Compliance- a Legal Risk Management Tool

July 25, 2013
Entrance Gate of Sejong University, Seoul, Korea

Entrance Gate of Sejong University, Seoul, Korea

One of the most important legal risk management (LRM) processes a company can implement is a "compliance program".  In fact, many countries now require companies to implement compliance policies for legal reasons. Some companies have implemented compliance policies for brand image reasons and others for legal reasons. Not only is it a good policy to implement a compliance program for brand image reasons, but if properly implemented, it is a great risk management tool. Why?

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A compliance program, if properly established and implemented, not only helps the brand image of an organization, but reinforces ethical behavior which in turn minimizes violation of local laws by upholding compliance of financial and legal rules as well as corporate policies. By implementing a compliance program in conformity with local law and in compliance with specific laws a company shows it fully appreciates local laws and regulations as well as laws and regulations of its home country. By developing a compliance program, a company or organization shows it understands in general terms the legal requirements of the country it operates in and also fosters a respect for law and ethical behavior.

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Of course, what is does the establishment of a compliance program entail? The establishment of a compliance program anywhere in the world usually consists of adopting a company code of conduct or code of ethics with perhaps specific policies governing local conditions. US standards are somewhat more specific and demanding than other countries because of the US Sentencing Guidelines. This however, is a topic for another day.

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