Today’s regulatory environment is more demanding than ever before. Gone are the days of paper compliance programs and “check the box” requirements. The mere existence of a corporate compliance program is no longer sufficient. Rather, compliance officers must be able to demonstrate that their compliance programs are actually effective in practice. But how can one demonstrate effectiveness?
Updated Guidance from the DOJ
The Department of Justice (DOJ), in its continuing focus on corporate compliance, has issued updated guidance (Evaluation of Corporate Compliance Programs) on the factors it considers to be relevant when evaluating corporate compliance programs, including a discussion of the hallmarks of a well-designed program, features of effective implementation, and metrics to determine whether a compliance program is operating effectively. In determining how to prosecute or whether to resolve corporate criminal enforcement actions, compliance program effectiveness is a key component which the DOJ takes into consideration by utilizing the evaluation factors in this revised guidance.
The new guidance document, which was released in April 2019, builds upon its prior 2017 version and is twice the length, adding further detail and context. Whereas the prior guidance was a list of questions with no insight into how those factors would be weighed by prosecutors, the updated version adds context as to why the questions are important and how they fit into the overall evaluation.
Besides allowing greater transparency into DOJ expectations and how prosecutors evaluate compliance programs, the document also offers insight into what regulators will consider when evaluating compliance program effectiveness. This allows companies to model their programs to meet regulatory expectations whether or not they agree with the standards (or even feel these things are appropriate criteria for measuring effectiveness).
According to DOJ’s recent evaluation factors, in order to be considered effective, corporate compliance programs should be risk-based and tailored to mitigate identified risks. Compliance programs should also be dynamic, and compliance officers need to incorporate tools for ongoing and continuous improvements.
Three Fundamental Questions
Most notably, the Evaluation of Corporate Compliance Programs document focuses on three fundamental questions, which in turn can be used by corporate compliance departments to assess the overall effectiveness of their company’s compliance program. These questions are:
- Is the program well designed?
- Is the program being implemented effectively?
- Does the program work in practice?
Within these three questions, the guidance groups 12 main topics, which the DOJ considers relevant in evaluating the effectiveness of corporate compliance programs. Furthermore, the updated version adds 61 new factors, presented in the form of questions, to be used in the assessment of compliance programs, which fall within the 12 main topics.
The first part of the guidance discusses compliance program design, including risk identification and assessment, applicable policies and procedures, tailored training and communications, confidential reporting structure and investigation processes, third-party due diligence and management, and risk-related issues related to mergers and acquisitions.
The second part of the document focuses on effective compliance program implementation, including commitment by senior and middle management, tone at the top, compliance autonomy and resources, and use of incentives and disciplinary measures.
Program in Practice
The third part of the updated version details criteria to assess whether the company’s compliance program works in practice, including continuous program improvement, periodic testing and program review, investigation of misconduct, and corresponding analysis and remediation of underlying misconduct.
Takeaways from the Guidance
The complexities involved in ensuring companies are operating ethically and legally are vast, and the DOJ’s guidance may help companies align with regulatory expectations.
With applicability to both large and small companies, the updated document is a valuable resource for all types of organizations, not just for defending their compliance programs in the event of an investigation but also to be used proactively to benchmark and enhance their compliance programs. Companies should incorporate the insights of this recent version to assess and strengthen their compliance programs, including their compliance training programs.
A carefully chosen training partner, well-versed in regulatory expectations and able to offer a variety of directly relevant training options, can help your company apply the DOJ’s recent guidance and design an effective compliance program in accordance with regulatory expectations.
True Office Learning offers training solutions that specifically address the new guidance. For example, the guidance states that a “hallmark of a well-designed compliance program is appropriately tailored training and communications.” True Office Learning offers a wide array of training that is directly based on this concept. True Office Learning also provides solutions that specifically address training-related evaluation factors from the guidance:
- "Have supervisory employees received different or supplementary training?” True Office Learning offers role-based training.
- "Give employees practical advice or case studies to address real-life scenarios" True Office Learning has learners work through simulations that are relevant and authentic to their day-to-day experiences.
- “How has the company measured the effectiveness of the training?” True Office Learning provides I.Q. Analytics.
- “Have employees been tested on what they have learned?” True Office Learning offers a learn-by-doing approach with resulting analytics.
- “How has the company addressed employees who fail all or a portion of the testing?” True Office Learning leads every learner to 100 percent mastery.
It’s more critical than ever to find a training partner that helps you assess your current training program and works with you to provide adaptive, customizable, and engaging training as well as analytics to help gauge the effectiveness of the compliance training for your employees.