A Key to Compliance: Fully Understanding an Entity’s Business

Absolutely essential to understanding how best to design, implement, and monitor an effective compliance program is having a sound and well-developed understanding of an entity’s business.  Until a compliance official gains a full understanding of an entity’s business, it is difficult if not impossible to adequately oversee and protect an entity from becoming vicariously liable for the conduct of those acting on its behalf.

For example, how does a business actually sell its products? What are the realities of the business and what are the unseen nuances?  A compliance official cannot simply impose a series of policies and procedures in the absence of a full understanding of the sales process.  Otherwise, the policies and procedures may be counterproductive. They may create a series of burdensome and useless policies and procedures that inhibit productivity and undermine the compliance program.

A compliance program should not be premised upon a top-down approach to directing how an entity conducts its affairs. Instead, it should be based upon a ground-up understanding of how an entity or organization’s operates.  Gaining such an understanding is a major undertaking.  As practical matter, it may entail seeking the advice and assistance of the very personnel that a compliance program seeks to monitor or oversee.

Resistance in various forms may be encountered. It is a demanding process that requires patience and excellent interpersonal skills. It can be a challenge to coax out critical information without being threatening or unduly calculating.  Particularly in situations where operations take place in foreign settings, a heightened sensitivity to the subtleties to cultural differences is required. Yet, in the absence of a full and complete understanding of a business and the realities of its operations, a compliance program is unlikely to be effective.

It does not matter whether an entity or organization may be subject to the Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, Canada’s Corruption of Foreign Public Officials, Australia’s Criminal Code, what is commonly referred to as Brazil’s Clean Company Act, and other anti-bribery legal regimes.  The greater the degree to which compliance officials understand the realities of how an entity conducts its business, the greater the likelihood that the compliance program will be truly effective.