Compliance – an integral aspect of risk management

Julie Methven, CEO of the Compliance Institute of South Africa

Compliance is an integral aspect of risk management and corporate governance and is about applying the law to business. The compliance officer acts as an adviser and assists management to fulfil its responsibility to comply with all the relevant rules, laws and standards that apply to that particular organisation.

Failure to comply is both a regulatory and a reputational risk to an organisation. The global financial crisis has starkly highlighted how a company’s corporate governance, or lack thereof, can affect the economic life of the community in which it operates – in this case negatively through job losses, the credit crunch, etc.

This has sparked a backlash across the globe against the loose standards of ethics and compliance in the financial services industry in particular and, no doubt, there will be an increased focus on stronger regulations and enforcing compliance going forward across all industries, says Julie Methven, CEO of the Compliance Institute of South Africa.

Three years ago the Compliance Institute of South Africa embarked on an ambitious project to develop a blueprint for compliance practice – the first of its kind in the world. They recently unveiled the completed framework, the Generally Accepted Compliance Practice Framework, at their 10th annual conference in Johannesburg.

Methven says that organisations with mature cultures consider the compliance function a vital element of risk management and business operations and no decisions, for example on new business ventures or services, are taken in such organisations without the involvement of the compliance function.

Writing in the foreword to the Framework Gerry Anderson, deputy executive officer of the Financial Services Board says the Framework is a contribution to good governance which, in turn, enhances consumer protection in the SA financial services industry.

Methven says, “It’s hoped that the Generally Accepted Compliance Practice Framework will assist risk management professionals, compliance professionals and the regulators and contribute towards promoting high standards of corporate governance and ethical behaviour in the financial services industry.”

The Framework provides a set of standards and norms that act as a benchmark of compliance best practice.

Methven says that compliance is more than just manuals and procedures and certainly much more than checklists.

“The commercial world is highly complex and inter-related, as are the legislation and regulatory requirements that organisations have to contend with. Compliance officers need to be able to apply their own judgment to their organisaton’s compliance risk and act accordingly,” she concludes.