Compliance: what is it and how it can affect a company
What is compliance?
In short, compliance means conforming with standards, internal and external controls, as well as policies and guidelines established for the company. This activity aims at reducing risks and ensuring that the business strictly follows the legislation imposed by regulatory agencies, including standards inherent to fiscal, labor, financial, environmental, accounting, social security and criminal instances, etc.
The term compliance comes from the English verb “to comply”, which means to be in accordance with the rule, with a request, a command or an internal instruction. This concept was spread in the mid 90’s, in the United States, as a principle adopted mainly by financial institutions.
Today, corporate compliance has become a rich concept, highly linked to the internal procedures of the organizations, comprising specific work methodologies, internal policies, people management, risk analysis and prevention, audits, crisis management, etc.
The importance of compliance in a company
To manage and prevent crises, create standards to minimize all possible risks related to the activities of the company and ensure that the business is in compliance with external rules are all by themselves reasons that justify the importance of being compliant.
By means of good practices and procedures, companies can avoid great financial losses resulting from fines, corruption or other bureaucratic irregularities. They may also take care of the image of an organization, preventing unnecessary crises, whose effects are capable of de-legitimizing a brand that was built years ago.
The compliance activities are not reserved only to large companies, they must be practiced by any enterprise, from micro-businesses to multinationals.
And the importance of compliance does not stop there. The adoption of ethical standards has even become a basic requirement of the current market. In this sense, in many cases, it is almost mandatory that the companies create preventive and monitoring programs to generate value for their stakeholders, that is, the actors linked to the business, such as employees, customers, suppliers, etc.
Why should companies invest in compliance?
More than being in compliance with the laws and standards imposed by regulatory agencies, the investment in corporate compliance has become a market strategy. The objective consists of adding value to the brand’s image and using these requirements as marketing elements.
Companies with transparency policies and humanized governance, which respect the environment, treat their employees well and serve their clients with excellence, tend to have a great competitive advantage.
Therefore, being in compliance does not mean only interpreting laws that regulate their activities. It goes much further. It is an investment in the company’s own image, aiming at structuring efficient standards of internal control, besides monitoring possible operational risks on a daily basis.
Companies that work based on ethical principles also find it easier to get discounts in credit lines, higher profitability and a portfolio full of clients.
How to apply compliance in a company
In order for a company to be considered in compliance, it must, as mentioned above, comply with all the legislations. For this, it must first understand which rules the company is subject to. From then on, elaborate and create a code of conduct according to policies and processes that aim at the execution.
It is not enough just to create norms to meet the necessary requirements with frequent audits. It is also necessary to institute a culture that guides the members of the organisation, with the use of internal campaigns and whistleblowing incentives, for example.
Of course, for an implementation to be successful, it is essential that it is an ongoing process and there is involvement from all areas and departments of an organisation. In addition, the ideal is that the compliance process operates for as long as the company exists. After all, new rules constantly come into force and require that the companies readjust.
What are the advantages of being in compliance?
Certainly, the main advantage for the effective adequacy to legal issues is the reduction of legal risks and prevention of fraud and acts of corruption. However, applying projects that ensure being in compliance may bring other benefits to a company as a whole. See some points:
Contributes to the reputation of the company
By investing in compliance, and conducting business with greater transparency and ethics, credibility is gained. This influence of this reputation stretches beyond the clients of a business.
An internal posture of honesty may help to retain employees and talents by the feeling of security in the face of the fulfillment of their rights.
In the same way, accounting compliance may be an important indicator to help attract and maintain investors for a business.
An image linked to the ethical codes may help to immunize the company against undesired exposures in news and social networks, extremely important in the digital world.
Moreover, as it involves several areas of the company, having a good compliance program also helps to organize other aspects, ensuring a better follow-up of the processes. This may affect the quality of products/services, impact the correction of non-conformities, among other points.
Reduction of Losses
All this can influence the company’s profits. Certainly, by avoiding the deviations from the laws, consequently it reduces expenses with fines and other penalties involved.
Besides the financial impacts, the adjustments can help a company to exist for longer. Not to mention that the emphasis given to the records and monitoring of a company increases its internal control. Thus, the follow-up and management of expenses can be made more efficient.
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