How to Build an Effective Corporate Compliance Program

Is your compliance program truly empowering your organization? With the right building blocks, you really can transform compliance into a strategic advantage. Learn how to build a compliance program that align your efforts with business objectives using innovative tools and strategies to navigate regulatory expectations with confidence.

What Is a Compliance Program?

A compliance program is a comprehensive set of procedures and systems designed to enable an organization to meet an intricate network of requirements and obligations, including:

• Federal regulations: For instance, Sarbanes-Oxley (SOX) for public entities, HIPAA for healthcare data privacy and security, FERPA (Family Educational Rights and Privacy Act), GLBA for Financial (Gramm Leach Bliley) and the Clean Air Act for environmental protection.
• International laws (where applicable): Such as the General Data Protection Regulation (GDPR) and anti-bribery conventions.
• State & local laws: Encompassing ordinances, permits and zoning regulations as well as state insurance laws, CCPA (California Consumer Privacy Act), and growing number of state privacy laws. Eight new laws, in particular take effect in 2025.
• Industry standards: Including the Payment Card Industry Data Security Standard (PCI DSS) for firms handling credit cards, ISO standards for information security management and NIST frameworks for cybersecurity.
• Contractual obligations: The commitments stipulated in agreements with customers, suppliers, partners, lenders and other business stakeholders.
• Internal policies: Including your organization’s bespoke rules, procedures and codes of conduct.

A robust compliance program effectively translates these obligations into actionable policies and controls, ensuring diligent monitoring and adherence across the organization to create a culture of compliance.

What Is the Purpose of a Compliance Program?

Implementing a compliance program effectively transforms regulatory adherence from a daunting task into a manageable daily routine. By establishing such a program, your organization ensures that all team members are aware of relevant regulations, understand their importance and are equipped to comply with them. This approach not only preserves legal integrity but also aligns with your company’s ethical standards.

A well-structured compliance program serves as a strategic guide, helping your team navigate complex requirements while upholding organizational values. Without such a framework, the risk of legal infringements increases, potentially leading to:

• Significant fines or settlement payments to regulatory bodies
• Negative media exposure impacting your brand’s reputation
• Erosion of trust among customers, employees and investors
• Protracted legal battles consuming time and resources

Importance of Corporate Compliance Programs

Staying On Top of Compliance Requirements

When you know how to build a compliance program, you’re ensuring that all stakeholders understand the importance of meeting regulatory requirements and clearly know their roles in maintaining compliance. The board of directors plays a pivotal role in enabling a culture of compliance and ensuring the program is well-resourced. Senior management is responsible for and operationalizing policies and procedures, ensuring employees comprehend and adhere to relevant requirements.

Importantly, the scope of the compliance program extends beyond internal operations. It also encompasses external partners, such as suppliers and technology vendors, allowing the organization to effectively manage third-party risks related to data security, ethical sourcing and anti-bribery.

Avoiding Costly Noncompliance Penalties

If a company runs for years without realizing it’s breaking the rules (or just choosing to ignore them), it pays a heavy price when regulators finally come knocking.

Take Toyota Motor Corporation, for example. For about 10 years, it failed to meet emission reporting requirements set by the Environmental Protection Agency (EPA). When the EPA eventually sued Toyota in civil court, the company was penalized $180 million and agreed to the conditions of a consent decree to monitor ongoing compliance, which settled the lawsuit in 2021. At that time, the settlement was the largest civil penalty ever for a violation of EPA pollution-reporting guidelines.

A compliance program ensures you understand the laws you must follow and make a real effort to meet legal requirements daily. In return, you avoid noncompliance fines, criminal sanctions and increased government oversight. The fines in particular can be huge—especially if they pile up throughout the time the violations occurred.

Protecting Your Reputation

Building a solid reputation in business requires time. However, one serious compliance issue can be enough to destroy it. In the words of Warren Buffett, “It takes 20 years to build a reputation and five minutes to ruin it.”

Learning how to build a compliance program is a table-steaks way to protect your reputation. They help you stay on the right side of regulations, so you reduce the risks of complaints and bad press. Instead of waiting to repair your reputation after a noncompliance incident, wouldn’t it be better to prevent the damage from happening in the first place?

How to Build a Compliance Program: Make-or-Break Elements

Wondering how to build a compliance program? If you understand the critical components of a corporate compliance program, you can create one that works for your business.

1. Leadership Buy-In

When establishing a compliance program, securing the active support and involvement of business leaders can pave the way for success. It’s not merely about obtaining their approval but ensuring they champion compliance visibly and consistently.

Key stakeholders and board members should set standards for compliance, communicate them through official channels, and exemplify these standards in their conduct. Middle managers play a crucial role by reinforcing these standards, encouraging employees to integrate compliance into their daily operations. This unified approach helps embed compliance into the organizational culture.

For instance, consider a company implementing a new data privacy regulation. Executives can lead by attending training sessions and publicly supporting the initiative, while managers can ensure all team members understand their roles in safeguarding data. This collaborative effort ensures that the compliance program is not only established but effectively incorporated into the business’s everyday practices, facilitating access to necessary resources for ongoing success.

2. Codes of Conduct

Once your company leaders endorse your compliance program, the next step is to establish comprehensive written policies known as codes of conduct.

Codes of conduct articulate the principles, values, and expected ethical behaviors within the workplace, serving as a framework for ethical decision-making and legal compliance. With clear codes of conduct, employees have a definitive guide to what is deemed acceptable behavior, ensuring alignment with organizational expectations and relevant laws.

