There’s little doubt that compliance has undergone a massive evolution in the past decade. Gone are the days of box-ticking, form filling and backside covering. These days, compliance professionals are more likely to be pondering behavioural metrics or how they can add value to their organisation.
As with other Governance Risk and Compliance (GRC) disciplines, culture has become a key talking point. It’s also beginning to show its value to organisations as a defence against regulatory breaches. In a 2006 judgement involving pharmaceutical firm Chemeq, the judge stated that greater penalties will be imposed in relation to compliance breaches of the Corporations Act on companies that neglect compliance and don’t develop a ‘culture of compliance’. The existence of compliance culture could mitigate the larger penalties handed out ‘when a corporation takes a calculated risk by intentionally or recklessly failing to disclose material information’.
The case was brought by the Australian Securities and Investments Commission (ASIC) against Chemeq for failing to disclose material information to the stock market. Penalties were agreed by both ASIC and Chemeq if the breaches were confirmed.
However, the compliance culture comment came as Justice French stressed that courts will not automatically ‘rubber stamp’ pre-agreed penalties, despite the fact both parties had concurred. Because the breach was related to disclosure, the court looked at a number of issues such as the impact of the disclosure on the company’s share price the material impact on traders of the company’s shares through non-disclosure and the existence of compliance systems relating to disclosure.
Moreover, many leading compliance professionals see culture as the key to unlocking additional value through compliance. “The true value-add [of compliance] is a mixture of bottom line results and corporate behaviour,” said Annette Donselaar, a board member of the Australasian Compliance Institute and chief compliance officer at American International Assurance in Hong Kong. “I find the latter the most interesting, and tend to spend most of my time looking at the cultural and behavioural aspects of compliance. Anyone can write a checklist or a process, but I like trying to get people engaged, and that requires, I believe, people working with people trying to work out solutions and that’s what challenges me.”
However, despite the growing profile of compliance culture, little is known of its nuances and defining it is difficult. “The compliance culture proposition depends on how you see it,” said Dr Len Gainsford, director of audit and assurance at the Department of Infrastructure in Victoria, and compliance culture expert. “I see it as a sub set of organisational culture.But I think in a better way to describe it is as a collection of individuals behaving in a particular way according to different value sets. It is more sociological than alot of organisations have understood.”
While grasping that kind of concept is relatively simple, applying it is another matter entirely. “The assessment and the application though, is it a bit more difficult at a particular point in time for some people to come to grips with,” said Gainsford, who researched several large organisations’ compliance cultures for his Phd. “And that’s where the problems emerge. But I think about organisational culture and compliance culture and a way in which you can build on the values of events and artefacts and so on within an organisation to actually achieve, you know a more compliant outcome. That’s something that just takes a bit of understanding.”
However, compliance professionals are likely to have more intelligence to draw on later this year, with a major research project into compliance and risk culture underway. A joint initiative between the Monash Centre of Organisational Research and Psychology and the Monash Centre for Regulatory Studies is set to lift the fog of uncertainty surrounding compliance culture.
The project, which is supported by SAI Global, is looking to investigate, measure and benchmark the elusive compliance culture concept. The study will focus on organisational and psychological dimensions, organisational drivers and outcomes and the relationship of compliance culture to law and regulatory policy.
According to Lisa Interligi, project manager at the compliance culture research project, the reaction from business has thus far been positive. An industry working group comprising compliance, risk and other professionals has been formed and includes Rio Tinto, Telstra and Australia Post, among others.
The project is expected to report its findings later this year.