Why is Compliance important?
From Blog Derecho e Inversión
This entry is based on a post on Derecho e Inversión Blog. If you want to read it in full, click Here (Spanish version)
The many regulations that exist in each country opens up a range of dangers for a company, an organization, an investor, a merchant, entrepreneurs and even for a natural person due to the complexity of the observance, application, monitoring and management of such regulations or regulatory compliance. As soon as there is a slight non-compliance, we will be faced with a danger that will lead to a level of risk with probable negative impacts for the organization. The level of that risk will depend on the non-compliance or the degree to which the organization was exposed.
That is why we must take into account the ethical action of all those involved in an organization; whether public or private, since ethics plays a preponderant role in the legal development of them.
In 2019, the prestigious institutions INCAE and KPMG presented a study called "A look at the issue of corruption and fraud in Latin American companies. Prevention, detection and response." A study to learn about the perception that senior executives of Latin American companies have about corruption and fraud in their organizations, as well as the impact, those responsible and triggering factors. The study was made with the opinion of more than a thousand executives from 18 countries in Latin America and the Caribbean, of which 23% of them work in companies with sales of more than 50 million dollars. I am interested in highlighting 3 interesting facts and copying it verbatim:
53% consider it important to talk about the issue of corruption and strengthen prevention in their companies.
56% of respondents answered that there is little commitment in the high management of companies to prevent corruption and economic crimes.
40% of executives said that corruption has a negative impact on the performance and competitiveness of organizations, the consequences of which could be significant damage to corporate reputation and economic damage.
Why does a Compliance Manager System matter in an Organization?
The answer is simple: It matters because:
The reputation, legal development, competitiveness, continuity and security of your organization are at stake.
Compliance should become part of the medium-long-term strategy to be taken into account by your organization.
So, what are the reasons for organizations to have a compliance program?
I give you 10 reasons that from my most recent experience, both professional and academic, gives you a compliance program.
First, it is important to emphasize that the benefits of a program are for all stakeholders. In other words: The same organization (all involved); the customers; the market; and the state.
An organization:
It more easily complies with the legislation, rules and regulations applicable to the activity in which it is carried out. This means that the organization can move more smoothly, orderly and without losing dynamism on a day-to-day basis. The processes that are applied with a program generate that orderly way of how to create a culture of compliance.
Improve your reputation. There is a reputational risk associated with the image of an organization that mostly has to do with the way it acts and the ethical custom it has. With a compliance program, all those involved internally must act under policies (ethics, with respect to third parties and anti-corruption) that ensure the reputation of the organization.
You will have the opportunity to reduce criminal liability. Especially in countries where laws or regulations on crimes of legal persons have been approved, by demonstrating that they have policies that ensure the proper and timely management of crimes caused by directors or collaborators within the organization. In this, the reporting channel plays an important role in the organization.
Improves internal controls. This helps to reduce the internal fraud that could occur; and therefore, the risks that exist will be better managed..
Improves the confidence of stakeholders In the organization: shareholders, investors, managers, collaborators, banks, suppliers, customers and community.
In some cases they are even achieved reduction of risk costs in contracted insurance.
Have a great advantage in both local and international bidding processes.
Look for a line of work aligned with suppliers who protect their integrity and reputation.
It improves the organization's processes by incorporating the ISO 37301 standard in charge of Compliance.
Contributes to Corporate Social Responsibility.
The program is not in itself an absolute guarantee because much will depend on the decision of the partners, the commitment of the board of directors and the participation of all stakeholders.
