Why Trust Is Central to Compliance
by Francine Breckenridge, Compliance and Legal Officer, U.S. Money Reserve
Without it, your business can’t flourish.
In most businesses, compliance is seen as the “land of no,” where every possible opportunity is turned down for a legal, regulative, or governmental reason. While compliance exists to help maintain the laws of the land and keep the business within its legal boundaries, the perception of compliance as a business blocker is inaccurate at best and damaging at worst.
The truth is that when properly integrated into any business, compliance can be a partner and a business booster. In fact, compliance is absolutely essential to the overall growth and stability of a business. At the core of successful corporate compliance is trust. Central to this element is the idea that every employee, company, and associated third party is doing their best to remain within the law’s bounds as they do business. Here’s why trust is central to compliance and why it’s so vital to understand the mechanisms of trust and what can derail it.
Why Businesses Need Compliance to Remain Successful
Let’s be honest; some of the negative feelings about compliance come with the territory. They are just part of the natural tension present between different business sectors. Regardless of how most people feel about compliance, it is a necessary component that ensures the future success of any business. In many ways, compliance can help open up future opportunities and lead to future success.
A 2015 study by PricewaterhouseCoopers demonstrates that companies with robust, comprehensive compliance plans are more likely to achieve an annual profit margin — a profit margin that improves by as much as 10 percent over a period of just three years. In highly competitive markets, that’s a tremendous advantage in a very short amount of time. Yes, compliance requires an investment, but the return a company can get on that investment is excellent.
If businesses treat compliance more like a partner and less like the “land of no,” they can ensure that they remain successful well into the future.
How Important Is Trust?
Trust between employees and compliance and trust among compliance and third-party vendors are just two of the many factors that can affect a successful compliance strategy. Trust is at the core, and it’s vital to every compliance strategy.
Each year the marketing and PR firm Edelman does a Trust Barometer study. The most recent one shows that an entity must demonstrate both competence and ethical behavior to gain trust. In their survey, competence means delivering on promises. Ethical behavior indicates that, regardless of who is paying attention, the entity always does the right thing and works to improve society. While businesses ranked high in competence, respondents do not consider businesses, NGOs, government, or the media to be both competent and ethical.
If consumers can’t trust businesses to do the right thing, they are less likely to purchase goods and services. Edelman’s 2019 Trust Barometer study shows that companies have a trust problem. While 81 percent of respondents say trust impacts their purchasing decisions, only a third of people say they trust the brands they buy from, and 41 percent say they don’t trust brands’ marketing communications to be accurate or truthful. Those are pretty dire statistics. Add that 45 percent of consumers say they would never trust a brand again if it displays unethical behavior or involvement in a scandal. Exactly 40 percent say they’d stop buying from that brand altogether.
The 2020 survey focuses much more on the advent of COVID-19 and the #BlackLivesMatter movement. In that survey, Edelman found that consumers expect brands to take a stand on racism and that businesses risk losing consumers if they don’t. Edelman calls this “brand democracy,” in which a brand is tasked with creating a tangible social good, especially when it comes to social justice.
All these stats prove that trust is absolutely vital to a business. That trust extends both outside and inside a business’s walls. Employees are generally your first customers, and if they don’t trust you internally, you have a serious problem. If an employee doesn’t believe that a company is acting ethically or doing its best to uphold fairness, equitability, and social justice, companies are likely to lose that employee and attract the wrong type of hires. After all, unethical people are most comfortable in places where unethical activity and behavior occur.
Compliance helps define clear rules of the road to build and maintain trust both with internal stakeholders and external customers. If you create distinct rules that everyone, both inside and outside your company, must comply with, you foster an environment in which trust can grow.
Trust Is Difficult to Build but Extremely Easy to Undermine
Trust is a fragile thing. In any relationship, it takes time to build trust. Whether you are getting employees to trust that your business has their best interests in mind or working to build trust with a customer base, it doesn’t just happen overnight. There are many elements of trust (which I go into below), but one potent piece of trust is the idea of faith. Others place their faith in you or your company to do the right thing every time, even when no one is watching.
Just one misstep or one mistake can profoundly impact trust among customers. Examples of this abound, from Hollywood scandals to damaging tweets from businesses. So many public figures and entities have had to backpedal because of something they’ve done or shared that is insensitive, racist, or just plain wrong. One misstep and trust can become a distant memory — so it should be handled and addressed with extreme care, especially in terms of the compliance function.
Employees are also profoundly impacted by trust. If employees cannot or do not trust a company, they will do one of two things: 1) follow the leadership and continue the unethical behavior until the entire house of cards collapses or 2) speak up, go to the authorities, and blow the whistle on what they have seen. Either case is damaging for a company.
As Edelman’s survey points out, trust is central to maintaining and growing a healthy customer base. If your customers take their business elsewhere because they see that your company is not complying with the laws of the land or that it is treating its customers or employees poorly, your business won’t survive. Building a comprehensive compliance strategy and managing it means keeping trust at the center of the work you and your company do every day. Without it, your business won’t last.
The Five Elements of Trust for Business
Trust, in the business world, is made up of five elements: integrity, engagement, operations, purpose, and products and services. Each of these elements provides a touchpoint for trust. Each one needs to be part of the compliance rubric to ensure the longevity of a company.
Integrity in this context is defined as ethical business practices. It means taking the heat when your company has made a misstep and working to change any cultural or procedural mistakes with open and honest communication. Engagement is how well you communicate (both listening and speaking) with your employees, customers, and vendors. Operations refers to how transparent things like your hiring and firing processes are, the integrity of your c-suite, and how consistently you deliver returns to investors. Purpose is a high touchpoint for your customers. Are you doing good in the world? Are you helping your local community and giving back? Products and services pose the highest touchpoint for your customers and vendors. These areas are where companies fall down when it comes to trust. Do your products do what they are supposed to do? Do they help or harm consumers or the environment?
These five elements are fundamental business tenets that both compliance and the whole company must take into consideration. If one of these five elements falls short or steps out of line, the damage can be wide-ranging and swift. Today, consumers are quick to “cancel” a company for a mistake, and the impact of a change in buying behavior can quickly sink any company.
The function of compliance exists to ensure that these elements are continually monitored and operating within safe ranges to support a company’s ongoing survival. Compliance works to protect the long- and short-term sustainability of a business, not to be a blocker or the “land of no.” When implemented correctly, compliance will help bolster and support a company well into the future. Without it, however, the risk of failure — and in some cases, massive fines or even jail time — is tremendous. Trust is central to compliance, and by understanding more about it, companies can intelligently and comprehensively integrate it into their DNA.
