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Coping with Covid-19 - the Business Response

Safeguarding business – the compliance landscape after Covid-19

by Katarzyna Saganowska, compliance director, TMF Poland
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Major challenges await the compliance function in international organisations as a new business reality and economic circumstances emerge

We are in the midst of a (hopefully) once-in-a-lifetime pandemic which is dominating the news, the social media and our everyday lives. Most businesses are currently undergoing a fundamental change in their operations as a result. Many experts are already today highlighting the fact that the global economy will soon face a deep recession. In response to the financial crisis, governments across the globe are focusing on programmes of more robust support for small- and medium-sized companies to survive the lockdown and collapse in revenues.

It would be natural to assume that all the priorities that compliance departments identified for 2020 have gone completely out of the window, given how much has changed and how much more remains uncertain. However, all firms need to adapt to a new operational framework while still dealing simultaneously with a vast range of national and international regulatory requirements – which remain valid and binding despite the crisis.

Here are some areas in which companies might engage with emerging issues to ensure that their compliance function expertly and safely guides them through turbulent times.

An effective compliance function is key to identifying and mitigating risk and protecting the business from regulatory censure, and protecting the company’s brand and reputation. Compliance – with its goal of helping to guide firms through regulatory changes and advising them on the far-reaching implications of non-compliance (including financial and reputational consequences) –  must evolve in line with regulators’ expectations, while addressing the emergence of new business circumstances.

In today’s environment, there is no shortage of threats to corporations from a variety of regulatory and security challenges – from dealing with the current crisis, a potential increase of financial crime, threat to ethical approach in competition (caused by target pressure), through to unforeseen developments in area of enforcement regimes (increased number of audits by public officials).  In the area of financial crime, companies now have to consider anti money-laundering risks, identity theft, cybercrime and fraud risks simultaneously.

Therefore, the role of compliance function should evolve towards business safeguarding, understood as ensuring that the company and its business model will have the ability to face new regulations and external problems in area of sustainability, prevention of financial crime and sophisticated challenges in area of business ethics caused by unfair competition between organisations trying to recoup losses linked to the Covid-19 lockdown.

One way that compliance teams could address ethical challenges is by reinforcing the compliance-culture environment in the organisation. Therefore, now even more than ever, the culture of compliance management needs to be strengthened in the first line through the tone set from the top. There needs to be increased communication on the value that is added by integrity and good governance for business stakeholders.

Other way to meet increasing regulatory expectations might be looking at opportunities for automation and digitalisation, and exploring the offer of advanced analytics and technology in fraud detection, transaction monitoring and client/supplier screening. In the new business landscape, compliance teams are also very likely to be forced to do more work and provide even greater assurance with fewer resources. This seems to be another argument for the function’s shifting from traditional practices of monitoring, surveillance and testing to new methods and operating models enabled by technological innovation.

The reward in improved efficiency and the department’s increased perception of value within the company is well worth the effort. In my view, how firms will (re-)structure their compliance functions to respond to these complex challenges will encompass the range of culture, strategy and people. Not only the function’s composition, but also its role and voice within the business and overall risk-management framework, should be considered.

Leading firms will see these external changes as an opportunity to enhance the value-adding aspects of compliance. Seeing the potential, but also recognising the limitations in their compliance functions will help them deal with threats, creating competitive advantage and improving corporate value and reputation in line with growing stakeholder demands around integrity, accountability and financial stability.

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