Over the next five podcasts I will visit with Paul Johns, Chief Marketing Officer, and Rebecca Turco, Vice President of Learning, both from SAI Global, the sponsor of this podcast series. In this series we will discuss the changes in ethics and compliance (E&C) learning and how a more technology-based learning solution can help move your company to a more effective and more operationalized best practices compliance program. In Part I, I visit with Paul Johns on the evolving nature of the E&C marketplace and what that means for compliance programs.

We began with a discussion of the evolving role of the Board of Directors. Johns sees Boards of Directors in a lofty position, away from the limelight, to a more values based, customer-centric approach. This is playing out in a couple of key ways for the E&C market place. The first is that the Board sets the organization’s appetite for risk. To do this the Board must articulate what is the acceptable level of risk the company is prepared to work towards as it considers operating a particular enterprise. Next is the direct line of sight  between that appetite for risk at the Board level and the performance and the behavior of everybody across the company.

To accomplish this continuum, the Board or Audit Committee would garner a sense of the markets they are in and the products that serve the market together with the associated risks. From there, the company would put together a strategy to move forward and push that strategy out to operationalize it across the company or applicable business unit. But the Board could never be assured that each employee, business unit  or geographic region understands the articulated risk appetite. This is in contrast to corporate culture.

In the values-based economy of today, what is it that you expect from your employees? If the behavior of one employee is antithetical to your values, what is the damage to  your corporate reputation? Consider the Starbucks store manager who called police for two patrons who were waiting for a third colleague. The two patrons were African-American and the store manager was white. The store manager had them arrested. Starbucks took a pounding the court of public opinion even though the store manager’s actions were against the stated culture and values of the organization.

All of this means that you must “make sure that everybody is living and breathing the values and the behavior that you’ve laid out”. If  you do not do so, the reputational cost could be quite high; far beyond the cost of non-compliance with a law or regulation. The reality of today’s marketplace is that “millennials and centennials vote with their wallet.” This is true for where they purchase an espresso, where they buy running shoes or where they might order their pizzas from on a Friday night.

This values-based approach has changed the dynamic at the Board level and indeed all the way down through an organization. A company can have a Code of Conduct, policies and procedures and internal controls in place but today those regulatory requirements or those suggested by such government publications as the 2012 FCPA Guidance are not enough, even if they meet the baseline requirements under a law or regulation. Johns believes a much more holistic approach is called for and from the educational perspective, it is a continual learning practice. Johns stated, “it is more than simply a company saying some aspirational ideas in your Code of Conduct. Do they really live those values as an organization?”

Johns said he would ask a senior executive such questions as “Are there key performance indicators (KPIs) in place to measure such a proactive approach to risk management and your company’s brand reputation?” It might be something along the lines of “what are you doing around how you identify the types of employees that you let into the business, the types of business partners or third parties that you do business with? What is the scrutiny? What is the high bar that you set to make sure that you have actually got the right people working with you and working for you?”

Another key step is E&C learning. E&C training should start with your organization’s brand, the integrity it stands for today; the importance of that reputation and what you can do to help preserve it. This allows you to have an ongoing dialogue not only internally but with your customers, your business partners and other stakeholders.

It all starts at the top with the Board of Directors and senior management basically “sitting down as a leadership team and saying, what is it that we care about as it relates to the quality of our brand? That we don’t just talk about it but we really live it and breathe it. Next, how do we cascade that down into a set of tools and to a set of measures across the whole enterprise to hold ourselves to that very high standard?”

The evolving role of risk, compliance and ethics will only continue. As the marketplace changes with new workers entering the workforce, becoming the new consumers and burgeoning social media led movements such as #MeToo, the risks will only become more dynamic. Are you ready?