The role of a CEO in ensuring regulatory compliance

The ever-changing nature of the compliance and regulation field creates challenges for chief executive officers (CEOs) and business leaders – but it also creates opportunities.

Every year, new regulations are rolled out and existing frameworks updated, leaving many industries and organisations scrambling to keep up with compliance requirements. Additionally, rules and risks vary across the world, adding another layer of complexity for businesses operating in international markets.

Understanding what changes are expected – and how they may affect your enterprise – is key. That’s why organisations of all types are investing in individuals with a keen understanding of compliance, as well as building in-house compliance teams, to ensure they stay on the right side of the law.

What is regulatory compliance – and why is it important?

Regulatory compliance is the process via which businesses abide by the regulations, policies, laws, guidelines, procedures, and standards governing the industry in which they operate. These often include rules relating to environmental standards, financial reporting, data protection, and health and safety. The extent and nature of regulatory requirements and regulatory environments varies widely; for example, some industries – such as healthcare, information technology, and financial services – are highly regulated.

Financial giant, PwC, understands many view regulatory compliance as doing little beyond ‘increasing costs, reducing efficiency and stifling innovation.’ However, they ask us to consider not only our own interests, but those of our customers and other stakeholders. Compliance protects our jobs and money – and, therefore, our livelihoods. It ensures the freedom and stability of the marketplace and gives us a sense of security and safety about the future. Non-compliance, on the other hand, brings with it some unpleasant consequences: a lack of credibility and sustainability, steep fines and legal penalties, business disruption, reputational damage, and loss of revenue and investment.

According to Globalscape, the cost of non-compliance – such as failing to adhere to regulations such as General Data Protection Regulation (GDPR) or Health Insurance Portability and Accountability Act (HIPAA) – is 2.71 times higher than the cost of compliance.

In summary, ensuring your business abides by relevant laws and regulations helps to:

• avoid legal and financial complications
• reduce risk
• increase visibility
• increase workplace safety and efficiency
• encourage healthy competition
• boost brand reputation.

What is the role of the CEO in regulatory compliance?

CEOs are ultimately responsible for every aspect of a business, its activities, and its long-term success – meaning compliance issues naturally fall under their jurisdiction. While a CEO may not be deeply embedded in day-to-day compliance requirements, maintaining a broad understanding of, and healthy interest in, the organisation’s wider compliance programme is important.

Proactive compliance management is required. CEOs must seek to establish a ‘culture of compliance’, where adhering to applicable laws and regulatory changes is baked into the very DNA of the business. But, how do they go about doing so?

How can a CEO create a culture of compliance?

Organisational culture is pivotal in influencing how employees work and function within their roles – making it a key factor in how successful compliance efforts are likely to be. Luckily, this is where CEOs can have a dramatic, lasting and meaningful impact.

How to create a culture of compliance:

1. Clearly communicate the role and importance of compliance. CEOs should begin by openly communicating why compliance is critical and how it affects the business and how it operates. Transparent goals and expectations help to align others with the organisational vision and values, as well as fostering direction and purpose.
2. Lead by example. All employees – from senior management to frontline operatives – must be cognisant of the importance of compliance and how it impacts their role and responsibilities. Leading by example is one of the most powerful ways a CEO can embed this way of operating, through clear actions and informed decision-making processes that platform and prioritise compliance.
3. Ensure robust policies and procedures are in place. CEOs must first ensure suitable policies and procedures exist that meet industry standards – such as internal controls to mitigate cybersecurity risks in the event of cyberattacks or personal data breaches – and then make these clear and accessible to employees.
4. Invest in company-wide training and education. It’s no good championing compliance and compliant practice if employees are unsure or ill-equipped to do so. Regular, in-depth training programmes that teach team members about company policies, industry regulations, and the relevance of certain laws helps to build a culture of compliance from the ground up.
5. Empower employees to report compliance issues. Create a work environment in which employees are encouraged to ask questions and speak up. This should feature channels employees can use to report potential compliance issues, violations, or concerns – without fear of judgement or retaliation. Any issues should be investigated and addressed promptly.
6. Recognise and reward compliance efforts. Ensure employees who consistently and proactively adhere to compliance requirements are rewarded to reinforce positive behaviour and motivate others.
7. Monitor and improve compliance efforts. There are plenty of technologies, tools and metrics that can routinely monitor and support compliance efforts, and CEOs can embed these in relevant business areas and processes.

While a CEO is ultimately responsible for establishing a culture of compliance, they do not have to do so alone. Depending on the size and type of business, hiring a chief compliance officer, forming a compliance department, or seeking legal counsel, is an effective way of ensuring regulatory compliance is being addressed without getting too buried in the everyday realities of doing so.

What is the role of a chief compliance officer?

A chief compliance officer (CCO) is responsible for ‘designing, implementing and monitoring the processes by which the company will comply with all applicable laws and regulations.’ It’s a senior management position – often part of the board of directors – that requires strong leadership skills to support and guide other colleagues and departments through relevant programmes and processes that ensure compliance.

Job and recruitment specialists, Indeed, list some key CCO responsibilities as:

• maintaining legality in company operations
• remaining aware of industry and legal standards related to the workplace, including conducting research for informational purposes
• meeting with other senior managers to discuss compliance efforts, initiatives and conflicts of interest, share best practice, and feed into strategic decisions
• monitoring compliance of employees and employers and correct behaviour
• reviewing existing compliance programmes and risk management strategies to identify areas for improvement
• managing other compliance professionals (depending on the size of the team and business).

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