The culture of compliance in regulated business entities

The behavior of a group of people in a particular setting, that is to say, their belief systems, aspirations, creed, goals and ethics is the embodiment of their culture. Culture is the root factor that forms the espirit de corps around which the goal of existence of the society is built. On the national scale, it becomes the national spirit (the voguism) which Von Savigny a German social scholar and a jurist considered as the fountain from which laws and rules become effective and binding on the people.

Culture can be corporate, traditional, societal, communal, spiritual or what have you. The concept of compliance in corporate business environment requires of individuals and or groups to conforms to or obey set of rules or regulations, guidelines and directives determined by law or by any responsible governing authority.

The real expectation is that corporations will obey all the laws and regulations with respect to their operations, staff, and the treatment of their clients, investors and stakeholders. Indeed, the principal tenet of the concept of compliance is to make sure that companies act responsibly towards all their stakeholders as well as their competitors. And so, there are anti-trust rules for corporations. Being responsible and doing the right things is a corporate culture that every business entity must cultivate if they are to succeed in their set goals in a regulated business environment.

Benefits of being compliant.

Before a company can begin its operations, it must first be granted an accreditation (incorporated) as a company to operate its business by the Registrar of Companies in Ghana. At some other places such as the United States of America, this function is performed by the Secretaries of State of the various regional States of the union. With most businesses, the registrar level of accreditation or incorporation is just enough to begin operations.

However, companies that operate in regulated environments needs another layer of accreditation or licensing before they eligible to operate their businesses. For examples, Commercial Banks, Investment Banks, Insurance Companies, Telecommunications Companies, Pension Fund Companies etc… apart from their registration as corporate institutions, need to obtain licensing from their sectorial regulators. For commercial banks, we have the Bank of Ghana as the regulator, Insurance companies, the National Insurance Commission, the Pension Companies, the National Pensions Regulatory Authority, the Investment banks, brokerage firms, mutual funds and unit trusts, the Securities and Exchange Commission. We also have the Financial Intelligence Center and the Data Protection Commission whose functions are inter-sectorial. All these state agencies have regulatory mandate and quasi-judicial powers.

Regulated entities have a lot of obligations with regards to their operations. As their operations grow and the business expands, the obligation to keep up with the rules of their engagement also increases. The nature of the obligations require that managers of these business entities develop a deliberate culture of compliance.

There are however benefits in being apt and good with the rules. The cardinal point to note here is that, disobedience to the rules are considered as infractions which in most instances attract penal sanctions. The points below although are not exhaustive as enumerated, yet when properly complied with has the tendency to bringing positive tidings to the business entity.

  1. Being compliant guarantees the companies continuous stay in its line of business. This is because without the operating license, the company cannot operate its legitimate business. Hence the need to take all measures necessary to hold on unto the operating license. The watch words are that habitual non-compliance to the rules is a clear signal to the regulators that the business entity has challenges which puts this entity on the monitoring radar of the regulator.
  2. Being compliant is a sign that all is well with the company and it is likely that the company would be able to clinch big deals from clients. This is because large clients especially foreign ones always undertake due diligence from the Regulators, existing clients, and or past clients to see how credible the company had been. With the Regulators, the large clients may want to know if the company had been sanctioned before and if so, the nature of the offence, the frequency of the offence, fines paid and if the Regulator has any reservations against the company. All these inform them whether to invest with the targeted entity or to go elsewhere. Compliance therefore becomes the barometer for good corporate citizenship, as foreign investors want to invest with an obedient and law-abiding business entity.
  3. Compliance Builds Positive Reputation
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The success of the company largely depends on the perception of the public about who they are, what they do and how they do it as a corporate entity. Indeed, the public image corporation is everything and being compliant enhances the positive image of the company.

