Compliance should be on everyone's mind - otherwise they could get into trouble. It's that simple, yet so complicated. Because "compliance" covers a wide range of areas and takes many forms.
So what is the exact meaning of "compliance"? The online translator provides an initial answer. According to it, "compliance" translated into German simply means "observance". That alone doesn't really get us anywhere if we want to understand the term "compliance".
The result of our further search for a compliance definition can be summarized as follows: In the corporate context, the term "compliance" stands for adherence to legal regulations and fulfillment of ethical standards. The German Corporate Governance Code (GCGC) defines "compliance" as the observance of statutory provisions and internal corporate guidelines for which the Executive Board is responsible. And joking lawyers like to interpret the term compliance as follows: "Compliance is the art of keeping the board out of jail."
One thing is certain: legislators and regulatory authorities from all over the world are constantly passing new standards, regulations and laws to govern cross-border trade in goods and services. These legal regulations create compliance risks. Therefore, functioning compliance and prudent compliance management are more important than ever for companies.
Compliance guidelines should help to avoid violations
One of the best-known compliance guidelines is ISO 19600, an international standard that contains guidelines for the use of compliance management systems. They are intended to help prevent compliance violations by employees and managers.
Security Island's "Compliance Channel" shows how diverse compliance topics can be and what a compliance office must be able to do. The online channel offers a large package of e-learning content on various facets of the compliance topic. Let's take a look at the topics addressed in the "Compliance Channel"!
Actively fighting corruption with functioning compliance processes
For example, there is an e-learning module on the topic of anti-corruption. Bribery is actually more widespread in the business world than outsiders would expect - and often the perpetrators arouse no suspicion even within their own ranks. They may be aware that their actions endanger the well-being of the entire company, but they often successfully suppress this fact. In order to avoid all forms of corruption, functioning compliance processes must be in place within the company.
Corrupt acts can actually permeate all departments and activities of a company - and they can occur in all sectors and industries. However, the areas of purchasing and sales are particularly susceptible to corruption. Companies must therefore establish sufficiently strong compliance in these areas in particular in order to eliminate compliance risks.
Compliance as a tool of business ethics
It is already clear: Compliance is important. After all, the wind has long since changed. Whereas in the past, bribes paid abroad could even be deducted from taxes as a business expense, corruption is now outlawed. Business ethics, on the other hand, are highly regarded and respected. Compliance is therefore also intended to promote honest behavior among employees. Compliance is seen as a crucial tool for business ethics, fair and sustainable trade, social responsibility, environmental protection and sustainability. Compliance thus has a direct impact on corporate culture and reputation - but only if values and standards are not just talked about, but made part of the compliance processes.
Competitive compliance also protects a company's reputation
Another example of compliance issues is competition compliance. Consumer advocates are not the only ones who are (rightly) very active when it comes to taking market participants to court who violate fair competition. In addition to damage to their good reputation, companies are also threatened with high costs. They are therefore well advised to have a functioning compliance management system. This enables them to identify unfair competition, market abuse or cartel agreements before it is too late.
Speaking of cartels, companies are often unaware that they have entered into illegal agreements that restrict free competition and are punishable by law. However, legislation is increasingly being tightened to prevent interference with the free market. Antitrust law is a complex matter. Companies are therefore well advised to take a close look at the issue of anti-trust compliance. After all, no company wants to become the subject of an external investigation by the antitrust authorities - and, in the worst case, suffer the associated consequences.
Compliance also takes trading partners into account
However, the issue of compliance also has implications beyond a company's own operations. The internationalization of supply chains and trade relationships has led to worldwide interactions with suppliers, subcontractors and customers. This can certainly lead to compliance violations among business partners. Monitoring and controlling all these third parties is the task of "third-party compliance". It ensures that a company and all its external partners comply with trade compliance laws and regulations.
The goal of "trade compliance" is to avoid liability risks. Trade compliance regulations cover areas such as import and export, customs and taxes, and other areas. Numerous regulations must be observed. Anyone who violates them must expect severe penalties. For example, as a central part of a trade compliance management system, every company involved in international trade must set up an internal export control system. Those with this area of compliance in mind will have an advantage when it comes to obtaining approvals, passing audits and avoiding liability for violations.
Anti-money laundering compliance protects against nasty surprises
Increasingly important in the world of compliance has also been the issue of money laundering. This involves the conversion of "dirty" money into "clean" assets. Companies often realize too late that they have become involved in an illegal money laundering business without being noticed. Since they should have ensured as part of anti-money laundering compliance that their customers do not pay with money from illegal transactions, they get into big trouble. Becoming a victim unnoticed, how is that supposed to work? An example: A German excavator manufacturer delivers his machines to a customer in Eastern Europe. Later, he notices that the Eastern European customer is reselling the excavators at dumping prices in Asia - and laundering his money in the process. Effective anti-money laundering compliance would have helped to detect this in advance.
Set up whistleblower system as part of compliance
So-called whistleblowing often leads to compliance violations being uncovered. "Whistleblowers" are persons who point out wrongdoings in a company to authorities or the media. It often happens that whistleblowers initially sound the alarm internally and are labeled "traitors" by superiors or colleagues - even though they could actually make an important contribution to protecting the company and the company with their suggestions. However, a prerequisite for the whistleblowers to be heard is that companies have set up a whistleblower system as part of their compliance. This can have a positive impact on corporate culture.
To promote honest and ethical behavior among employees, many companies draw up a "code of ethics" or a "code of conduct". Such a paper sets out the company's core values and fundamental beliefs. It is based on standards of business ethics and social responsibility. Thus, a "code of ethics" or a "code of conduct" are crucial aspects of effective compliance.
Compliance is incredibly multifaceted
In summary, it becomes clear that the topic of compliance is incredibly multifaceted. Understanding it in full depth is virtually impossible for non-experts. However, compliance always begins with a risk analysis to identify compliance risks. That's why knowledge of the subject matter is of elementary importance - and for every individual who does business. After all, a sustainable compliance culture increases transparency within the company, boosts consumer confidence and supports the achievement of corporate goals.
One way to develop and deepen one's individual compliance knowledge is Security Island's "Compliance Channel." The intensive e-learning program examines the topic of compliance from many angles, provides numerous real-world examples, and gives participants the opportunity to test their knowledge themselves at the end.