A compliance program is more than just a document. It is a living manual that helps you stay out of court. Since 1995, we have helped multiple medium and large sized businesses develop and implement compliance programs.
What is a Compliance Program and why is it necessary to have one?
Most of us running organisations would say "Well of course we comply with the law; we are honest, we get our tax returns in on time and we are responsible employers". Unfortunately, compliance with the law is not often as simple as we would wish or may believe it to be.
Businesses can reduce their risk of breaching the law if they have in place a compliance program. A compliance program refers to an organisation's strategic plan for conducting all of its activities within the law. It involves:-
- identifying the laws that apply to the organisation's activities;
- identify areas where the company's activities are at risk of breaching these laws;
- putting in place systems and procedures to try to prevent such breaches ( "procedural compliance"); and educating and changing behaviour through training where this is necessary ("behavioural compliance").
The size of an organisation and the extent of its activities will determine the nature and extent of the compliance program required.
To achieve its objectives and to be cost effective, a compliance system should be built into the business operations of the organisation. It should truly be part of the business plan for the organisation, in the same way as other key result areas like marketing, finance and operations. The aim should be to achieve a compliant organisation rather than to have an organisation with a compliance program sitting "off the side".
The laws that apply to companies are many and varied. Some legal obligations are well publicised, for example occupational health and safety, workcover, superannuation and trade practices, whilst others are less well known.
Some industries must comply with legislation that is specifically targeted at them, for example, the financial services industry. Other industries are less regulated but must still comply with legislation that is common to all. Examples include laws relating to taxation, employment issues, privacy, and trade practices.
A breach of some laws can be very expensive indeed. For example a breach of the fair competition provisions of the Trade Practices Act may result in penalties of up to $10million for a company and up to $500,000 for individuals involved the in the breach.
As well as minimising the chances of breaching the law, an effective compliance program will be taken into account by Courts on the severity of the penalty imposed. An Australian Standard, AS 3806, has been developed to assist organisations in developing compliance programs. Whilst this is not a compulsory standard, it is very helpful and is known by the Courts and the regulators. More information about AS 3806 can be downloaded from the ACCC website. Other helpful links pertaining to compliance are listed below.
Develop Compliance with a good paper trail
Download an article written by Tim Nethercote, written for financial advisors:
- Is a good paper trail really that important?
- Some practical tips to improve your record keeping.
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