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Successful Compliance Programs

Updated on February 17, 2016

CFPB Aftermath

1. Many companies found themselves lacking in a compliance program

2. Some created programs that were not in place, others added onto theirs.

3. Few stepped back and looked at how they could be more proactive in their attempt to detect, report, resolve, and monitor issues internally.

4. Most failed to ensure information exchange between functions.

5. The silo-effect can be adverse to your firm's compliance intentions.

Is Your Business Proactive or Reactive

Compliance is on the tip of every tongue, especially after the creation of the Consumer Financial Protection Bureau. Nearly every business under the scope of the CFPB did the very same thing when it was established: look at its compliance programs, or, in some cases, created compliance programs that did not exist before.

During the scramble to review all compliance programs, many have lost sight how universal compliance is, and how necessary matrix management is to develop, implement, detect, and monitor potential compliance issues.

The key to successful compliance programs is the approach: Is your company proactive or reactive?


The Silo Effect

Many companies operate under bordered functions. Meaning, they are separate from others and focus compliance on each function. Communication between functions, and compliance heads of those functions, is muted in this silo atmosphere.

The focus solely on each unit, and only on compliance results in a horse-blinder result. In addition, the separated functions will typically focus on reactionary projects. In other words, they will find errors that already occurred, and their efforts will be invested in resolving them.

There is no additional communication with other business functions that may be impacted, or foresight on changes to correct a current issue and its future impact on other business segments.


Matrix Management

Successful compliance programs are married with a matrix-management approach in which several cross-functional employees are grouped together on both special projects for critical review, as well as ongoing projects of monitoring and communicating for process improvement with proactive approaches in mind: catch it before it happens and communicate it to all.

Paramount to this is inclusion of all types of employees. In my experience, front-line employees offer the most knowledge and insight of their processes and systems. Their knowledge can help other leaders and functions uncover areas of opportunity for improvement, or defect avoidance. Often, they have ideas they have not brought forth to management for they have an "it is what it is" mentality that resigns them to just dealing with issues, or not improving on areas that may actually result in not only more efficient productivity, but also a cleaner compliance plan for monitoring.

In my experience, business process improvement is just as critical to compliance adherence. Using a value-chain management approach, many potential future defects can be found, current system upgrades/conversions can be altered before go-live, numerous strategy changes can be determined to improve working processes within each function, and improve its impact on other functions--all while reviewing for compliance issues. Is is the most efficient, and proactive method for ensuring compliance.

Value Chain Management: Redefine "Customers"

Traditionally, Value Chain Management is known as the coordination of the sequence of departmental activities needed to transform input into goods or services customers want (Jones & George, 2011). Successful value chain management focuses on lowering input, increasing efficiency, innovation and customer focus and responsiveness (Jones & George, 2011). More importantly, and a central focus of value chain management, is customer responsiveness. If a company does not research what the customer wants, how it can be improved, or care about the after sale service, the company will not be successful.

And by changing our views of "customers" we can take this approach with all compliance related activities. Customers can mean our pricing department, our strategy department, our customer service department, our call center representatives etc. By taking an approach that not only focusing on delivering quality goods/services to actual customers while being compliant with laws and regulations, but also ensuring the method in which they are ultimately delivered is also superior (ie-our employees systems, processes, policies, communications, incentives) we create a universal globe of proactive improvement with internal and external focus resulting in the demonstration of proactive compliance, and internal awareness and collaboration.


Stop: Collaborate and Listen

I have been a part of many collaborations that I personally created and led. The defects, resolutions, and additional knowledge acquired through a group-cooperative has been invaluable for those employers, as well as for me personally. To witness the exchange of information and the 'ah ha's' from even departmental leaders who had no knowledge of the inner workings of their sister functions was priceless.

Once collaborations are incorporated, a new mindset is established between functions, and at all employee levels. Fresh insight is provided between functional information exchange, innovation is a fuel, and empowered employees feel a new level of purpose and loyalty to the company.


Wild Gardens

1. A result of adding on new functions and positions to compliance program without regrouping to review current positions, reports, gateways, and efficacy.

2. Results in duplicated efforts and wasted resources

3. Drains skilled and talented employees morale and focus

4. Prune your garden with the same approach of constant improvement

5. Organize weekly meetings between collaborating departments to ensure information exchange and removal of duplicated efforts and redundant findings

Caveat: Don't let your garden grow wild

There is a caveat here: Some companies I have worked with began the matrix approach. As they grew their programs to include governance, surveillance, internal audit, process review, etc, their gardens grew wild. They literally kept thinking of new additions to monitoring and just threw some more seeds out in the garden of matrixed collaboration. Gardens need pruning too. What I mean by this is: this is a large task that requires just as many collaborators creating it, as are participating in it. Voices from all functions and approval processes to ensure redundancy and duplicated work efforts are not bi-products of this approach. Adding layers to multiple layers can undo the original intent of efficient compliance and process improvement.

A committee should be assigned to review the current matrix, remove any duplicated efforts such as the following scenario:

Functions 1,2,3,4,5 all have surveillance to ensure adherence to processes and policies. Functions 1,2,3,4,5 all have reporting mechanisms to track these occurrences, and report them.Functions 1,2,3,4,5 report independently within their group and only share during collaborative efforts. Thus, overlapping issues may be reported and followed up on by numerous department heads.There is no gateway to filter out repeat issues, and there is no 'surveillance head' actually managing the matrixed efforts. This can result in limited resources, and frustration from duplicated meetings regarding issues that overlap or intercept each other. The last thing a company wants is its best talent losing faith in its approach. Then it becomes a problem rather than a product.

The best way to avoid creating an environment on an endless loop is weekly regroups between surveillance/compliance heads of each function to compare, research, and eliminate duplicated reports, and isolate true issues. Establish a 'hub' of issue/surveillance items that are stored and updated for audit trails.

Finally, a value-chain management approach to the actual value chain management approach on regular intervals will ensure the garden of compliance is thriving, prosperous and often pruned to maximize efficacy and efficiency.

Do you feel your firm can benefit from a matrix management approach to compliance programs?

See results


In closing, it is said that all things successful must be visualized first.

You now have a draft of a blueprint. Select the talented individuals in your firm capable of delivering under high pressure and with tight time horizons.

Make sure their environment is as quality as your consumers' product/service you are creating.

Always step back and regroup.

Bring in fresh eyes-often the most talented individuals in your firm also suffer from business environment blindness. In my consulting experience, when I have pointed out a simple deficiency or area of opportunity for improvement, their response has been "well, I've been here so long, it has always been done that way, I didn't think of a different way it could have been done". In other words "it is what it is"...and that is a sticky spot to be in when you're a company with an innovative thirst.

Prune your garden often.


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