What is compliance in companies and how to apply it?
Understanding of concept and application of compliance in companies is the basic necessity to be able to manage successfully in business. After all, being a complying company enhances credibility and transparencies in the market.
You have probably already seen news regarding companies facing punishment for corruption, violation of environmental laws and a hostile work environment to employees that significantly affected their mental status and working capabilities.
These businesses get their lid opened by such frauds, but their image and reputation are also shaken in front of the customers, the general public, and other stakeholders.
Therefore, the concept of compliance is strongly linked to ethics, helping companies to implement good internal practices and to commit more strongly to the rules of their sector.
In other words, the process is not just about creating a set of bureaucratic rules and putting them in a manual, but rather about creating a culture of compliance based on the understanding and importance of standards and teamwork.
Does your business need reinforcement in this area? Continue reading this article and understand what compliance is in companies, its importance, the types that exist, how it works, its advantages and how to apply it.
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What is compliance in companies?
This set of measures to preserve the company’s integrity with the public sector and its relationships with other businesses, partners, suppliers and employees are implemented and monitored by the Compliance area.
In this way, compliance rules are present in all sectors of the company, ensuring that it operates within the standards required by its market niche, in addition to complying with general government rules regarding financial, environmental, labor and other aspects.
Function
Compliance programs enable companies to operate in accordance with industry best practices and business needs. They are also a way to mitigate risks while maintaining ethics and compliance with existing laws and regulations.
By conducting the process appropriately, companies avoid external sanctions, public exposure and internal crises that harm business growth.
This result, of course, is directly related to the team’s engagement with compliance guidelines. To achieve this, it is essential to have strategies to train and educate employees so that they behave as requested.
How important is compliance in companies?
Compliance in companies is important because it contributes to establishing an organizational culture focused on compliance by reinforcing the communication of standards that regulate activities and training to disseminate knowledge.
The culture of compliance in business is still valuable in an educational sense because it establishes corporate values, which will be demanded from the entire team, from the president to the operational team.
When a company is able to remain compliant with the rules, closely monitoring the team’s conduct, it is free from public exposure, fines, lawsuits and sanctions that could harm market performance.
Compliance does not prevent erroneous processes from happening nor does it put an end to them definitively, but efficient monitoring allows you to identify them and act before the problem gets bigger.
Types and examples of compliance in companies
To develop a compliance program, you have to know the different types of compliance and what your company must comply with. In addition to those below, you must inform the area manager of other specific requirements in his market, ok?
Discover the main types and understand the function of each one:
1. Tax compliance
Tax compliance ensures that the company complies with all tax obligations related to its operations. So it is essential to have good accounting advice to help with this task.
Errors in this area can result in fines that harm companies’ financial goals . When they are not complied with in bad faith to evade taxes, for example, the penalties under the law are even stricter.
Therefore, having good accounting ensures that the business complies with its municipal, state and federal obligations, avoiding unnecessary expenses.
2. Financial compliance
It is very destructive not only to a company’s image but also to the reputation of that organization while doing its business in the market. One of the examples of such destructive behaviors includes fraud, bribery, and embezzlement.
Financial compliance comes into the picture to ensure that all business transactions carried out are done legally along with proper records, such as invoices, direct deposits into the company’s account, etc.
Annual reports are availed that include the Balance Sheet, Income Statement (DRE), Statement of Accumulated Profits or Losses (DLPA) and Statement of Sources and Applications of Funds (DOAR) and many more. Laws decree annual reports accounting for all financial transactions.
3. Labor compliance
Labor compliance is still a bottleneck for many companies that neglect aspects related to hiring and compliance with working hours.
The recruitment and registration process, as well as labor rights, are established in the Consolidation of Labor Laws, the famous CLT. Therefore, it is the duty of companies to ensure that their employees have their rights respected.
This work is the responsibility of the Human Resources department, which takes care of hiring, but also welcomes each new member and monitors aspects such as safety, well-being, quality of the work environment, access to the best tools, etc.
