From Cleaning-Up to Keeping Clean: Ukrainian Businesses Prone to Gradual Change in Behavior

From Cleaning-Up to Keeping Clean Ukrainian Businesses Prone to Gradual Change in Behavior.jpg

Over the years, many companies have experienced the resistance to ethics and compliance. During decades, it was common to say that it was too expensive to build a compliance system. However, such penny-wise mindset to compliance led to a pound-foolish aftermath. Accordingly, business culture has started changing slowly.

Compliance has gradually started to be treated not as the center of cost but the center of trust. To support this, 58% of businesses surveyed by Thomson Reuters viewed promoting a corporate culture of integrity to be the ultimate goal of their compliance programs due to necessity to keep trust of consumers and clients. According to the mentioned survey, accounting scandals typically take a reputation-related toll equal to 27% of a company’s pre-scandal price. So companies become more willing to invest into compliance as a competitive advantage to prevent trust and reputation collapse.

An example of implanting the above trend in Ukraine could be a recent successful launch of Ukrainian Network of Integrity and Compliance. It is a new voluntary initiative for businesses that foster the idea of business integrity and transparency. This shows that business leaders in Ukraine support developing processes that weave integrity into the fabric of business organizations. An additional example of positive transformations is that the number of corporate integrity (ethics) and compliance workshops, seminars, forums and conferences is running higher each year in Ukraine.

I call these business transformations “from cleaning up to keeping clean”. And here is my reflection on most important points in support of building ethics and compliance programs by Ukrainian businesses:

·         Leadership matters much. Leadership, tone at the top, leading by example are not novel and have been expressed previously in many policy statements. For instance, the DOJ’s in its most recent Guidance on evaluation of corporate compliance programs focuses on the concrete steps a company’s leadership takes to foster a corporate culture of compliance. In many respects, a primary audience for the guidance is the board of directors in exercising its compliance oversight obligations and putting the content of compliance policies into the hearts and minds of employees. 

You would definitely agree that it is too utopian to require from CEOs ensuring that every employee in every part of the world stay utterly clear about what conduct is acceptable and what is not.  At the same time, nothing will damage compliance culture more than misconception. Thus, the CEO should remember that social and corporate memory is many times more effective than a bunch of policies. Over time, people will know what is acceptable in your company and what is not if you lead by example.

·         Build capacity for those who need it most. Identify areas that are most sensitive to corruption in your business (e.g., procurement, regulatory, legal support, etc.). Prioritize and strengthen such departments as their employees face compliance dilemma more often than others. In this regard, organizations should not forget that busy people working in challenging spheres need to know what to do and what not to do in terms of ethics and compliance. Most importantly, they need to know and believe that their employer sincerely wants to find out about problems and welcomes the concerns they bring forward. To implant this order, I would recommend providing a significant dose of compliance induction upon hiring and have regular training updates. Further, arrange specific compliance training prior to any change in job description to meet the new position requirements.

·         Sanctions and incentives. People behave in the way they are rewarded to behave, right? Accordingly, reward the right behaviors and penalize the wrong ones. If leaders are incentivized to focus on one goal above all others, they do not necessarily focus on how that goal is achieved. Accordingly, incentives must be aligned to performance - but performance with integrity. Demand accountability from your employees and partners by monitoring and oversight those who choose to violate the norms. This would help you to prevent the so-called “monkey see, monkey do” effect (i.e., those employees who observe more unethical behavior also engage in more unethical behavior).

·         Use the power of technology. The stunning growth of technologies has ushered in a new era of transparency allowing exposing illegal transactions of your potential partners quite easily and raising profound new ethical questions before them. Here you could find brilliant input from our fellow regarding how third parties due diligence could be eased with the help of automated solutions. In the mentioned post, the author recommends checking such tools for third parties due diligence as You ControlKrollBureau Van DijkCosaOpen data bot etc. 

One might say that companies have different compliance needs depending on their size and the particular risks associated with their businesses, among other factors. Accordingly when it comes to compliance, there is no one-size-fits-all program or approach. It is true but it is even more true to say that the business culture will continue pushing the companies to be more and more refined in its ability to evaluate compliance programs and test whether the programs are functioning as expected by regulators. So it is better to become well prepared to keeping clean.