Identifying the ROI of Trade Compliance can be a difficult process for many organizations, as the return on compliance is often intangible. As compliance tends to be more focused on prevention, the most obvious returns relate to avoiding financial penalties rather than generating revenue.
Our experience working with clients covering almost every major industry has shown us that there are many other ways in which a strong culture of compliance provides benefits to an organization.
Organizations that take the time to look for irregularities will benefit from robust export compliance programs that are less likely to miss a potential compliance violation. Ultimately, there are two major components to a successful compliance program—organizational buy-in complete with compliance professionals who have the initiative and attention to detail needed to identify red flags, and tools that help verify the compliance status of potential business partners and staff.
A Strong Culture of Compliance
In order for organizations to truly see the benefits of trade compliance, it’s important that there not only be an acceptance of the need for compliance, but that the compliance needs to fit comfortably into the organization’s culture and values. Compliance shouldn’t be just about making sure that companies are obeying the law. It needs to be part of the mission and vision of the organization, and something that’s reinforced by leadership. After all, if management doesn’t buy-in, those responsible for compliance won’t feel its importance.
Getting management to recognize the value in culture and compliance can be a difficult task, as they’re often focused on dollars and cents. There are, however, some benefits that can be easily communicated and translate directly to financial gains:
- Attracting and retaining quality people to work in the organization
- Gaining and strengthening clients’ trust
- Building a strong reputation in the marketplace
- Improving employee morale and work ethic
- Developing goodwill with government agencies and regulators
Developing a strong culture will help in all facets of the organization. As Louis V. Gerstner Jr once said: “Culture isn’t just one aspect of the game, it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.” 1
The Costs of Compliance
One of the common reasons compliance officers experience resistance from management are the costs associated with developing a compliance program. Compliance is often seen as getting in the way of business, causing inefficiencies, and increasing overhead costs. While this may be true of inefficient compliance departments, these obstacles can be easily overcome.
These days, a significant portion of compliance processes can be automated or integrated into existing workflows. Transactions no longer have to be put on hold so that all parties can be screened and cleared, or until documentation is produced manually. Being compliant doesn’t have to be the burden it may have once been. Automation allows businesses to do more with less, decreasing the number of hours required to remain compliant without increasing (and, in many cases, decreasing) the total expenditure.
Compliance That Fits Your Needs
The way an organization approaches compliance depends on a number of factors, including industry, risk tolerance, etc. For instance, the focus of a financial institution is going to be significantly different than one focused on research. Compliance program needs to be tailored to the business.
When preparing a pitch to management, it’s vital to consider what the primary compliance needs are for the organization and industry sector, as it’ll make it easier to highlight the benefits of the program in a way that can easily be understood. For example, in the financial industry, organizations will want to focus efforts on how their suggested programs help keep the organization in line with regulations established by the Office of Foreign Assets Control (OFAC); or, in the research industry, an institution might choose to focus on how the solutions being recommended help address deemed exports and working with non-US persons.
Our experience has shown us that, no matter what the compliance needs of the industry may be, there’s a solution available to address them.
Working with Third Party Vendors
Compliance is a complex process and requires ongoing effort and buy-in from the entire organization. It requires a certain mindset in terms of how it—and business in general—is approached. For many organizations, compliance is too large a concern to keep it entirely in-house. Third party solutions—like Descartes Visual Compliance—and consultants are often necessary to maximize the efficiency of internal processes. While working with these third parties comes with a price tag attached, there are a number of benefits to partnering with compliance specialists.
Compliance specialists are focused on interpreting and understanding government regulations. Their business revolves around stay up to date with the most recent changes made by government agencies that are responsible for international trade compliance regulations, as well as cases that may impact how regulations may be interpreted by the courts. Their expertise can be invaluable in helping to ensure that organizations are always up to date with the compliance status of vendors, employees, and business partners, which can help prevent future violations. After all, the best compliance programs are those that are proactive rather than reactive.
1. Gerstner, L. V. (2003). Who says elephants can’t dance?: Leading a great enterprise through dramatic change. New York, NY: HarperBusiness.