Q: What is a compliance program and does my business need one?
A: A compliance program is made up of company policies and procedures intended to reduce the possibility of legal consequences, such as regulatory fines or lawsuits. Any simple step can be part of a compliance program. For instance, if the city requires paper recycling, placing recycling bins around the office helps ensure compliance with that rule.
The possibility of a legal problem, such as a regulatory action, fine or lawsuit, is a real business risk. Your company likely deals with many of these risks already. But ad hoc efforts result in a patchwork that may not address the largest compliance issues faced by the company. A company may be in compliance with recycling requirements, but have no oversight over highly regulated functions such as payroll, which can cause larger financial consequences.
An integrated and effective compliance program is grounded in a company's culture. If business owners and managers create an ethical environment, then its employees are less likely to violate the law. With this foundation, a company can build a compliance program to include seven elements: standards and procedures, oversight, training, auditing and monitoring, reporting, enforcement and response and prevention.
Basically, a company should develop a written program for legal compliance that is reinforced through management review and workforce participation. The program should evolve as the company improves its procedures and as the law changes.
A company should look first to its operations to develop internal standards and compliance processes. Tax issues and employment laws are among these concerns. From there, a company can review requirements for its specific activities. A painting service must follow lead paint rules, for example, while a bar needs to be consistent in how it deals with underage drinkers.
Even if a compliance program fails, it still may reduce the consequences if a company faces legal action. If a company can show that it tried to avoid a legal problem through compliance, then fines and monetary awards for violations that occur anyway may be reduced.
Stacey Supina is on faculty in the ethics and business law department at the University of St. Thomas Opus College of Business.