After the financial crisis, the role of compliance departments became paramount. To safeguard the global economy against a repeat of the financial meltdown, governments and financial bodies implemented steep re-regulation – and adherence was mandatory. Compliance teams occupied the frontier between safe operations and the threat of crippling fines. Yet despite their significantly more prominent role, even today, many still wonder what exactly it is that a compliance manager does.
Compliance is a critical function within most corporates – and it’s certainly not restricted to financial services. It’s as important for legal firms and construction businesses as it is for retail organisations and food suppliers. Compliance departments are responsible for making sure that their company’s activities comply both with internal policies and external regulatory requirements, protecting them from falling foul of the law.
Regardless of the industry, compliance usually involves the same broad framework of activities. Firstly, compliance departments need to identify the risks specific to their organisation. Once identified, they then need to devise and implement controls to protect the company from those risks. The efficacy of these controls needs to be monitored and reported on, to ensure the company continues to safeguard itself effectively. With this framework in place, compliance teams then need to resolve issues as they occur and deliver an advisory service for the business – managing queries and providing guidance to ensure activity remains in line both with internal policies and external regulation.
Over time the role of a compliance manager has changed significantly. In fact, it’s only in recent years that many organisations have established formal compliance operations.
“Formerly, [Chief Compliance Officers] were found only at mid-sized and larger corporations, and they oversaw small departments that put in place compliance procedures in common areas such as labour and employment,” explains Gregory Husisian, an attorney at Foley & Lardner.
In the last decade, this has changed significantly. In fact, by 2010, a report in Corporate Compliance Insights suggested that in heavily regulated industries, like financial services, “the Chief Compliance Officer may be the most important figure aside from the CEO.”
A growing area of responsibility for compliance managers is data privacy. With the arrival of big data and companies’ increasing reliance on technology, the risks of exposure are huge. Companies therefore need to ensure they have in place rigorous measures to protect their customers’ information. To further complicate this, as commerce continues to globalise, compliance managers need to make sure their operations adhere not only with local law, but also with the national and international regulation of each region in which they operate.
The evolving nature of compliance means that, nowadays, compliance managers are often involved in most business functions. For example, a compliance manager may have far more interaction with the corporate secretary or the general counsel than ever before, and also play an integral role in everything from authorising external communications to overseeing training programmes and IT management.
With such an expanded role and unprecedented reach, this has also impacted the organisational structure of compliance. Where previously it often sat as a subset of the legal department, in many companies it has now evolved into its own business area.
With regulation here to stay, it’s likely that the compliance function will continue to grow. And in light of recent history, this seems like a reassuring development.
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