Compliance and Risk Management - Chief Compliance Officers - Coursework Example

SHОULD СHIЕF СОMРLIАNСЕ ОFFIСЕRS BЕ FINЕD ОR BАNNЕD BY RЕGULАTОRS FОR FАILING TО РЕRFОRM THЕIR DUTIЕS АS IS THЕ САSЕ IN USА АND KОRЕА? Name Institution Course Date Introduction The modern business environment is increasingly having strict and complicated requirements which are forcing companies to develop new designations within theirstructures. People occupying these positions are required to take responsibility and integrate the best compliance practices in order to implement safe and quality business processes1. In addition, they should be able to handle business risks to create better performance culture which determines the consistency, delivery, quality of service, and compliance procedures. Irrespective of the turbulent business environment, Darcy (2011, p.236) explains that the demand for senior compliance officers is rising due to the changing economic trends. It has been further enhanced by the fact that corporations are expanding beyond borders so as to increase their revenue. This has led to an increase in commercial regulations that require creation of the speciality for effective interpretation and implementation within the defined legal framework. The officers work in a wide range of business where they may be required to take risk management, auditing, or other positions whose core purpose is compliance. Often, they are required to be extremely conversant with the industry’s policies so that they can perform their duties without causing violations during the business operations. Moreover, they should be able to lead the company’s compliance strategies while advising the senior managers on the procedures that serve the best interests of the business. Due to the level of responsibility bestowed on the compliance officers, the value of their position has continuously increased Cusick (2013, p.874). They are no longer regarded as compliance specialists, but also experts whose services can be used to mitigate the growing risks in the dynamic markets. The position has been further enhanced by the growing number of compliance scandals as explained by Steinberg (2011, p.46). Normally, the officers report to the organisations chief executive or operations officer2. Roles of chief compliance officers According to Darcy (2011, p.236), the handling of complex and stringent compliance requirements in the business falls under the job description of these officers. It is their duty to review the organisation’s processes to ensure that they operate within the defined compliance framework. In addition, they are required to be independent, objective, and able to handle demanding circumstances. Normally, the work of a compliance officer is centred on three key areas: policy and procedural management, legal reviews, and inspection of business processes3. Inspection of business for compliance They are needed to inspect the business in order to ensure that the organisation is complying with the internal and external rules while offering guidance how things should be done. In reference to Cusick (2013, p.874), there are several ways of doing inspection such as constant observation, random sampling, and intermittent reviews. However, the process of inspection differs with the business depending on the nature of the operations being undertaken. For instance, a financial institution will be focused on accounting, record keeping, and handling of money. Since they hold positions of trust and power, they are supposed to investigate any suspected violations because they are held responsible for their actions. In reference to Kouzes& Posner (2011, p.65), they should ensure that anything in violation of the set legal and regulatory requirements is effectively handled and the respective managers are properly advised. The use of proper investigative procedures is essential for ensuring that potential legal problems are averted without putting the business in punitive legal procedures4. Policy and procedural management When it comes to the management of procedures and policies, the officers know whatever is happening within the departments in regards to employee compliance with the outlined rules and regulations. They make it an effort to reach out to workers to collect information regarding the business procedures. Usually, things get complicated when the officers start evaluating the submitted information since a large amount of time is spend doing research and investigation as a sure way of pointing out legitimate concerns. In addition, Witney & Posner (2012, p.98) further elaborate that effective policy management is a good way of maintaining consistency, order, and employee management so that the company do not miss its strategic goals. Therefore, it is the duty of the compliance officer to ensure proper management procedures that can handle any events that are likely to occur. With such implementations, any situations that arise become easy to solve since the parties refer to the outlined policies rather than making instant decisions. Legal reviews Also, it is their duty to continuously review the legal compliance status in the whole organisation since it is vital for ensuring that the outlined policies are adhered both in the internal and external business environment. In addition, it creates a compliance culture that is adaptable to the dynamic organisational needs. It ensures that the compliance processes are continuously adjusted so that they can be in synch with the overall business strategy: it is easier to make incremental changes rather than major modifications after a given period of time5. Biegelman (2010, p.235) explains that the scope of this profession is continuously expanding due to the evolution of business procedures, technologies, and trading policies. Therefore, it is the duty of the organisation to continuously re-evaluate the said position so that is can reflect the changes occurring in the business field, strategy, and legislation. On the other hand, it is the responsibility of the chief officers to ensure that they are up to date with the changes occurring in their respective fields through activities such as seminars. Cases where officers have been banned, fined, or both Due to the changing needs of the organisations, new rules, restrictions, and procedures have been formulated to enhance business operations. They are meant to improve profitability, business survival, and maintenance of the organisation’s reputation. This means that there is little or no room for error so that the organisation can remain relevant. It is from the way compliance officers approach these requirements that determine if they retain their jobs, get dismissed or pay hefty fines (Steinberg, 2011, p.46). Authorities in different countries have either banned or fined their chief compliance officers as a result of failing to do their duties as required. Fox (2012, p.123) explains that it is taken as violation of duties thus putting the business at a risk of failure. Therefore, the actions taken by the organisation are a measure taken to shield the business from facing negative results due to non-performing officers who have been entrusted to handle sensitive business operations (Witney & Posner, 2012, p.31)6. To begin with, the finance authority fined a compliance officer over ten thousand pounds due to failure of performing her duties. In addition, she was banned from performing any significantly influential duty within the financial market. The organisation stated that it was a necessary action meant to maintain and improve the standards of the financial industry. It further argued that it was ready to take punitive actions against the other officers who may not adhere to their duties. The actions taken by the financial institution were triggered by