05 / 08 / 23
Compliance and integrity as pillars of any organization
MEXICO CITY, MEXICO, May 8th, 2023 – Compliance and integrity should be the foundation and part of the pillars of any accepted, successful, accountable, and recognized organization. From our perspective, compliance refers to the process of discovering, creating, maturing, measuring, and sustaining a culture of compliance with laws and standards according to the business or industry, as well as following codes, guidelines, and internal policies to foster inside the organization a 360 result-oriented work environment for its customers, employees, and suppliers. This compliance must be lived and led by the leadership group (also known in some organizations as board of directors, management team, board of trustees, or ethics/integrity committee) of the organization and is known as “tone at the top”. Non-compliance may derive in various types of sanctions, from fines to administrative and criminal proceedings for both the organization itself and its legal representatives, and non-compliance can even seriously damage the financial stability, operations and even worse its reputation, which has been forged over many years and can be lost or be perceived as such with a single act.
On the other hand, integrity refers to the organization’s commitment to always do the right thing, that is, to define and maintain an ethical, honest and transparent behavior, both internally and externally, in accordance with its own principles and values, according to its business model or business objectives, so integrity is the basis on which the reputation of an organization is built and determines how customers, employees and third parties perceive the organization. An organization that operates with integrity easily earns the trust and loyalty of its shareholders, partners, employees, customers, and suppliers, thus building long-term relationships.
Therefore, compliance and integrity are not just buzzwords, they should be part of the DNA of any organization that help for the viability and success in the medium and long term of any organization, regardless of its purposes, size or places where it operates, so both pillars are essential and vital.
An organization cannot maintain its integrity if it does not comply with the external (laws and regulations) and internal (codes, guidelines and policies) regulatory framework, likewise, an organization that complies with the regulatory framework but does not operate with integrity can still run the risk of suffering reputational damage, which is why we can say that both compliance and integrity can reduce these risks and build a positive reputation even in different jurisdictions.
It is also very important to understand that compliance and integrity are not only important for large or multinational organizations, medium-sized, small or new organizations are equally vulnerable to legal and reputational risks. In fact, smaller or new organizations may be even more susceptible to discovering legal and compliance issues because they are typically limited in resources, capabilities, specialized personnel and, therefore, expertise.
Finally, the fact that an organization lives and prioritizes a culture of compliance and integrity at all levels can give it many advantages such as the probability of building a positive and sustainable reputation, achieving professional ethics, compliance with the regulatory framework, gaining the trust of the general public (potential collaborators, clients, investors or sources of financing), also earn the loyalty of its shareholders and collaborators, and better yet, reduces legal and reputational risks (including its representatives and directors).
Our partner and head of this practice José Gerardo Vázquez has contributed to the development of a compliance and integrity culture for different organizations through tailor-made compliance programs, considering their risks, size, business model, etc., this as a first step in their growth, profitability, reputation, and better yet, as part of a strategy to achieve all their ESG policies or objectives.
As such, investing (not spending) in compliance and integrity translates into organizations setting themselves up for long-term success and sustainable growth in an ever-evolving marketplace, which in turn allows them to be prepared for what is to come.
By José Gerardo Vázquez S.M.
Partner
1 After several corporate accounting scandals, such as Enron, WorldCom, Adelphia, etc., the Sarbanes-Oxley Act (SOX) of 2002 popularized the term “tone at the top,” a missing element in the aforementioned previous scandals. It refers to a company’s management and the leadership of the board of directors and their commitment to being honest and ethical. It sets the cultural environment and corporate values of a company.