Compliance Officers Struggling with Expanded Responsibilities and Liabilities

The 617L15_WEB-1recent Munich Court Judgment against Neubürger (April 2014) has shown how the failure to address regulatory risks and comply with relevant laws exposes senior management to prosecution. As a result, legal counsel and compliance officers whose responsibility it is to report to, adequately inform and protect the board are increasingly challenged to answer to their CEO, board, regulators, and investors. What does this mean for the compliance officers who are now viewed as the watchdogs of their company? Are they really all that stands between the company and potentially costly compliance breaches? Comprehensive industry research recently conducted by C5’s legal division with compliance officers and legal counsel from across Europe’s leading multinational and up-and-coming SME companies delved into the evolution of the compliance role, revealing the key challenges keeping them awake at night. “Under-Resourced and Over-Exposed” The rapid development of the compliance role has led compliance officers to question the remit of their job description in light of increased responsibilities, liabilities, and internationally accepted standards. Speaking on condition of anonymity, a senior compliance officer from an MDAX-listed company expressed concern that they are “under-resourced and over-exposed”. “We are increasingly being seen as a proactive job function, whereas in prior years it could be said that the role of the compliance officer was to react to legal and regulatory developments.” This is the result of ever-expanding responsibilities that have seen them tasked with managing and harmonising a diverse range of corporate governance issues such as “human resources, environmental, human rights, data protection, anti-trust, and anti-bribery”. The international nature of modern business only exacerbates the problem, having to work through a myriad of potential regulatory issues in “every country they operate in”. Top 5 Challenges Keeping Compliance Officers Awake at Night As a key focus of the research, over 50 cross-industry compliance officers and legal counsel were asked: “what are the top 5 compliance challenges keeping you awake at night?” Their revealing answers and select quotes are below:
  1. Anti-trust and competition: “This area is very interesting because of the level of enforcement and penalties potentially exceeding that of FCPA breaches”
  2. Data privacy: “The NSA scandal has heightened awareness of this issue in Germany, and it is an area we could use extra definition and discussion”
  3. Personal liability of compliance officers: “This really hits where it hurts… extradition is possible!”
  4. Labour law & HR compliance: “Arguably the biggest issue on the horizon, and we still don’t know who in the company wears responsibility for it”International trade sanctions: “We have recently begun exploring operations in Russia, so this is currently an incredibly problematic issue to determine what we can and can’t do”
An over-arching challenge faced by compliance officers was revealed to be establishing the critical importance that compliance plays within a company, and therefore securing buy-in from a board questioning whether compliance really does create additional value; “without the board taking this seriously, how do we get the financial and internal support we need?”  Implications for Compliance Officers? With the avoidance of reputational damage a key motivating factor for companies, it is absolutely business critical that risk assessments are conducted and robust compliance programmes are implemented as a result. These programmes need to reflect a broad range of diverse regulations, and must translate a company’s values and principles into day to day operations and behaviour. However, this process requires a business-specific tailored approach, and when compliance officers are faced with limited resources and budget, how can you efficiently install a compliance programme without sacrificing any efficiency? Unsurprisingly and unfortunately, there are no easy answers. What works for any given company will differ based on size, geographical scope, and inherent corporate cultures and values. Simply put, benchmarks vary. The good news is that companies are increasingly seeing the value in a robust compliance programme, if for no other reason than to protect against the heightened risk of individual liability for board members. Based on our research, the role and responsibilities of compliance officers and legal counsel have expanded quicker than expected, and it will be some time until the support afforded them matches what is expected of them. In the meantime, they will be left looking for insight wherever they can find it, with a hope to establishing a best practice approach suitable for their company.  


  Article written by Ben Sharples, Senior Legal Conference Producer – [email protected]