the fact that she failed to investigate claims raised by investors concerning the legitimacy of bonds. This means that she did not act with the required skills and care as part of her responsibilities. In addition, she fully relied on another employee which further enhanced her capacity to make the wrong decision pertaining to the investors’ concerns. This means that she failed to comprehend the importance of her role and the regulatory responsibilities it carries7. In the United States, corporate scandals and failures have indicated the need for strong compliance and regulations in the registered organisations. For instance, the Enron case of 2001 showed the importance of discipline in the compliance profession due to the reputational risk that was posed by employee failures. This led to the creation of policies that tightened the personal responsibility when it comes to accurate presentation of information in accordance with the laws. Noncompliance with these laws and regulations attract penalties as outlined in the sentencing guidelines. The failures by the officers cannot be attributed to anything since the government has implemented structures that give information on the methods of complying with the formulated regulations. Biegelman (2010, p.84), further states that the authorities created a centralized system where businesses can get information regarding compliance with government regulations. The same case applies to Korea since compliance officers are not spared when they fail to perform their duties with the necessary level of professional ethics. In fact, their compliance standards have a definitive threshold which is meant to trigger the process of determining the punitive actions. Many officers have faced hefty fines whose amount depended on the severity of their actions. Others have been banned and the worst action being imposed both actions. In addition to being banned and fined, some officers have found themselves serving jail terms due to ignorance, negligence, or willing full blindness to suspicious business operations. For example, Peter Madoff is serving a ten year jail sentence for aiding fraud in the organisation he held the responsibility. This is an acceptable move that ensures that the officers are fully aware of their duties and how to best perform them to benefit the organisation. Kouzes& Posner (2011, p.310) further explain that it enables the employees to know the implications that their decisions have on the operation of the business and its ability to achieve its overall strategy8. Adoption of the strategy in Australia9 Banning or fining the compliance officers is a recommendable action since they are being punished for failing to perform their defined duties. Since they committed themselves to server their employers’ business interests, any failure to adhere to their duties should be subject to punitive measures. It cannot be blamed on the authorities since it is a personal decision taken by the given employees to neglect their responsibilities. If they perform, the authorities have no reason to impose the punitive actions. This is why Australia should adapt the same strategy to ensure its compliance officers work within the defined legal provisions in full discharge of their duty. In reference to the named cases, these instances occurred due to the failure of the officers to realise the magnitude of their responsibilities and their effects in the business arena. Therefore, the authorities should integrate these disciplinary measures into the existing systems so that the officers are forced to act with the required skills and care as part of their responsibilities. When the senior officers are fully aware of the consequences for failure of performing their duty, their productivity is high since they leave nothing to chance. In reference to Lager (2011, p.218), they are forced to create benchmarks that guide them to adhere to their responsibilities. This ensures that they minimize the chances of failure and negligence of taking the required measures to handle business situations that arise. In addition, they strive to surpass the benchmarks which will translate to better performance within the Australian business environment. According to Darcy (2011, p.232), such actions by the authorities will act as lessons in their respective industry. It becomes a learning instance to all the players in the industry on what happens when they fail to perform their duties. In addition, their effects trickle down up to the training institutions so that they can prepare their students on the outcome of their failures in the real business environment. Darcy further explains that they take it as their responsibility to learn the regulatory laws so as to avoid breaking them. Also, it is a move that authorities can use to enforce standards in the industry as explained by Cusick (2013, p.873). According to him, standards are linked to the performance of the compliance officers; therefore, the officers should operate within the specified parameters in order to maintain the existing standards and improve on them. High standards are important for maintaining the Australian brand, reputation, and market relevance thus making it necessary to standardize the operations. Conclusion The emerging business and client needs come with numerous and complicated compliance challenges and uncertainties. Therefore, the future of compliance officers depends on the ability to create mechanisms of ensuring that there is discipline and compliance of regulations in the profession. Also, it is the duty of the authorities to create mechanisms that ensure the officers have the information necessary for making well informed decisions and valid recommendations that withstand the test of time. Although all the systems, authorities, and laws may be perfect, the compliance professionals should take it as a personal responsibility to bring high standards and quality of service in the profession. Teaming up with the authorities is an efficient way of enhancing the continuity of the profession while eliminating the people who violate the stipulated guidelines meant to streamline the profession. It will also shift the focus of the authorities from punitive role to the one that works with all stakeholders’needs and recommendations. Therefore, Australia should adopt this strategy as a means of streamlining the compliance profession. From the countries it has been implemented, it has proved to improve compliance activities, industry standards, quality of service, and other checks and balances that enhance business operations. In addition, it will create high quality professionals with the ability to adapt to the changing compliance needs without violating the policy frameworks that guide the operation of their respective industries (Witney & Posner, 2012, p.98). References Biegelman, M. (2010).Foreign Corrupt Practices Act Compliance Guidebook: Protecting Your Organization from Bribery and Corruption. New Jersey: Woley. Cusick, A. (2013). Ethics is More Than Compliance. Journal of Compliance, 873-876. Darcy, K. (2011). Compliance Leadership: The past, present and future. Journal of Business compliance, 234-241. Fox , T. (2012). Lessons Learned on Compliance and Ethics: The Best from the FCPA Compliance and Ethics Blog. Singapore : Ethics 360 Media. Kouzes , J., & Posner , B. (2011). Credibility: How Leaders Gain and Lose It, Why People Demand It (2nd ed.). Califonia: Jossey-Bass. Lager, J. (2011). Governments demand compliance, ethics demands leadership. Journal of Public Affairs, X(3), 216–224. Steinberg, R. (2011). Governance, Risk Management, and Compliance. New Jersey: Wiley. witney, J., & Posner, A. (2012). The Leadership Challenge: How to Make Extraordinary Things Happen in Organizations (5th ed.). Califonia: Jossey-Bass. Read More