The ROI (Return On Investment) in Compliance Programs.

By Javier Fernández Blanco, Venture and finances expert.

The implementation of compliance programs in our legal entities should be a constant in a business environment, where the Good Corporate Governance and the excellent Business Management were the basic principles of whom might have bet and bet their effort and patrimony to create, in a sustainable way, wealth, employment and social utility, unequivocal objectives of every good businessman.

For several years, it exists a not so accurate tendency that confuses the entrepreneur with the businessman. Not every entrepreneur needs to demonstrate their own capacity as if they were businessmen, and not every businessman is an entrepreneur, although they think they are and seem to be. In more than 30 years of experience, we have been entrepreneurs without having created a company to prove it, we have created companies without having been entrepreneurs, moved by a specific initiative, and we have been, occasionally, entrepreneurs and businessmen at the same time. This issue will be treated in future reflections in this forum.

In any case, a good businessman is the one capable of creating, in a sustainable way, wealth for his environment, employment and social utility. And all of this has an origin: its unequivocal compromise with the accomplishment of all legislation and normative, civil and penal, which affects the company and affects the businessman as an administrator, either he is from “iure” or from “facto”, as our legislators have affirmed.

The above is the basic principle of the Compliance Programs that should be present in the corporate strategy (management strategy and social strategy), and in the business management of any legal entity, being part of its beliefs, values and behaviours, elements of the Culture of an Organization. Only from this point of view, we can understand the message of the present reflection.

In fact, there are still a minority of legal entities which have established and adequate Integral Compliance Program. Considering our business demography establishes that 99,78% of the companies with employees in Spain are SME’s (less than 250 employees), 1.488.477 out of 1.491.795 (INE-DIRCE), it is not surprising that that the established Compliance Programs are in the abovementioned minority (in many large companies with resources and excessive appearance and little effectiveness, and in very few SME’s, in most cases, without knowing what they have actually hire). And until the large company (more than 250 employees, 3.288 out of 1.491.765, the 0,22% of our companies with employees) doesn’t commercially demand their suppliers (large and small companies) the establishment of a Compliance Program and these, in return, do the same with them (medium and small companies), the road to excellence in Compliance will be very long.

However, a supplication to those legal entities that have demonstrated their interest in this issue. As in every sector, and more if they are emergent, there is everything in the offer. Please, go away from whoever tells you that is going to implement you a Compliance Program “in just few days”, from whoever gives you “papers and papers” without having made a rigorous and prior analysis of your organization in every sense, from whoever tells you is implementing a software that “takes care of everything”, from whoever assures you that with the things they are doing for you, “you will always be safe from your civil and legal responsibilities”, from whoever tells you that “hiring a bonus training, gives you for free the Compliance Model”, from whoever offers you “a Low Cost Compliance with a fixed monthly fee”, etc. Those are an evident proof of fraud services or, as trends denominates, proof of “Fake Compliance”.

Returning to the nuclear issue, an adequate Integral Compliance Program (not only criminal) assumes a strengthening component of a corporate strategy and of a successful business management, which provides a return on investment made on it, since it contributes to greater efficiency in the organization, to the generation of new income, to the saving of expenses and to the increase of Enterprise Value, key elements of the abovementioned return.

Greater efficiency in the organization

The well-established Integral Compliance Program, (Policy, control of financial resources, identification and assessment of risks, prevention and procedures manual, ethical code, monitoring body, whistleblowing channel and disciplinary system, communication plan, training plan, obedience indicators and model verification) contributes decisively, to the improvement of operative structures and production processes. Additionally, it contributes to the existence of a very attractive work environment for all the people who are part of the organization, favouring their professional development, increasing their motivation, their sense of belonging to the team, and consequently, increasing the productivity and improving the image they transmit of the organization. All of the above also contributes to save costs.

New revenues generation

The well-established Integral Compliance Program responds to the standard of an increasingly high demand in our Society, for the existence of transparent, visible, healthy, solid and sustainable organizations that involve clean, orderly, organized and committed corporate governments with their groups of interest. The abovementioned, incorporated into the competitive strategy of the legal entity, not only facilitates the achievement of its business objectives, but also increases them, because it represents a competitive advantage that is so appreciated by current and future clients.

Costs saving

The well-established Integral Compliance Program prevents, in most cases, that a risk, with civil and criminal consequences, get materialized, something that would imply tangible sanctions and associated expenses and intangible negative repercussions on the corporate image and reputation, with tangible loss of earnings, and very tangible criminal repercussions, both personal and corporate (from fines and prohibition of working for Public Administrations, until the disappearance of the legal entity). Once again, the costs of NON-COMPLIANCE exceed the costs of COMPLIANCE.

Increase in Enterprise Value

The well-established Integral Compliance Program contributes, as we have said, to have a more transparent, visible, orderly and efficient organization, from all points of view, where valuation parameters are triggered. This "indicator" will be developed in future reflections in this forum.

Hence, we conclude in the enormous contribution that an adequate Integral Compliance Program supposes for any legal entity, being its design, implementation and maintenance, an investment with proven and unequivocal return.