How To Build a Compliance Culture in Your Organization

By Lana Shneydina, General Counsel

In general, a compliance culture will help you avoid costly pitfalls like having to rebuild a product or service offering due to legal issues or negative publicity; it will lower the risk of lost trust and lawsuits, which can be game-ending.

I see it all the time.

If you’ve read settlement orders, here’s what you might find, reading between the lines: a business—whether early-stage or more established—makes a legal misstep or series of missteps, such as related to product itself or even claims or consumer communications, then has to call in legal experts to deal with the regulatory and other fallout, often at significant cost.

In such situations, leadership wishes they’d had a better understanding of the regulatory environment in the first place. They learn it eventually, but that comes at the cost.

That common scenario highlights the importance of creating a compliance culture in your organization, especially if you operate in a highly-regulated environment. A thoughtful compliance culture helps you understand relevant regulatory frameworks and requirements, develop best practices for complying with these, and build it into all your processes: from product development to marketing, from consumer communication to operations, and work effectively with consumers, partners, and other stakeholders. Critically, it helps you promote the value of “doing things right” organization-wide, from your customer offerings to your internal processes and communications. Every organizational decision is driven not only by commercial feasibility and consumer preferences, but also takes into account any compliance-related requirements or boundaries.

Increasingly, a compliance culture is becoming a must-have, with multifold benefits. For one, consumers are ever more sophisticated about what they buy, with sky-high expectations for service. If you fail to meet those expectations, negative reactions can be swift, large, and costly, due largely to social media and the ease of filing complaints with various regulatory bodies. Building a strong compliance focus ensures you’ll offer more credible, attractive products to today’s market. That’s also of great importance for B2B players, such as businesses selling technology solutions to banks, which deal with a complex, changing set of federal and state regulations.

In general, a compliance culture will help you avoid costly pitfalls like having to rebuild a product or service offering due to legal issues or negative publicity; it will lower the risk of lost trust and lawsuits, which can be game-ending.

That’s the case for forging a strong compliance culture. Below I explain how to build one, based on things you need to understand and how to use those to implement the mutually reinforcing components of a compliance culture.

Three Things To Understand

The cornerstone of a compliance culture is understanding. Below I break down what you need to understand into three related parts.

Understand the regulatory landscape. You need to understand the legal/regulatory environment in which you operate: the laws and frameworks in play; the regulatory agencies and other bodies with influence at federal, state, and local levels; the unspoken norms that may go beyond the codified rules in place (see below). This means both getting into the details of often-complicated regulations and understanding their implications for what you offer or plan to offer. In-house and external counsel can advise, but learn to ask the right questions to make the best use of them.

Understand industry and customer practices. In many cases, industries and/or their customers go beyond the legal regulations in place, and this becomes standard practice. For example, banks can be wary of offering third-party lending products with APRs (annual percentage rates) they view as too high, even if these are within legal bounds. Learn the standard practices in your sector with the help of industry experts or even leaders of competitors, such as through industry associations.

Understand consumer expectations. Just as industries have expectations that may go beyond regulations in place, so do consumers, a general point I made earlier. So work to understand what your target customers expect of your offerings, by researching content on consumer forums (especially when consumers post about negative business experiences), conducting focus groups, and speaking to consumer advocates.

Build a Compliance Culture

Use your understanding of the three areas above to build an effective, sustainable compliance culture. Here are practical tips.

Partner with legal advisors. Find trusted in-house and external attorneys to partner with, interviewing candidates carefully to recruit professionals invested in understanding business needs in regulatory context. “Partner” is the key word, as you need to provide a clear, full vision of what you hope to achieve in the market, including existing and planned offerings, growth, and potential risks. Together you can work to understand the regulatory layers you’ll have to deal with, and how those might represent barriers to entry and other challenges. Aim to engage in regular dialogue about viability of ideas and potential risks, along with creative solutions, promoting a strategic, compliant approach.

Build to the regulatory framework. When you start building a product, align it to the relevant legal framework. That means educating businesspeople about the regulatory issues, including the limits, licenses, permits, and other features involved, and how these may differ by state or other jurisdiction. Being deliberate in this arena enables better products and faster growth.

Create a compliance management system. The goal for leadership is to use the ideas here to build a robust compliance management system. That means a team approach—with the directors of the company’s board, businesspeople, legal advisors, and others—to conducting a comprehensive risk assessment across key regulatory areas, to understand where a product faces more risk and take steps to reduce that. For example, financial services leaders must recognize risk in underwriting processes (such as perceived discrimination) and advertising, and ensure full review of offerings—such as underwriting rules and advertising templates—by the legal team, in close collaboration with the business side. This enables a proactive rather than reactive approach. Then, build appropriate policies, processes and controls. 

Drive continuous improvement. As with any system, aim to refine it through feedback and lessons learned. For example, business leadership should receive feedback regularly from legal partners around shifting regulatory practices, and what adjustments are required for products and advertising. Ongoing reviews, trainings and meetings and other forums can facilitate this.

I hope I’ve made a strong case for building a compliance culture in your organization. Use the ideas here to create such a culture and compliance management system, to not only survive in an increasingly regulated environment, but thrive.

Lana Shneydina is Sunbit’s general counsel, leading all legal and regulatory compliance matters. She holds an LLM degree from UCLA Law School, a law degree from the International Solomon University and an MA in International Economics and Finance from Kyiv National Economics University. Her most recent role was Deputy General Counsel at Avant where she supervised all regulatory aspects of business. Prior to Avant, Lana built and managed the legal team at Global Analytics. She also has significant experience from her time as consumer finance regulatory and compliance counsel at Enova International.

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