The “Home” Model of Effective Compliance

Organizations with effective compliance professionals have effective compliance programs.  Organizations with effective compliance programs are subject to less regulatory scrutiny.

The effectiveness of compliance professionals is evaluated in hindsight, and often by a regulator that already formed a perspective on the design and operation of the compliance program.  There is limited regulatory guidance on the criteria regulators use to determine whether a compliance professional will be held liable for the violations within an organization.  Regulators, like the U.S. Securities and Exchange Commission, simply state that compliance officers must be knowledgeable, competent, empowered, and adequately resourced.  Presumably, when regulators bring an enforcement action against a compliance professional, it’s the result of the regulator determining that the individual lacked one or more of those attributes. 

Without any guidance as to how regulators assess or define each of those required attributes, compliance professionals and their counsel can only deduce the criteria from the forensics of enforcement actions.  Our mission is to provide clear and practical guidance where regulators will not.

By analyzing whether compliance professionals were charged or not, we’ve identified the preventative actions and behaviors through the lens of the attributes regulators state are required for compliance officers: knowledgeable, competent, empowered, and adequately resourced. 

Our analysis resulted in a framework that helps compliance professionals decrease risk and liability and increase their effectiveness and career potential.  Simply stated, it is our Home model for effectiveness compliance. 

The required attributes for an effective compliance professional and compliance program are inherently successive.   There is a natural hierarchy to the attributes and the degree of effectiveness is directly correlated to how each attribute builds upon another. 

Knowledge is the foundation for the hierarchy.  Without knowledge of the relevant regulations, a compliance professional could not be deemed competent, let alone effective.  The ability to apply knowledge appropriately is an integral part of competence.  However, competence is an ambiguous term and fits into a category of binary traits that are more readily recognized by their absence than by their degree when present.  It is easier to identify an incompetent compliance professional than to clearly distinguish between different stages of competency.  In an ideal world, competence provides an opportunity for empowerment.  By extension, empowerment is often interpreted as conditional or an attribute that is achieved after certain prerequisites are evident.  Lastly, the attribute of being adequately resourced implies that the compliance professional alone, even fully knowledgeable, competent, and empowered, is insufficient and therefore requires support or assistance.  It is the implied acknowledgement that for a compliance program to be effective, it cannot rely on the compliance professional alone. 

The additive aspects of these attributes reveal a structural model that we refer to as the Home model.   Knowledge is the foundation.  Competency is the structure and framing.  Empowerment is the roof.  Adequate resources represent the exterior, sealing the structure and making it resilient and sound. 

Each required attribute and structural component for the Home model is comprised of skills and behaviors that develop and strengthen effectiveness.  These skills and behaviors include: 

• Knowledge

  • Regulatory knowledge: Ability to navigate, interpret, and apply the relevant regulations and regulatory expectation, including areas of regulatory development, enforcement, and focus.

  • Industry knowledge: Understanding of the industry ecosystem, operating models, practices, trends, and developments.

  • Business knowledge: Understanding of the organization’s structure, model, operations (including products, services, clients, and infrastructure), as well as its leadership, culture, history, and strategic objectives.

• Competency

  • Communication: Skills to communicate clearly with diverse audiences across a variety of channels and aims, including conflict resolution.

  • Awareness: Awareness to stay attuned to risks, including situational and commercial awareness.

  • Adaptability: Proficiency at navigating changing environments and priorities, as well as problem-solving and crisis management. 

  • Judgment: Critical thinking, deductive reasoning, and analytical skills and identify the most effective ways to demonstrate your judgment and decision-making.

• Empowerment

  • Executive Presence and Leadership: Elevate the compliance professional’s profile and impact as a leader in the organization.

  • Strategic Partnerships: Create and maintain partnerships with stakeholders throughout the organization in ways that advance compliance objectives and deliver value.

  • Trust and Management Support: Invest in opportunities to build trust and support from management across the organization. 

  • Ambassadorship: A compliance professional that consciously curates their embodiment of ethics and compliance in the organization to be seen as a mentor and model.

• Adequate Resources

  • Process Design: Leverage and creatively use business processes and available resources to accomplish compliance objectives.

  • Productivity and Team Management: Achieve the optimal productivity from your available time, energy, and resources, and manage your team to perform similarly.

  • Vendor Management: Optimize how the compliance program evaluates, utilizes, and oversees service providers. 

  • Budget and Advocacy: Practice the most effective ways to advocate for the compliance budget resources and ensure the prudent and best use of the available budget. 

The Home model of effective compliance is a simple illustration that provides a logical and sequential construct to transform the required attributes of knowledge, competence, empowerment, and adequate resources into proactive actions and behaviors.

In the absence of more informative regulatory guidance, the Home model provides a self-assessment guide for compliance professionals and a mechanism to close any gaps.  Compliance professionals can be proactive in reducing regulatory liability and risk exposure, and the resulting changes will increase their professional potential.