Welcome to Episode 8 of Compliance Man Goes Global podcast of FCPA Compliance Report International Edition. In this episode, we will focus on tough questions, which Compliance officers need to address. We will explore this matter in a plain language so to say and in the simple game form. Moreover, to make the podcast handy and more appealing we attach respective illustration from the Compliance Man illustrated series, created by Timur Khasanov-Batirov.
For those of our listeners who are not aware about our format, in each podcast, we take two typical concepts or more accurately misconceptions from in-house compliance reality. We check out if these concepts work at emerging jurisdictions. For each podcast, we divide roles with Timur, a practitioner who focuses on embedding compliance programs at high-risk markets. One of us will advocate the concept identifying pros. The second compliance man will provide arguments finding cons and trying to convince audience that that we face a pure myth. As a result, we hopefully will be able to come up with some practical solutions for in-house compliance practitioners.
Tom: OK, Tim, let’s get started.
Myth #1 Decrease of the Compliance department’s budget could significantly affect its effectiveness. Tim, would you agree with this statement?
Tim Khasanov-Batirov: I believe it is a tricky question. It depends. Obviously, Compliance officer should has resources to do his job. The question is what we consider as an “adequate” level of resources or budget. Consequently, we need to deploy criteria, which could be used for estimates. In my view, the best algorithm will be the following:
- To define scope of applicable regulatory requirements;
- To conduct risk assessment;
- To plan activities, which will tackle high-risk regulatory requirements. This for instance might be related to implementation of the 10 Hallmarks of the Effective FCPA Compliance Program;
- To estimate respective budget.
Thus, in my opinion mere fact that the department’s budget is decreased or increased does say anything. First, you have to look whether you have funds to address key priorities.
Another thing to mention is allocation of resources. For instance, in my view due to creation of different apps and software compliance staff is in position to create training video itself significantly cutting costs on expensive video production. Probably you will not become Oscar winner for your video but it is not your goal. One more tip for compliance practitioner is to approach HR, PR/Communications teams to check out if they might be interested to conduct joint activities with Compliance department. In the ideal scenario, they might finance your projects as for instance contest for personnel on knowledge of corporate Ethics Code. In this case, both HR and Compliance departments will find themselves in a win-win situation.
Tom, you write often about Compliance department’s effectiveness. What will be your recommendations when we refer to budget cutting?
Tom: A couple of things come to my mind, Tim:
When I refer to operationalizing Compliance, I mean tailoring your efforts to particular organization. Thus, look at level of maturity of your organization in order to find out what resources your need and what is more important whether those resources will help you in practice. For instance, you might get budget for sophisticated databases, which might be useless if there is no trained personnel to operate this software. You also do not want to ask budget for doing fancy training video as you already mentioned knowing that majority of staff is located in the fields and would not be able to watch it. I also encourage Compliance practitioners (who are primarily lawyers) to dig deeper in corporate budgeting process exploring basic financial concepts and the logic of forecasting. This will allow you to speak with decision makers on the same business language.
But from the corporate perspective if your business takes a downturn you may well be faced with a smaller budget and overall compliance resources. If that occurs you will have to do less with less by prioritizing on your highest risk and manage those risks. The key is how you use the resources available to you.
Tim: Tom, I agree with you.
Tom: OK, Tim. We can formulate the next concept or maybe misconception in the following way:
Myth #2. We have adopted internal policies. Now we can save on hiring high qualified and consequently high paid compliance personnel. Tim, will you agree with this concept?
Tim: I strongly disagree with this concept.
What I have seen on practice at emerging markets that unfortunately in many cases compliance professionals are viewed solely as internal policy makers. Thus, the misconception you have mentioned is based on this presumption. The problem that in this scenario all other key elements of compliance program as top management engagement, communications, risk assessment, etc. are kind of getting out of picture. The sad part that even if we refer to policy making the essential part of it is policies implementation, which becomes impossible in absence of other mentioned elements. To manage compliance risks at high-risk markets the company should hire a person who would be able to demonstrate ability in deploying all elements of the effective compliance program.
What are your views, Tom?
Tom: I think it is good that we are referring to the topic of professional level of compliance personnel. I have some thoughts about that based on my practice.
There is no way to get a high-qualified in-house compliance support if organization hires a junior person or someone who has not practical experience in ethics. I would recommend deploying a risk-based approach hiring seasoned and consequently well-paid professionals. This is particularly important when you look for CCO and practitioners covering risky areas or regions. But the key is qualified professional, coupled with pay commensurate to a senior level position.
Our profession is relatively a new one. Therefore, what I have seen that professionals from different occupations join in-house Compliance community. This is a positive trend if he or she possesses skills and demonstrate knowledge allowing to effectively implementing the corporate compliance program. In the same time, personal experience in compliance profession is something, which could not be substituted by any other expertise or background. This is my message to hiring managers, who consider internal candidates for key compliance roles.
Tim: Agreed, Tom. As key takeaways from today discussion, I think we can mention the following:
- No matter whether we talk about in budget planning or in hiring of in-house compliance professional, a risk based approach is your best friend.
Tom: Fair enough, Tim. It looks to be a practical tip. Tom Fox and Tim Khasanov-Batirov were here for you.
Join us for the next episode of Compliance Man Go Global episode of FCPA Compliance Report International Edition. Let’s bust more corporate compliance myths with us.