When a company starts facing several court actions or paying fines or being seem as not in the good books of its regulators, the general public gradually loses their trust in the company and the company’s sales  and services will eventually drop. Compliance will ensure that a company can uphold its positive image and build consumer trust. This also helps to build clients loyalty, since they are more likely going to recommend a good service or product to other clients as they might have found the company as trustworthy. A company that fulfills compliance requirements through its internal structures do not only strengthens the structures but also gradually develops a positive reputation in the minds of its clients. For instance, how will you feel if you will ever find out that the company that you have personally invested funds with, is listed by its Regulator as “not in good standing”, that feeling is what is in reference.

  1. Most business transactions involve complexities and availability of information to the market practitioners puts them at a position of advantage, hence can easily exploit the vulnerability of the investors to their benefit. The investors need to be protected from harm through loss of money. Setting up compliance measures are a sure way of protecting the market from abuse. Banks licenses are likely to be revoked if prudential requirements set by the regulator, the central band are not being met. To protect the bank’s depositors from loss of monies, the regulator may revoke the license and distribute the deposits to the owners.
  2. Compliance and Market Regulation removes the fear that unscrupulous practitioners will run away, or misuse invested funds. The role of compliance is to police and safeguard the integrity of the whole system. The absence of that fear of loss of investment and returns engenders trust and promotes market growth and insulates the integrity of the market as a whole. Indeed, in effectively regulated markets, unscrupulous practitioners are easily spotted and are deterred beforehand. This is to say that lousy rules and poorly regulated business environments attracts all sorts of business entities and persons some of whom have ill-motives. It is always a situation of good and bad apples, no sooner would the spoilt one begins to affect the good ones and whole system suffers the abuse and lack of the ineptitude on the part of regulation.
  3. Compliance promotes professionalism. This is because good laws, rules and regulations are not adequate in themselves. They are effective only if they are accurately interpreted and adhered to by the market practitioners who has at the core of their professions, ethics; the right to “doing the right thing”. Unlearning the wrong things are always difficult most especially when there are untold benefits in doing the wrong things. The point to note is that “other peoples’ money” a business concept upon which some corporations thrives comes with the duties of trust, loyalty and accountability. The breach of these duties have dire consequences for professionals. They face the ridges of culpability if they fail to do the rights things by the right methods.
  4. Compliance promotes business growth, sustainability and succession. Records show that businesses in Sub-Saharan Africa mostly do not outlive their founders. The business collapses as soon as the original owner hands it over to successors mostly heirs. Examples of this phenomena abounds. Lack of the culture of doing things the right way is at the core of these failed business enterprises. Lack of accountability, proper controls and poor financial management to say the least are the key factors that lead to the collapse of businesses after the original entrepreneurs hands them over.
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Corporate sustainability, succession and good corporate governance are relatives. They germinate on the carcases of the culture of compliance. As compliance demands that the rules are followed, habitual obeisance to this way of doing things in the business entity becomes the culture. Then, frugality, ineptitude and frivolity all give way to corporate growth in the long run. Some businesses also fail after the original founder because the heirs either loss focus or lacked the passion and vision of the original founder. All these have a place in compliance. You cannot simply bargain for apples and decide to supply maples. This is an example of learning to play by the rules of the game.

In the nutshell, lets conclude by knowing that there will always be RULES to be followed. As natural persons, one cannot live without obeying rules. Non-compliance to any rule of the sort can make us vulnerable to the requirements of those rules and once the long arm of the law catches up with us, the consequential punishment follows. So, it is with business corporations, enterprises or whatever name they are called. They are bound by rules and regulations. However, in their situation, they need us, the human beings who work for and on their behalf to be able to obey the rules that have been impose on them.

Really, it does not matter how we feel about those rules at the workplace especially those impose by the regulators. Some of those rules are made for the survival of the business corporation. In fact, no rule is ever set to operate in a vacuum, they are always somehow to achieve a purpose. Some rules are simply making sure that the playing ground (the industry) is safe for your business entity and all others and their stakeholders. This purpose may not be obvious, however as you play your role as an agent of the business corporation, it is advised that you consciously give regards to the rules that offered life and perpetual existence to the business enterprise where you sell your labor.

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