Future Outlook For Compliance and Ethics Programs
Compliance risk is the current and prospective risk to earnings or capital arising from violations of, or nonconformance with, laws, rules, regulations, prescribed practices, internal policies, and procedures, or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain bank products or activities of the Bank’s clients may be ambiguous or untested. This risk exposes the institution to fines, civil money penalties, payment of damages, and the voiding of contracts. Compliance risk can lead to diminished reputation, reduced franchise value, limited business opportunities, reduced expansion potential, and an inability to enforce contracts.
Governance, Risk Management, and Compliance (GRC) management capability is the solution to addressing increasing stakeholder expectations. Solid financial results are no longer sufficient. Stakeholders are demanding more. They want to know about non-financial results and the intangibles that will ensure financial growth. They want increased reporting and transparency and insight into an organization’s strategy, risks, and operations along with an understanding of the manner in which business is conducted. As with the quality movement of the mid-1980s to early 1990s, these stakeholder demands are becoming baseline expectations.
Compliance and ethics practices can no longer be viewed in isolation of the rest of the organization, as some function off to the side to keep an organization out of jail. It must become part of the overall business strategy and operations, pervasive throughout the entire organization. Ultimately, taking this integrated approach will lead to better overall performance and compliance will become less of a burden on the business.
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