It’s a new year, and with it are clear organizational challenges for the road ahead. Economic headwinds. Geopolitical conflict. Supply chain disruption. Stakeholder activism. Increased scrutiny by government regulators. New compliance requirements and ESG developments. At LRN, a central lesson from our ongoing research and work with thousands of organizations is that a values-based approach to governance, culture, and leadership is crucial. It builds and sustains ethical culture, which is the essential element of effective ethics and compliance programs. And it correlates strongly with reduced risk and better business outcomes.
3 insights to help businesses prepare for upcoming compliance requirements
As businesses prepare to meet upcoming compliance requirements, program effectiveness matters to stay the course. Here are some things that my LRN colleagues and I are keeping top of mind for 2023.
Continuous improvement is vital to navigating regulatory expectations
The regulatory landscape is changing faster than most organizations can keep up. In the US, to satisfy increased interest by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in individual accountability—alongside a growing number of dimensions to manage for ethics and compliance program effectiveness—plus the elevated risk inherent in supply chains with recent sanctions, E&C program leaders need better access to data about what is happening in real time in their organizations.
Traditionally, these leaders could make-do with borrowing common LMS platforms to deliver courses, tracking basic results in spreadsheets, and comparing themselves against last year’s peer benchmarks. There is now added pressure to understand what is working and what is not, and which areas of the business have greatest risk—and much of this falls into the growing scrutiny around environmental, social, and governance metrics and disclosures. The UK’s financial regulator, the Financial Conduct Authority (FCA), has established an ESG committee to provide guidance to the board on emerging ESG topics and to recommend how the FCA should develop its ESG strategy moving forward. It appears traditions must come to an end.
Measuring ethical corporate culture matters more than ever
Further questions from regulators remain unanswered, and corporate culture measurement lies at the heart of this:
- Are people throughout the organization equipped to handle rapidly changing landscapes?
- Can they spot and identify risks?
- Is everyone truly aligned with the company’s mission and values?
- Are teams and individuals feeling pressured to cut corners?
- Which business units are partnering with E&C, and which are trying to fly under the radar?
- Does everyone know where to go to find the answers they need where and when they need it?
Questions require answers and getting the tools into place to ask the right questions, measure sentiment, and compare populations are becoming more vital.
Having the right compliance technology solutions will determine which E&C programs sink or swim
Great corporate cultures and technology solutions purpose-built for ethics and compliance are required now to support corporate resilience and reduce risk. We hope that both boards and management are seeing this rising tide. We know from our recent survey for the forthcoming E&C Program Effectiveness Report (February 2023) there is a wide gulf between high-performing and less effective programs when it comes to resourcing, standing, and authority to carry out the mission. With rough waters ahead in 2023, it is not a year for coasting.
The key takeaway
Even in the best of companies, there is considerable risk. Active attention to ethics and compliance programs means having the platform, delivery mechanisms, analytics, customizable courses, disclosures tools, communication strategies, and curriculums to cascade values that really resonate throughout the company. Focusing on continuous improvement in 2023—with the right tools capturing the right metrics—will help organizations and their people absorb the shocks of unanticipated business realities.