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“Organizations do not commit legal violations or misconduct. These are committed by the people within the organizations.”
Compliance combines goals and functions to fulfill legal and regulatory requirements within a company and to create a framework that prevents misconduct. In practice, compliance looks different for every company.
Of course, every company must adhere to legal requirements and is therefore “compliant” by default. However, the laws and internal rules relevant to a craft business differ from those for an IT firm or a logistics company. All internal rules that go beyond legal requirements are shaped by industry customs, stakeholder expectations, and corporate values. In many medium-sized companies, compliance measures are scattered throughout the organization without any conscious central responsibility. This creates risks, as it hinders transparency and coordinated procedures. A specific event, such as the necessary implementation of the EU Whistleblower Directive with a reporting system or a concrete suspicion, can be a great opportunity to establish compliance in a transparent and structured way for a secure corporate future.
When building a compliance organization, the goal is, of course, to identify all relevant current legal and internal rules and bundle them into a transparent system. For compliance measures to be successful and accepted within the company, it is essential to define a target vision: What is our value framework? What are the guidelines for our actions? How much of this do we incorporate into our compliance management?
Compliance Organization in Medium-Sized Enterprises
The compliance organization consists of various company-relevant measures that work together to ensure mandatory standards are met and errors are quickly detected. It is important that all relevant rules and laws are communicated to employees clearly and understandably so they know what is permitted in the company and what is not. Regarding prevention, the rule of thumb is: the fewer gaps in the internal control system (ICS) and the more compliant, fair, and responsible the corporate culture, the less likely criminal acts become. The leadership level plays an important role here: management should set a good example for their employees. If the top management acts as a role model in terms of legal integrity and makes it clear to the staff through respectful and transparent communication that the company values a “clean slate,” this has a positive effect on the team. Advice and information sharpen awareness within the organization and demonstrate the right ways to act. The compliance organization develops proactive measures for cases of damage and ensures emergency plans are in place to act in a controlled manner when it matters most.
Furthermore, a company can voluntarily take on social responsibility and advocate for more fairness or better standards, because not everything that is permitted is something a company can stand behind. If a company imposes such rules on itself, it can noticeably strengthen its reputation and have a positive impact on returns. Taking on ecological and social responsibility is, in most cases, positive for financial performance and sustainable corporate success. A compliance management system that strikes a balance between fulfilling obligations and fostering a positive corporate culture brings real added value to medium-sized companies—and is sometimes much closer than you might think.
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