To ensure these policies are effective, consider the following best practices:

• Utilize clear and straightforward language in your internal policies to ensure they are easily understood by all employees.
• Regularly review and update employee codes of conduct in response to regulatory changes, technological advancements, and insights from compliance incidents both within and outside the organization.
• Ensure that employees have easy access to the ethical and compliance policies relevant to their roles at any time.

3. Compliance Program Oversight

The management of a compliance program involves coordinated efforts across various roles within an organization to ensure adherence to legal and regulatory requirements. Here’s how it typically operates:

• Board of Directors: Provides oversight and sets the tone for the organization’s commitment to compliance. The board is responsible for approving key policies and ensuring that the compliance program aligns with organizational goals.
• Chief Compliance Officer (CCO): Leads the compliance program, developing strategies and policies to mitigate compliance risks. The CCO reports directly to the board or a relevant committee to maintain independence and communicate significant compliance issues.
• Senior Leadership (including CEO): Collaborates with the CCO to integrate compliance into the organization’s culture and operations. They allocate resources, support compliance initiatives, and assess compliance-related risks to ensure an effective program.
• Compliance Managers: Assists the CCO by implementing compliance strategies and monitoring day-to-day adherence to policies. They serve as a liaison between the compliance department and other operational areas, ensuring consistent application of compliance standards.
• Operational Teams: Execute the compliance policies and procedures on the ground. They are trained and supported by the compliance program to maintain adherence to relevant regulations and standards.
• Ongoing Training and Monitoring: Continuous education ensures everyone in the organization understands their compliance obligations. Regular audits and monitoring assess the effectiveness of the compliance program, identifying areas for improvement.

An effective compliance program is dynamic and responsive, continuously evolving to meet new legal landscapes and organizational changes—and that take a concerted effort on the part of everyone.

4. Program Training

Training employees is a critical element in how you build your compliance program. In some cases, it’s a legal requirement. For example, a company covered by the Health Insurance Portability and Accountability Act (HIPAA) must train all employees on its data security and security policies and procedures.

Compliance training educates your staff on laws that regulate workplace safety, hiring practices, data privacy and more. When everybody understands government rules relevant to their roles and follows them in their daily operations, you improve compliance. This makes the program successful.

Useful tips when training existing and new employees:

• Check compliance needs. Training on some topics may be a legal requirement, depending on the regulation you need to comply with.
• Tailor the content to employees’ roles. This makes training more effective.
• Use case studies. With real-life violations, you can show employees the consequences of noncompliance and the best ways to avoid them.
• Use digital technology such as mobile learning. This makes it easy to measure employees’ engagement with training materials and determine whether they’ve learned the topics covered.
• Make compliance training a continuous process. Regulatory changes make old compliance efforts out-of-date. Ongoing training ensures employees follow updated legal requirements.

5. Operative Communication

After training employees about the regulations and internal policies they should follow, you need to create a communication channel. Think of it as an ethics and compliance hotline that someone can use to report misconduct, fraud or any inappropriate behavior in the workplace.

The line of communication should be anonymous. According to the DOJ, a well-designed compliance program has confidential communication channels. Employees can use them to report misconduct without fear of retaliation. Setting up your line of communication correctly provide insights you can use to improve risk management. Best practices include:

• Spread the word. Make sure everyone in your organization knows that your “hotline” or anonymous communication exists and why.
• Offer several communication options. For example, consider a special phone number, a dedicated email address and an online form. Whatever means of communication you go with, it should provide an option for leaving messages anonymously.
• Work with third-party hotline service providers. Many people might not trust an in-house hotline to keep their identity anonymous when reporting policy violations or misbehaviors in the workplace.

6. Monitoring and Auditing

Establishing a corporate compliance program is just the beginning. The ongoing task is continuous compliance monitoring. By regularly evaluating the program’s effectiveness, you ensure it consistently meets regulatory standards and safeguards your organization.

By continuously monitoring your compliance program, you can detect and address violations before they escalate, significantly enhancing your risk management efforts. Best of all, manual tracking isn’t necessary. Compliance management software and auditing software automates the process for you.

Should in-house monitoring and auditing feel overwhelming, consider outsourcing these tasks to trusted third-party providers.

7. Incident Response

Incident response involves a systematic approach to investigating policy violations, suspicions of misconduct, data breaches, and other compliance-related incidents.

An effective incident response plan not only outlines the steps for investigating these issues but also specifies the disciplinary actions to be taken against responsible parties. Additionally, it incorporates strategies to prevent the recurrence or escalation of such events in the future.

A well-structured incident response plan helps organizations promptly address compliance issues, demonstrating accountability and a commitment to regulatory standards to both internal stakeholders and regulatory bodies.

8. System Efficiency

Leveraging advanced technology can be a gamechanger in the design and execution of effective compliance programs. High-performance tools empower organizations to adhere to complex regulatory frameworks by:

• Accelerating compliance workflows: By automating routine tasks and streamlining data collection, technology enables your team to focus on critical analysis and decision-making, ensuring timely adherence to regulatory deadlines.
• Minimizing errors: Integrated technology solutions reduce the risk of human error by standardizing processes and providing real-time validation checks, thus ensuring accuracy and reliability in compliance-related activities.
• Proactively identifying compliance risks: Advanced analytics and real-time monitoring capabilities allow for early detection of potential compliance breaches. This proactive approach enables swift corrective actions, safeguarding your organization from escalating issues.

Simplify and Centralize Compliance Management

Implementing GRC technology not helps you structure how exactly to build your compliance program, but it also transforms compliance into a strategic asset, enhancing your organization’s resilience and efficiency. And that’s where Onspring comes in. For monitoring compliance, managing policy lifecycles, delivering real-time reports and streamlining regulatory change, we can help. Take look by booking a demo today.