Fulfilling the New Compliance Mandate – The Compliance Convergence Journey

(This article was contributed to Corporate Compliance Insights by management consultant Mr. Matthew Podowitz. He can be reached via email at the following address: mpodowitz[at]gmail[dot]com.)

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Fulfilling the New Compliance Mandate

The Compliance Convergence Journey

The compliance landscape continues to evolve and create new challenges for the corporate compliance function. These already significant challenges are complicated further by corporate pressures to minimize costs and a reduced emphasis on those functions that do not contribute directly to the top or bottom line. In short, the compliance mandate has changed significantly over the past several years and a step change in the corporate compliance function is required to fulfill that new mandate.

The New Mandate for Chief Compliance Officers

In the current economic environment, in order to garner executive support and resources required for compliance to be effective, the Chief Compliance Officer must shift focus beyond management of risk to reducing costs elsewhere in the business and creating value by contributing directly to fulfillment of the corporation’s business strategy. That value creation may occur, in part, by leveraging the compliance function’s existing strengths and assets to help manage risk, reduce costs, and create incremental value for the corporation’s partners.

Buy-in to this new mandate both by the Chief Compliance Officer and the corporation may yield several significant benefits:

• Increased Returns on Past and Future Compliance Investments – By expanding the compliance focus from risk management to cost-efficiency and value creation, a tangible, positive return on investment can be quantified and realized.
• Continuous Business Process Improvement – As compliance expands beyond regulatory matters to encompass legal, ethical, and contractual requirements, compliance activities will incorporate business process performance matters as well.
• Market Differentiation and Increased Customer Value Proposition – Customers and suppliers will benefit from the compliance function’s focus on value creation through performance-based agreements and reduced costs of vendor management.

Ideally, when a compliance function operates under this new mandate, the corporation realizes tangible business benefits from increased compliance and actually seeks out new, value-creating compliance standards.

Fulfilling the New Compliance Mandate Through Compliance Convergence

The new compliance mandate will be fulfilled not by the compliance function alone, but through a deliberate, purposeful convergence of the entire enterprise’s process, organization, information and technology:

• Process – Includes both the compliance process itself, as well as enabling elements of operational processes.
• Organization – Includes all organizational elements involved in compliance, not just the compliance organization itself.
• Information – Refers both to compliance-related information and the manner in which that information is generated and managed.
• Technology – Includes compliance-enabling technology and the manner in which that technology is used.

This convergence occurs in the same process any corporation follows to design and implement a program of business process transformation effort:

Defining the rationale for transforming the compliance function and quantifying desired benefits,

• Defining specific process, organization, information, and technology changes and the degree of effort required to realize those desired benefits,
• Finalizing the design, identifying gaps and launching individual improvement efforts,
• Deploying individual process, organization, process and technology improvements,
• Measuring and testing results of those implemented improvements,
• Implementing a continuous compliance improvement program.

Getting Started With Compliance Convergence – A Roadmap and Compass

As with any journey, one must have a destination and understand one’s starting point relative to that destination.

In the context of compliance convergence, “destination” refers to the level of benefit the corporation wishes to realize from transformation of the compliance function and fulfillment of the new compliance mandate. The level of benefit delivered today serves as the “starting point.” The Compliance Convergence Benefits Model below provides a formal, albeit qualitative, means to define both.

Figure 2 – Compliance Convergence Benefits Model, © 2009 Matthew H. Podowitz

The Compliance Convergence Maturity Model below can serve as both a roadmap and a compass, helping to define both direction of travel and the distance to be traversed. While there is not a direct correlation between current levels of maturity and level of compliance benefit received by the corporation, understanding what level of benefit the corporation receives from the compliance function today at current levels of maturity will indicate strongly what level of maturity must be achieved to realize the desired level of benefit.

Figure 3 – Compliance Convergence Maturity Model, © 2009 Matthew H. Podowitz

As with any great journey, the first step is the most critical. An honest and frank self-assessment of both benefits delivered by the current convergence process and maturity of the corporation’s level of compliance convergence maturity is that first step. With that first step completed, the process of building the value case and gaining approval for, and executing successfully upon, a corporate compliance convergence initiative can begin.

The Road Ahead for Chief Compliance Officers

The Chief Compliance Officer will have to do much more than lead the compliance convergence process – they must champion it. In doing so, Chief Compliance Officers will have many critical roles to play:

• Change Agent – A relentless, discreet force driving the compliance convergence process to its successful outcome, overcoming all resistance and winning the loyalty of those who would resist the coming change.
• Lead Architect – The design authority, able both to create and to help others create the strategy, architecture, and governance of the transformed compliance function.
• Quality Inspector – Reviewing and approving every work product created in the compliance convergence process to ensure it is fit for purpose, consistent with design principles, and can be operationalized.

It is only through the experience, drive, and passion of Chief Compliance Officers that the new compliance mandate can be fulfilled.

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Matthew H. Podowitz is a career management consultant with over eighteen years of experience assisting companies manage and optimize their operations and use of information technology to support the key objectives of the business. Matt is a Certified Management Consultant and Certified in the Governance of Enterprise Information Technology, as well as a Certified Information Systems Auditor. Matthew can be reached via email at mpodowitz[at]gmail[dot]com

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. The author shall not be responsible for any loss sustained by any person who relies on this publication.

Tags: chief compliance officer, compliance convergence, compliance function, compliance mandate, corporate compliance, matthew podowitz