,
- preventing financial embezzlement.
Compliance officer - who is it and what does it do?
In many companies, particularly financial institutions such as banks, there are entire departments of compliance. In other companies, it is sufficient to create a position of so-called 'in-house'. compliance officer. Such specialists are especially employed by manufacturing companies, pharmaceutical companies or food manufacturers. In my opinion, in any industry where it is necessary to follow the relevant procedures, it is now necessary to appoint such a position. This function can be likened to a so-called 'internal policeman' or 'supervisor' in an organisation. Compliance officer examines whether all rules are followed.
The work of this position consists primarily of minimising the risk of non-compliance of the company's activities with regulations, standards or sets of recommendations, in order to prevent financial or reputational losses.
The following is an illustrative catalogue of activities that constitute the terms of reference compliance officer:
- takes care to avoid conflicts of interest,
- ensures the proper handling of confidential information,
- ensures that the company's data protection procedures are complied with,
- countering money laundering and terrorist financing,
- verifies compliance with the law in respect of contracts concluded,
- supervises the legality of budgetary activities (VAT, income tax),
- provides advice on the application of newly introduced and existing legislation and market standards for business units,
- cooperates with law firms that offer legal audits to financial institutions and develop individual company procedures,
- counteracts corruptive mechanisms within the company.
Of course, these are only examples of tasks compliance officer. The responsibilities of the position will depend very much on the size and scope of the company concerned.
Risks
We have already explained to you what is meant by compliance and what is the role of the person occupying such a position. For the sake of completeness, the following are the risks that the procedures face compliance should protect your company. Of course, the following list is exemplary and depends on the type and profile of your company.
Risks:
- non-compliance with FATCA (Foreign Account Tax Compliance Act - is a law passed in 2010 by the US Congress. It aims to make it easier for US tax authorities to prosecute US taxpayers who hide their income from the tax authorities through accounts located abroad),
- non-compliance with tax legislation,
- lack of verification of contractors in the context of VAT regulations,
- corruption,
- conflict of interest,
- participating in money laundering,
- use of restrictive practices,
- violations of labour or human rights,
- failure to comply with environmental standards,
- not having sufficient protection for company assets and confidential information,
- breaches of corporate governance.
Benefits of introducing compliance procedures
Benefits your company will gain from the introduction of procedures compliance are obviously directly related to the risks mentioned above. When carrying out an audit compliance and by creating appropriate procedures from scratch, many problems can be avoided in the future.
By effectively implementing compliance procedures in your organisation:
- you will see a decrease in the amount of abuse,
- you will identify risks more effectively and make better decisions in all areas of your business,
- the company will operate more efficiently due to the implementation of appropriate procedures,
- awareness of risks will facilitate bold business decisions, e.g. the introduction of new products and services,
- you will be able to react more quickly to emerging risks - even before they become a serious problem,
- your company's valuation will increase, which may consequently increase the value of its listing,
- the confidence of your investors, employees and customers will increase, which will have a positive impact on the reputation of your company.
Summary
I would like to emphasise that, in my view, the role of the compliance will become increasingly important in the near future. If you have not yet put appropriate procedures in place in your organisations, now is a good time to take action on this. It is clear that different risks require different ways of managing them, so compliance procedures should be tailored to the specifics of the company. There is, in my opinion, no one-size-fits-all and only correct model for a compliance management system. It is therefore worth enlisting the help of specialists to develop an efficient mechanism that will support your organisation.
In terms of compliance Our law firm provides you with training in the broad field of enterprise risk management in order to familiarise you with this subject matter, as well as post-audit training on how to comply with individual procedures, dedicated separately for managers and other company employees depending on the number of procedures in which they will be involved on a daily basis.
An important element in the implementation of compliance is an audit, which we carry out with the involvement of specialist auditors and legal advisers. The result of the audit is a report containing indications of the main risks and very detailed post-audit recommendations.
Development of procedures compliance is carried out systematically, starting with those areas that require immediate action. Once the procedures have been prepared, they are implemented in the company as well, starting with those that require the most attention and that prevent risks in the most extensive way.
