Research shows ethics taking center stage for compliance

May 31, 2019
Two thirds of chief ethics officers and CCOs plan to refine ethics work this year

A new study highlights many companies’ increasing focus on ethics and its growing role within the work of compliance teams.

Two thirds (66 percent) of chief ethics officers and chief compliance officers (CCOs) surveyed by KMPG identify ethics as one of the key regulatory and compliance obligations around which they plan to refine their efforts in 2019. By comparison, the other four top-rated areas – privacy, product safety, time and expense compliance and third-party vendor management – are each mentioned by just 27 percent of respondents.

The focus on improving ethics-related compliance work is particularly pronounced in the industrial manufacturing sector, being mentioned by 76 percent of respondents in that field. The results are broadly consistent between different industries, however.

‘Across all industries, an intensely heightened awareness of ethical behavior has elevated the need for executive leadership in the areas of ethics and compliance, and it is prompting change,’ the report’s authors write. They point to the impact of ethical misconduct and growing awareness at the board and C-suite level of the importance of ethics and culture.

Amy Matsuo, principal and global and national leader of KPMG’s advisory regulatory and compliance transformation solution team, tells Corporate Secretary that companies are facing pressure from boards, regulators and shareholders to respond to a range of issues such as the #MeToo movement, market manipulation, data breaches and the opioid crisis.

Boards don’t want to be surprised by a problem, and compliance teams are therefore focusing on their ethics efforts in general, and monitoring and investigations in particular, to try to stay ahead of the curve, she explains: ‘There is a growing understanding that companies can’t – and shouldn’t – bifurcate ethics and compliance.’

Asked to identify ethics and compliance activities that they will or plan to enhance in 2019, by far the most commonly cited areas are investigations and monitoring and testing, both of which are cited by 65 percent of professionals in the survey. Data analytics, regulatory change management and reporting and/or data visualization/dashboard, each of which is mentioned by 32 percent of respondents, lag behind.

In terms of areas where companies are focused on further integrating or converging processes, activities and controls in support of the ethics and compliance environment, the most commonly cited is training (67 percent of respondents), followed by investigations (55 percent), monitoring and testing (55 percent), due diligence (26 percent) and governance of compliance (24 percent).

Board support and encouragement are key to compliance programs receiving the resources and authority they need and to making sure they are effective. On one hand, only 39 percent of respondents in the KPMG survey strongly agree that their board’s engagement in ethics and compliance oversight and supervision is strong. However, an overwhelming 96 percent agree or strongly agree, which Matsuo describes as a ‘strong finding.'

She notes that a growing number of boards are setting up ethics and compliance committees, although the proportion doing so depends on their size and industry.

KPMG polled 220 chief ethics officers and CCOs in January. Respondents were predominantly at large US companies.

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