By Frank Sheeder on November 14th, 2011
Stakeholders often raise “the price of compliance” as they endeavor to justify their lack of support. We hear about how:
•The compliance function is a cost center.
•The odds are small that this will become a problem.
•Compliance Officers make a mountain out of a mole hill.
•We are an ethical organization and therefore don’t need to dedicate resources to compliance.
•We are too important — nobody will ever dare to come after us.
•Our reputation will protect us.
These are risky pushback themes that engender substantial financial, legal and reputational costs in a high percentage of cases. The better question is, What is the price of a compliance failure? While we don’t know all of the facts about the current Penn State situation and we should never assume or judge, the circumstances already validate some transcendent truths about compliance. Organizations cannot simply “check a box” indicating that they have policies or that they technically fulfill legal requirements. Action and inaction have consequences, and those consequences are not abstract principles — they are real. What lessons can we learn?
•Leaders must insist on developing a culture of compliance that permeates an organization.
•Much is expected of powerful leaders.
•Not speaking up when there is a compliance concern can be costly for you and your organization.
•Looking the other way because you fear losing your job is not a good strategy.
•Going through the normal chain of command does not always absolve someone of responsibility.
•You can lose a solid reputation, which was built over generations, in a nanosecond.
•Compliance training is essential. If individuals are not trained to recognize signs of potential concerns and empowered to raise them, serious problems can flourish.
•One unfortunate decision can lead to cascading consequences that are far more damaging than the initial problem.
Look for more insights as the facts come out. We will tally up the price of compliance failures later. For now, here’s a challenging question: What are you doing in your organization to avoid running afoul of these realities?