Martin Tolar charts the rise and challenges ahead for a profession now beginning to find its feet
When it comes to professional services, compliance and governance practitioners are the new kids on the block. The advent of compliance professionals can be traced back to around the early to mid-1990s when the AS 3806 Compliance Programs standardwas introduced. From there compliance was no longer a role undertaken on a part-time basis by lawyers, auditors or accountants, but rather it became a full-time responsibility.
Like the people who work in compliance, the discipline itself has also evolved over this period. No longer is compliance purely about ticking boxes to ensure laws are being followed or being the ‘handbrake’ on the business. Compliance today is more focused upon best practice, international competitiveness and being a partner to the business in helping it to achieve its strategic goals.
So what has happened over the past 15 years and why is compliance now seen as a genuine career path?
Previously, many first-time compliance managers had the role forced upon them based upon a number of factors including their knowledge or experience in legal, audit or finance matters, or because they had an in-depth understanding of the business. In some instances, the role of compliance was fulfilled by long-term employees as a last stop before retirement. Those days have long since changed. Today compliance professionals are experts in the specialist skills required to create compliance frameworks and instigate culture change within organisations.
Today’s compliance professionals are highly educated and well versed in the powers of persuasion, and they have a deep understanding of business principles. Former ACI vice-president Julie Winkler best sums up the changes that have taken place over the past 10 years. “Compliance practice has developed to be an essential component of corporate governance,” she says. “It has moved from simply being an authoritarian ‘approver and checker’ who had the position of power and control simply because everything required their sign off. Today the leading compliance professionals are consultative business advisers and corporate problem solvers.”
A number of factors have added to the reform of the compliance role, however the single most influential factor has been the regulations governing the financial services industry. ASIC insisted that organisations that held financial services licences had to have a dedicated compliance person and adequate resources to undertake the role. Consequently the profile and importance of the compliance manager has increased significantly.
On a global scale corporate failures like Enron have also contributed to the increased focus businesses now place upon governance, risk management and compliance. These three disciplines have increased in importance for major corporations as they seek to minimise risk, preserve reputations, protect brands, and stay out of the sights of regulators while still delivering shareholder value. It is no surprise that in this complicated mix, compliance professionals have come to the fore in assisting their organisations in achieving what at times can appear to be conflicting goals.
Unlike in-house legal counsel, CFOs or heads of HR, the pathway to the position of ‘group head of compliance’ is not always as straight forward. Just as the discipline of compliance has been evolving over the past 10 years, so too has the skill set required to succeed in the role.
Initially people with a legal background were drawn to the role due to the strong focus placed upon meeting black-letter legal requirements, however those who have excelled in the role are proof that the ability to communicate across an organisation is one of the most important skills that today’s compliance professional needs. However, the range of roles that today’s compliance professionals are drawn from initially is diverse.
In the ‘other’ category, respondents had established a career in compliance via undertaking MBAs, commerce and business degrees, studying sociology or music, or trained as technicians or engineers.
In addition to ensuring legal obligations are maintained, today’s compliance managers are also change agents required to embed a culture of compliance throughout all levels of an organisation. They are negotiators required to mediate and determine if conflicts of interest exist. They are in the business of communication and selling; selling the value of compliance to staff, senior management and directors as well as other key stakeholders.
Based upon the understanding that compliance professionals have developed over this period, the Australasian Compliance Institute (ACI) has developed in conjunction with industry practitioners a comprehensive set of competencies that are required by individuals if they are seeking a successful career as compliance professionals.
It is these competencies that underpin the three-tier accreditation program that ACI has developed. At present, members of ACI can be accredited as either an associate, a certified compliance professional (CCP) or a CCP fellow. Typically associates have two years worth of practical experience, CCP’s five years worth of experience, with two in a senior role, and CCP fellows 10 years’ experience with five in a senior role. All accreditation levels are only achieved after the candidate has undertaken and passed a rigorous assessment process.
The existence of ACI’s accreditation program underpins the professional expertise with academic rigour and provides a solid foundation and tangible career path for today’s new compliance managers. For employers and business owners, the accreditation program clearly defines the skills and knowledge required of compliance professionals in today’s market, which mitigates most of the risk in the hiring process by assisting in the selection of new employees for compliance roles.
Increasingly compliance is also becoming a career that can take skilled practitioners around the world. As many international organisations focus greater attention on ensuring good corporate governance, mitigating risk, operating ethically and addressing the variety of changing legislative obligations, the demand for qualified compliance professionals internationally has increased. Recent legislation that has a global impact such as anti-money laundering legislation, the Sarbanes-Oxley Act in the US, as well as new international accounting standards and the international harmonisation of business practices, have quickened the global demand for suitably qualified compliance professionals.
The skill set demonstrated by today’s compliance practitioner is not only transferable internationally on a vertical basis within varying industry sectors but also horizontally across new industries. The principles-based approach taken by ACI to the application of compliance means that once mastered these skills are applicable to a diverse number of industries. This development and the waning focus on the black-letter law approach has not only assisted in the evolution of compliance, but has also greatly expanded the career options available to practitioners.
This transferability is not only applicable to industry sectors and geographical boundaries but also within the ‘governance profession’. Through its survey’s of members, ACI has witnessed that increasingly multiple roles are being filled by individuals. A popular trend is the merging of compliance and risk departments, which means that it is not unusual to see a hybrid of roles such as ‘head of risk and compliance’or ’risk and business continuity management’ or ‘business continuity management and compliance’ within various organisations. From here we are then witnessing the progression of compliance managers to the role of company secretary or public officer.
The knowledge and skills gained by senior managers from working within these governance roles has been seen as a positive move forward. We have witnessed a number of financial institutions now insisting that senior staff obtain experience in a compliance, or a broader governance, role before being considered as candidates for their top leadership roles within the corporation. Once viewed by some as the last stop before retirement, compliance is now an important step in securing more senior roles within the business.
Looking forward, the next challenge facing compliance professionals is the advent of corporate social responsibility (CSR). This emerging practice is becoming increasingly important as governments around the world introduce environmental protection legislation that affects how businesses operate as well as the increasing belief by many consumers that companies have a broader responsibility to society, beyond increasing the wealth of shareholders.
The task for compliance professionals will be how to ensure that ‘social promises’ and ‘green claims’made to consumers in order to promote the company’s brand and secure a market advantage can be both achieved and proven. Misleading statements and a failure to uphold these claims represents a significant reputational risk and could also result in prosecution from industry regulators. Within this context, the future of the compliance professional will see them add CSR to their tool kit and come to the fore in the setting of the organisation’s strategy, particularly in respect to the communication and enforcement of social compacts with their customers.
Martin Tolar is chief executive officer of the Australasian Compliance Institute