Compliance as a Business Success Factor: Why “Dealing Quickly and Simply” No Longer Works

26 червня, 2019

Compliance as a Business Success Factor: Why “Dealing Quickly and Simply” No Longer Works

Building a robust compliance system in any organization is, undoubtedly, a challenge – from applying integrity requirements to all stakeholders in the procurement cycle to building reporting mechanisms, fostering trust of management to compliance function, and embedding compliance measures in a product or a service. But even greater challenge is for CEOs to begin viewing compliance function as business enabler, not a servant of bureaucracy. UNIC Secretariat has talked to Dr. Rainer Markfort, a Dentons Berlin Corporate Partner and co-head of the European Compliance Group, on what it takes to build a compliant organization today and the UNIC’s possible role in facilitating the collective action of its member-companies to further the adaptation of international integrity principles and practices in Ukraine.

What challenges for companies regarding the implementation of anti-corruption targets do you see in Europe/world? What challenges in terms of compliance do you see for German companies considering entering the Ukrainian market? How do you recommend using these disruptions and turning them into opportunities?

Implementing anti-corruption targets is always a challenge. You have to be specific, meet the business culture of the company, understand the business thinking of your sales people and the habitudes of the business communities they are working in. So, each compliance program must be adapted to the specific company.

But there is an additional challenge for companies entering foreign markets. You have to understand the business culture in this country and adapt your measures and your communication accordingly. This does by no way mean to reduce or change your anti-corruption targets. The goal avoiding unethical behavior always remains the same. But means and methods may vary from region to region. For example, a US anti-corruption program does not work one to one in a German company. Policies and procedures need to take into account German business culture and management structures. The same is true for a German company entering the Ukrainian market. You may not simply use German leadership style to guide a Ukrainian business and for compliance programs the same is true.

What landmark changes do you expect to influence on compliance in the nearest future? Would it become more complicated to fortify business for investors in Germany / foreign jurisdictions?

The landmark changes to influence compliance are both globalization and digitalization. A global economy leads to more cross-border business opportunities – and new risks. And new digital business models will allow for access to new markets and new regions, but also give rise to new areas of compliance risks. To fortify business against new corruption risks you need to understand these new business models and run a risk analysis. The question to start with is always simple: How do they make money with this product or service? Finding the right answer might be more complicated as new business models often are not that easy to understand. But this is the task of compliance.

Technology is neither good nor bad. It is just a tool - a very powerful tool - and what matters is how the world uses it. It can be used as an avenue to help tackle corruption, but behind every opportunity are risks. What is the tension between risk and opportunity arising from applying new digital tools to combat corruption? What tools do you recommend to consider companies for preventing corruption-related malpractice?

Technology may trigger a series of new risks depending on the products and services that technology supports. But there are lots of opportunities for compliance in it. The first is “Compliance by Design”. Technology allows you to have compliance measures built in the product. It requires that already in the development and design phase the compliance people need to be involved. If the anti-corruption goals of a company are clearly stated then it should be an easy task for the developers to align with compliance and design the product in a way that certain safeguards are built-in, for example in the workflow process and certain control mechanisms.

Technology offers new opportunities for preventive measures. The time of stupid and boring e-learning programs has passed away. Today technology allows for using features developed by the gaming industry to make compliance learning tools attractive. Hence, technology may help communicating anti-corruption targets with a fun factor.

Private entities represent not only the victims but also the perpetrators of corruption. Accordingly, on the corporate level, implementing integrity and compliance programs is an important step towards preventing corruption. According to your experience, how long does it take to build trust between compliance function and business? What are the linkages between fast boost of the business on one hand and, preventing corruption, on the other?

How long does it take to build trust between compliance function and business? A really good question. I believe it is not a question of time but of quality in the relationship. Business people need to learn that the compliance function’s task is to be a business enabler. To my experience there is always a way to make a deal in a way that is compliant with anti-corruption rules and other compliance regulations – understood however, that the business goal as such is compliant with said rules. Business people quite often run into difficulties when they try to do a deal “quick and simple” without sufficient understanding of the applicable rules. This is when they need an experienced advisor at their side. A qualified compliance manager will find a suitable solution and this will build trust over time. That’s the best way to build trust.

Measures such as accreditation of compliance level, anti-corruption due diligence on third parties and the supply chain can help to strengthen integrity in the wider business environment. How can the implementation of such measures contribute to accelerating progress in achieving the anti-corruption targets? What are the most popular among your clients?

Business Partner Compliance remains the most challenging part of a robust compliance program. A company may have as many external business partners as it has employees, however, the business partners are not integrated in the internal organization of the business. Therefore, it is more difficult to align them with your anti-corruption targets. The interface to the business partners are the people from your purchase and sales departments. They need to become the ambassadors of your compliance program and this requires a good compliance function having to ensure that they understand the compliance goals and are willing to follow them. An important step on the way is to make their life as easy as possible. Compliance therefore, needs to provide a tool for third party checks that is easy to handle. And compliance needs to prove that the results of a third party check are to the benefit of the business as a whole and not only to serve compliance bureaucracy. Make your compliance people understand that “you cannot make good business with a bad partner” (Warren Buffet).

Business collective action can enable multiple companies to work together to create islands of integrity and trust in their supply chain. How do you estimate perspective of such agreement? What needs to be changed within governments as part of galvanizing the response to tackle corruption by the collective actions?

Collective action is a very powerful instrument in promoting compliance. Even the most powerful market players are not able to establish ethical rules of business behavior all alone. There is a series of good examples for successful collective action, for example in international construction industry. Companies from the private sector most often will need facilitator as for example a government entity or an international organization like the World Bank to organize the process and provide for mechanisms of control and remediation.

What, in your view, is to be done by ethical business in achieving its purpose to educate other private sector representatives of doing business with integrity and building corruption resilient culture? What are your insights for UNIC, a brand-new business collective action in Ukraine?

On the international level there are established NGOs that stand for successful collective action: Transparency International, TRACE and the Alliance for Integrity, just to name a few. UNIC is a great example for an NGO on a national level. Another good example is DICO – Deutsches Institut für Compliance e.V. (German Institute for Compliance), an NGO that was founded six years ago by companies from the private sector, lawyers and accountants. Today, DICO has more than 300 members across all industry sectors. 180 people are actively participating in 21 working groups on all aspects of compliance.

They discuss and develop guidelines, working papers and training materials on various topics such as business partner compliance, internal investigations, qualifications, compliance certificates and quality management. Other working groups cover healthcare compliance, data privacy, anti-trust and export control. They formulate opinions and develop proposals for legal initiatives. By this means, DICO protects the stakeholder interests to avoid bureaucratic and excessive laws and regulations. On the other hand, DICO members can rely on proposals and models that they have developed collaboratively.

This is the best way to ensure compliance: taking the initiative and not waiting for the legislator to intervene. UNIC is a great initiative and has shown its potential in its first year of existence. Bringing stakeholders together to further the development of compliance in the Ukraine and by this means improve the country’s business success in the future.