We asked industry experts, colleagues and compliance officers what they believe will be the top issues impacting workplace ethics and corporate compliance programs in 2015. We gathered their best thinking and prepared our annual summary of trending issues and the steps you should consider taking as you plan for the coming year. We’ll share each of the trends here over the next few weeks.
Trend #1: Increasing pressure to maximize the ROI of ethics and compliance
In a time of tight budgets and increasing scrutiny, ethics and compliance programs are not immune from the expectation that time and resources be well spent, and that organizations will see a tangible return on investment. All indications are that pressure to maximize the ROI of ethics and compliance is increasing—and there is no reason to think the trend will change in the coming year.
Key Steps For Organizations To Take:
1) Ensure you have a clear and complete picture of the size of your budget. To maximize the ROI of your ethics and compliance program, the first step is to ensure that you have a clear and complete picture of the size of your current budget. This may seem obvious, but an analysis of data published over the last year indicates that many organizations actually underestimate the size of their ethics and compliance budgets and oversimplify their allocations. An independent study commissioned by NAVEX Global found:
- Compliance officers lack adequate and accurate information about their current and historical spend. In part this is because ethics and compliance expenditures originate from an average of 2.7 departmental budgets in addition to the Compliance department budget. These departments often include: Audit and Finance, Risk Management, Training and Professional Development and Legal.
- Only 60% of organizations’ ethics and compliance spending is accounted for in annual, fixed budgets—the rest is in “special budget allocations.”
- When compliance professionals share incomplete budget information, one consequence is that budget trends and benchmarking among peer organizations can also be misleading.
- Our 2014 study indicates that the ethics and compliance budget story is better than most people realize. Budgets are increasing. Nearly half of the respondents to our study expect budget increases in 2015 and virtually none expect budget cuts.
2) Account for “non-quantified expenditures.” Non-quantified expenditures are too often left out of budget calculations. One significant non-quantified spend is the hours that employees devote to training. For example, one hour of training for all employees plus the time that managers or in-house trainers spend preparing can quickly add up to thousands of hours. Another major non-quantified spend is the amount of time organizations spend tracking and analyzing regulatory changes. A recent study noted that over one third of organizations globally spend an entire working day every week on this activity. Business leaders who are eating this time will often be the first to remind compliance officers of these hidden costs.
3) Assess your ethics and compliance program’s effectiveness. Of course, getting a handle on expenditures is only half of the story. To maximize ROI you also need to assess effectiveness—what is your organization’s return on its corporate compliance program investment? Unfortunately, according to a 2014 survey by Deloitte, 68% of compliance officers try to measure program effectiveness, but only half have a high degree of confidence in the metrics they track.
4) Maximize operational efficiencies. There are major efficiencies—and major ROI improvements—to be gained in a well-run ethics and compliance program. An organizational structure that enables planning and coordination across functions is critical to efficiency and success. In addition, outdated, manual, time intensive approaches are under heightened scrutiny and no longer make sense—particularly related to policy management and third party risk management. Scalable, automated technology, combined with access to integrated data, is key to program effectiveness and an improved ROI for ethics and compliance.
5) Use advanced ethics and compliance measurement tools. In recent years, we have seen significant progress toward integrated ethics and compliance dashboards that can provide compliance officers with useful, robust, data on training, code acknowledgements and third-party due diligence which can in turn can enable them to be proactive in predicting risks and problem areas. And, more and more resources are being deployed in a “smarter” more integrated way.