Covering all requirements improves productivity and talent retention, as well as attracting qualified professionals.
4. Compliance for data security
Remember the General Data Protection Law (LGPD)? This legislation has been in force in the country since 2018, and has required adaptations in businesses to ensure that corporate data is kept confidential and shared with third parties only with authorization.
Data security compliance defines guidelines related to how companies handle, capture, analyze, store and dispose of data, whether from customers, marketing campaigns, among others.
Information security is one of the main points of this work to prevent leaks, which can compromise the business strategy and the privacy of the people involved.
5. Environmental compliance
Environmental compliance is a rising strategic objective, especially with the rise of ESG , a proposal whose objective is to integrate the environment, social and corporate governance issues to encourage the construction of more sustainable and responsible businesses.
Therefore, each company, depending on its area, needs to be aware of the guidelines that govern its activities, such as, for example, the management of waste .
In addition to complying with the rules, environmental compliance also helps to analyze how an operation can be more efficient and cause less impact . Energy security studies and the use of sustainable energy sources are some examples of exchanges.
How does compliance work in companies?
A compliance program works based on the alignment of the following points:
- Commitment of senior management
- Risk mapping and assessment
- Defining a clear code of conduct
- Creation and dissemination of a compliance culture
- Implementation of communication channels
- Organized documentation and accounting processes
- Investment in hiring and training
- Definition of disciplinary actions
- Damage management strategies
- Relationship strategies with business partners and competitors
- Monitoring and updating guidelines
The responsible sector, in partnership with the managers of each area, must strive to ensure that, through work, the company has more efficient governance and broad visibility of operations, adopting lawful growth strategies.
The proper functioning of the compliance program is essential for the company’s credibility, combating corrupt and illicit behavior and providing accurate and rapid solutions when administrative deviations occur.
What are the advantages of compliance in business?
Investing time and personnel to align ethics and compliance in companies has positive benefits for the image and reputation of the business. Check out these benefits:
Have a greater competitive advantage in the market
The more aligned and followed the compliance processes are, the more solid the company’s work will be, helping to maintain a high operational standard that will make it stand out in the market.
After all, credibility and integrity are valued requirements in the market and businesses that can offer them come out ahead of their competitors.
Better risk management
Every company is vulnerable to risks, whether in the execution of processes, in the conduct of employees or in compliance with regulatory guidelines.
With active compliance, potential risks are monitored, allowing identification and anticipation through the implementation of prevention strategies.
Building an ethical organizational culture
Organizational culture acts as a leveler of expectations within a company. Established values indicate what the organization expects, and corrective measures make clear the consequences of those who act contrary to them.
When companies invest in training and conversations about compliance, understanding and, consequently, the adoption of recommended postures is improved, establishing the standard of integrity.
More sustainability
Sustainable development is an objective that is currently on the radar of companies. Compliance guidelines help achieve this goal by providing clear guidelines for managers to evaluate the available solution options and prioritize the most sustainable inputs.
Recognition of these efforts benefits several corporate aspects, such as operational efficiency, market credibility and increased investor interest.
How to apply compliance in a company?
Now that you know what compliance is in companies, its types and how it works, all that’s left is to understand how to apply this process in your company, right? Here are some tips to help you take the first steps in your business:
- Have a team responsible for the operation : compliance work is complex, so set up an internal team or hire a consultancy to carry it out.
- Create and document a company code of conduct : The document lists corporate guidelines and values and defines policies and channels for reporting misconduct across all areas.
- Strengthen internal communication : disseminating compliance policies through training, lectures and department meetings is essential for adopting compliance principles.
- Conduct periodic internal audits : Audits are a form of risk prevention and allow you to discover errors and inappropriate behavior before the problem escalates.
Did you enjoy learning about compliance guidelines? Investing in implementing a compliance program contributes to the maturity of business management and also stimulates business growth. Invest in this change!
