What the job of a Compliance Officer entails and tips for getting started in the industry.
What does a Compliance Officer do?
A Compliance Officer fulfills several functions:
- Monitors all operational processes and procedures using a compliance management system to ensure that the company complies with all legal regulations and ethical standards.
- Manages information flow by researching, recording and analysing data and information. With a regular flow of information and conducting compliance risk assessments, they ensure that the business runs smoothly.
- Trains and educates staff so that they are informed of any legal changes and updates to compliance guidelines.
- Acts as contact person and liaison between department heads and senior management.
- Conducts regular assessments to determine whether policies are compliant with the law.
Compliance Officers provide a link between specialist departments and the management. They regulate the flow of information between management and specialist areas, while respecting different responsibilities and confidentiality requirements.
To avoid conflicts of interest, the Compliance Officer position should not be situated within or report directly to the legal department. Compliance Officers ensure that the company complies with the law while ensuring that the business runs smoothly. Ideally, the position is located directly under the board of directors, guaranteeing independence and also a direct reporting line to senior management. This ensures that unfiltered reports reach the management.
Compliance is a complex issue that affects all areas of a company and requires adherence to many laws and regulations. As a one-man band, a compliance officer can quickly become overwhelmed, depending on the size of the company. Establishing a compliance department ensures that a team is present to help take on tasks such as those related to the compliance management system, risk assessments and training.
Because a Compliance Officer communicates directly with the management and is involved in business decisions, they also play an advisory role. Unlike an external consultant, however, a Compliance Officer actively helps to shape these business decisions and seeks solutions to achieve business objectives while complying with all laws and regulations.
If the company is new to compliance, a Compliance Officer starts by setting up a compliance management system, a whistleblowing hotline and an approval manager to ensure that gifts and hospitality are properly registered and processed. If the company already has a compliance management system in place, they take over the supervision and organisation of this system. Either way, it is a Compliance Officer’s job to assess and identify potential risks within the company, develop proposals for dealing with and avoiding compliance risks, optimise existing processes and procedures and, if necessary, strengthen their department with additional resources and staff.
Responsibility and personal liability of Compliance Officers
A Compliance Officer earns a high salary and this reflects the high degree of responsibility that comes with their position – they are after all responsible for ensuring that the company’s business practices comply with all legal requirements and ethical standards. In direct communication with management, they also monitor and ensure that their company complies with all laws, policies and regulations when working towards its business objectives. In doing so a Chief Compliance Officer bears the highest degree of personal liability risk.
This raises the question of whether Directors and Officers liability insurance (D&O insurance) could help to mitigate this personal liability risk. Individual companies should clarify whether their D&O insurance policy covers their Compliance Officer because the level of coverage normally depends on how much responsibility this position holds. If the coverage is inadequate, the company should renegotiate.
A D&O insurance policy protects a Compliance Officer in a civil law context. It usually covers legal fees and also damages. Penalties and fines, on the other hand, are not always covered.
Companies would be advised to clarify the exact responsibilities their Compliance Officer holds and officially record these responsibilities as binding. This could be done, for example, through a Board resolution.