How to Resolve a Compliance Issue & Manage Positive Solutions
by Francine Breckenridge, Compliance & Legal Officer, U.S. Money Reserve
There’s an opportunity in every compliance issue that arises. Here is how to turn compliance into a boon for your business.
In very basic terms, compliance programs are designed to keep companies, their employees, and their customers out of trouble with the law — local, state, and federal. Compliance is very often considered negative. Many think compliance prevents companies and employees from being innovative or forward-thinking, as I have written before. That’s not true. Compliance exists to help the business grow.
We can’t pretend, however, that there won’t be times when compliance issues arise. We need to enforce compliance when those issues arise. While this may sound punitive, the truth is that these moments offer opportunities to improve everything about the compliance process. Here’s how to turn a compliance issue into a positive long-term solution.
Be Clear About how Compliance Issues Should Be Brought to Light
When you are considering how to resolve a compliance issue and turn it into a positive, you need to review the process of bringing a compliance issue to light. How do employees or others raise a compliance issue? What kind of procedure do you follow to ensure that accusations made are not false? You need to consider these things during the early compliance ideation to provide clarity as to how to resolve a compliance issue and manage positive solutions, what the process entails, and how it works for all parties involved.
No matter what your process is for reporting compliance issues, you also need a process to document any problems. Keeping a paper trail of the allegations, witness testimony, and other information is crucial to ensure that the company is on the right side of employment, local, state, and federal laws and regulations. Documenting can help protect the company, but it can also help you discover lessons during the process. Think of it as a case study: You learn from past mistakes and make sure there are parameters in place, so those mistakes don’t happen again.
It is important to realize that compliance and the process of bringing violations to light can and should change as your business evolves. Compliance is not a “set it and forget it” issue. Compliance guidelines need to be treated as challenges to the living, breathing parameters that help everyone do their jobs in a safe and healthy environment.
Be Clear on the Consequences of Breaking Compliance
The next step in turning a compliance violation into an opportunity actually takes place well before you even start enforcing compliance. It should start as you begin to build your compliance program.
When you establish the guidelines that you want to implement to ensure that the company is within the lines of laws and regulations, you need to provide clarity on the consequences of breaking the rules. These often have to be considered based on what your business does and where most of the business occurs (overseas or locally, for example). Enforcement also depends on the severity of the violation and should be considered on a case-by-case basis.
That being said, you can use basic guidelines to set the parameters and potential consequences of breaking compliance. Here are a few:
● Identify a prescribed method of resolving conflicts or accusations of wrongdoing around your compliance program. Such method should include a process of asking for an investigation and punishing violations. This provides the best place to find a list of possible penalties for noncompliance with corporate governance.
● What happens if someone misses too many meetings or fails to live up to the financial responsibilities they’ve agreed to as a member of the board of directors? In these cases, discipline could involve a fine, censure, or temporary suspension. The same applies to employees.
● What if someone violates your company’s ethics? Unlike failing to show up at a meeting, which can be minor and/or accidental, ethical violations are much more significant. These issues range from stealing to failure to fully disclose potential conflicts of interest. The consequences can include censure, firing, or suspension, depending on the severity of the infraction. It is up to the compliance department to determine the punishment and its enforcement.
● What if someone does something criminal? Consider the right path to address these issues and ensure that the company remains safe and sustainable.
Once you clearly outline the consequences for violating compliance, you need to share them with the relevant stakeholders and the employees who will be held to the compliance standards. If you don’t communicate the consequences of compliance violations, you cannot enforce the penalties.
Follow the Rules You Lay Out
Anyone making the compliance rules, regulations, and processes for bringing these issues to light needs to walk the talk. If you are making and enforcing the rules, be prepared to be above reproach.
Once you lay out the rules of the road, you must be willing to act on them and follow them to the letter. If there is a very specific process for resolving issues, you must be able to hold yourself and others to that process. This means that no matter who comes to the table to address compliance issues — whether they are a boss, a member of the board, or a coworker — they must be prepared to follow the process laid out for everyone. Rules cannot change based on who is involved.
The same goes for consequences. If you have created a comprehensive compliance plan that lays out consequences, you should not deviate from those consequences based on who has broken compliance. Deviating from the rules and consequences you implement does not support the business, nor does it create a safe space for workers.
Do Some Self-Reflection
It is important to realize that none of these processes and punishments are set in stone. Each compliance violation offers an opportunity for management and investors to reassess their own responsibility in the violation. Why did the compliance violation occur? What needs to change to ensure that something like this doesn’t happen again? How can you improve the environment to make it more conducive to rule-following rather than rule-breaking? We can only improve by learning from our mistakes and missteps and recognizing how our culture, company, government, and/or environment contributed to the violation.
Have a Plan for Damage Control
Once you have properly investigated the problem and implemented the penalties, it’s time to think about damage control and turning the compliance violation into a positive. If the compliance issue was a public violation of trust, be prepared to make amends with your customers and the general public. Many will see through empty gestures, so whatever you choose to do to make it right with the public, make sure it comes from a genuine desire for renewing trust.
If the compliance violation was more internal facing, you’ll need to do damage control with your employees. After a significant investigation, everyone will feel taxed and on edge. Compliance departments can help ease the anxiety and explain what happened by being transparent about the process (as transparent as possible). Communication about what might change as a result of the final outcome is also necessary. Providing clear and concise communication about what happened and why it happened can set many people’s concerns at ease. Plus, it offers an opportunity to open conversations with employees about any changes they might like to see given the business’s changing nature or goals. While a compliance issue can be challenging to navigate, it can open up the floodgates of communication between employees and management. It can be a real boon for making a more inclusive, diverse, safe, and comfortable work environment.
Turn a Compliance Issue into a Positive
Mistakes and missteps offer the opportunity for reflection, reassessment, and reevaluation. They offer an opportunity for growth and change. While this may seem frightening, doing this work is vital to ensure that your company will last well into the future. It sounds harsh, but the adage “Adapt or die” is true — especially in business. Compliance issues can destroy a company from the inside and from the outside. Without a firm, clear, and concise compliance strategy in place, as well as a plan to turn new compliance issues into moments for growth and change, your business won’t be around long. By reframing compliance issues as opportunities for learning, development, and reevaluation, you create the opportunity for your company to be stronger and more resilient.