Navigating governance compliance

Compliance is good governance

Compliance is a crucial element of good governance, and every board director, company secretary, senior executive, and governance professional needs to recognise its importance. It's not just about following laws and regulations—compliance also plays a key role in maintaining ethical standards and ensuring smooth operations. All board members are responsible for integrating compliance into the organisation's culture while concurrently navigating all the other complexities of governance.

This article is from the webinar 'Compliance in the boardroom - who is responsible for what?', with Margot Foster, Julie Garland McLellan, and Steven Bowman. It outlines compliance insights and its relationship with risk, how to understand and meet your compliance obligations, and the cultural aspects of compliance. 

Five compliance insights

Compliance isn't just a regulatory requirement; it's a fundamental aspect of operating with integrity. Compliance and risk management are also closely intertwined, making it crucial for board members to understand this relationship. "You can't have risk without compliance, and I think the two go hand in hand," says Margot Foster.

Governance compliance comprises:

• Interconnection: compliance and risk are two sides of the same coin, and each influences the other.
• Personalised frameworks: each organisation needs compliance obligations tailored to its unique operations, reinforcing that compliance is not one-size-fits-all.
• Director responsibilities: board members must grasp their compliance responsibilities deeply to promote accountability across all levels of the organisation.
• Proactive compliance management: maintaining a robust compliance management system is about meeting regulations and fostering trust and integrity.
• Cultural perspective: viewing compliance as essential to organisational health enhances ethical conduct amongst employees. Good hygiene leads to good health in governance, says Julie Garland McClellan.

Keeping these insights in mind means organisations are in a position to strengthen their compliance frameworks effectively. 

How to tailor compliance obligations

Unique needs

Compliance frameworks must cater to the specific needs of each organisation. Tailoring compliance obligations to each organisation means compliance goals align with operational goals and regulatory expectations, says Julie.

Engaging leadership

Active engagement from board members is essential to create personalised compliance measures. By promoting discussions around these obligations, they can effectively evaluate and adapt frameworks to fit the organisation's unique context, ultimately leading to better governance.

Understanding compliance obligations

To understand compliance obligations clearly, board members need to develop a comprehensive grasp of what compliance is and navigate any risks effectively. A lack of clarity can lead to a significant risk to the organisation. "Understanding what we have to comply with ... and what evidence is there to show that we are actually being compliant in a fit-for-purpose manner."

This proactive stance allows directors to monitor compliance activities effectively and ensure all processes adhere to standards. By creating a culture of accountability surrounding compliance, organisations position themselves to handle challenges with confidence and cohesiveness. When directors understand their compliance obligations, they can implement measures that promote adherence throughout all levels of the organisation, enhancing overall governance.

Internal compliance management

Internal compliance management is crucial in ensuring that organisations align with both internal policies and external regulations. Directors need to understand these areas and understand the processes, says Margot Foster. This ensures that an organisation develops a robust compliance management system that aligns with regulations and also enhances its ethical framework. With a strong internal compliance framework, organisations can mitigate risks associated with oversights and lapses.

A strong internal compliance framework strengthens organisational integrity, builds stakeholder trust, and enhances reputation. Directors play a crucial role in championing compliance, and fostering a culture where ethics and accountability are valued at every level. By prioritising compliance, organisations create an environment of transparency and integrity. 

Creating a culture of compliance

Promoting a compliance-centred culture leads to significant benefits for the organisation, and can be achieved in several ways.

• Compliance as a cultural pillar: Integrating compliance into the core of the organisational culture strengthens the governance framework. This ensures compliance is not just a set of rules to follow but a fundamental aspect of the organisation's identity, making it easier for everyone to understand and fulfil their responsibilities.
• Promoting open dialogue: Encouraging discussions around compliance allows for the fluid resolution of ethical dilemmas. Open dialogue creates an environment where employees feel empowered to voice concerns and collaborate on ethical decision-making, fostering a culture of integrity and shared ethical goals.
• Framing compliance positively: Presenting compliance as an ethical commitment rather than a mere obligation can significantly boost engagement. Framing compliance positively shifts the perception from a burdensome task to a shared responsibility, enhancing motivation and participation at all organisational levels.
• Shared accountability across the organisation: Ensuring all employees understand their role in maintaining compliance fosters a culture of shared accountability. This collective responsibility helps to create a sense of ownership among employees, where everyone contributes to upholding ethical standards and compliance practices.
• Building trust through transparency: Transparent compliance practices are crucial for building trust with both internal team members and external stakeholders. By being open about compliance efforts and challenges, organisations can strengthen relationships and enhance their reputation, leading to long-term trust and credibility. 

Compliance leads to good governance

Tailoring compliance obligations to your organisation's unique needs ensures more effective governance, while a clear understanding of these responsibilities helps board directors maintain accountability. Strong internal compliance management upholds organisational integrity and ethical standards, and fostering a culture that views compliance as a positive commitment encourages ethical behaviour across the board. By integrating these insights into your governance practices, you can cultivate a more responsible and ethical organisational environment and, ultimately, an organisation that follows good governance best practices.

Find out more in the on-demand webinar 'Compliance in the boardroom - who is responsible for what?'.