What is compliance?

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October 3th, 2024
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Compliance refers to the set of processes put in place by a company to ensure that they comply with regulations, rules and ethical standards applicable to its business. In a context where regulations are becoming increasingly complex and stringent, compliance plays an important role in risk management and protecting the company’s interests.

Definition and meaning of the word compliance

In a business context, compliance goes beyond mere legal compliance and encompasses a broader notion of ethics and responsibility.

Defining compliance means talking about a set of processes and practices aimed at ensuring that a company, its employees and its partners respect the legal, regulatory and ethical standards in force in their industry. It is a proactive approach that aims to prevent infractions rather than just reacting to problems once they occur.

The concept of compliance also extends to business ethics, encouraging companies to go beyond simply complying with the law and adopt responsible and sustainable business practices.

Thus, compliance represents much more than just a set of rules to follow. It is a fundamental pillar of the corporate strategy, essential to ensuring the company’s sustainability and competitiveness in an increasingly demanding market in terms of transparency and integrity.

The main areas of application of compliance

Compliance covers a wide range of areas, reflecting the complexity and diversity of regulations to which companies are subject.

Fighting corruption and influence peddling

The fight against corruption is a fundamental pillar of compliance. Companies must implement measures to prevent and detect acts of corruption, in accordance with some laws. This involves the implementation of codes of conduct, employee training and internal control procedures.

Protecting personal data (GDPR)

With the entry into force of the General Data Protection Regulation (GDPR) in 2018 or Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016, the protection of personal data has become a major compliance issue. Companies must ensure that they collect, process and store personal data in a compliant manner, respecting the rights of individuals and implementing adequate security measures against cyber risks.

Anti-money laundering and counter-terrorist financing

This area is particularly important for financial institutions, but also concerns many other sectors. Companies must implement know-your-customer (KYC) procedures and suspicious transaction detection processes to prevent money laundering and terrorist financing.

Competition law

Compliance in competition law aims to prevent anti-competitive practices such as abuse of dominant position or unlawful cartels. Companies must train their employees on these issues and implement procedures to avoid any behaviour that could be perceived as anti-competitive.

Economic sanctions and embargoes

Companies must ensure compliance with the economic sanctions and embargoes imposed by various countries or international organisations. This involves constant monitoring and rigorous verification procedures for their business partners and transactions.

Committing to corporate social responsibility (CSR)

Corporate social responsibility (CSR) is an integral part of compliance. It concerns the respect of social, environmental and ethical standards in all the company’s activities. This includes initiatives to ensure fair working conditions, reduce the carbon footprint, and engage in sustainable and responsible practices.

Business ethics

Beyond strict regulatory compliance, business ethics is an area of compliance that is gaining in importance. It is about promoting responsible and ethical business practices, often going beyond the minimum legal requirements.

Compliance in the company: Challenges and objectives

Compliance in a company represents a major strategic challenge, the importance of which is constantly growing in the current economic landscape.

Risk management

Compliance is first a risk management tool. It allows to identify, assess and prevent the risks related to non-compliance with laws, regulations and ethical standards. A precise risk mapping is essential to implement an effective compliance programme. This proactive approach helps companies avoid legal sanctions, financial losses and damage to their reputation.

Compliance with laws and ethical standards

The primary objective of compliance is to ensure respect of applicable laws and regulations. This includes not only national laws, but also international compliance regulations that may apply to the company’s activities. Beyond the legal framework, compliance also aims to promote high ethical standards within the organisation, thus strengthening its culture of integrity.

Protection of reputation

In a world where information circulates rapidly, a company’s reputation is a precious asset. Non-compliance can have disastrous consequences on the brand image. By implementing a robust compliance management system, companies protect their reputation and strengthen the trust of their stakeholders: Customers, investors, partners and employees.

Performance improvement

Contrary to a common misconception, compliance is not just a constraint, but can be a real lever for performance. By optimising internal processes, promoting transparency and fostering an ethical culture, compliance contributes to operational efficiency and long-term value creation.

Competitive advantage

A company recognised for its commitment to compliance enjoys a distinct competitive advantage. It is perceived as a reliable and responsible partner, which can open up new business opportunities, particularly in highly regulated sectors or markets.

Engaging in corporate social responsibility (CSR)

Compliance is part of a broader approach to corporate social responsibility. It helps demonstrate the organisation’s commitment to ethical and sustainable business practices, thus meeting the growing expectations of society in terms of responsible corporate behaviour.

Prevention of sanctions

An important objective of compliance is to prevent the legal and financial sanctions that can result from non-compliance with regulations. These sanctions can be extremely heavy, to the point of jeopardising the very survival of the company. Compliance therefore acts as a protective shield against these risks. According to the Director-General of the International Labour Organization: "It’s not only working conditions that have changed over time, it’s the nature of health and safety hazards as well. And this will continue in the future. With all the transformative technological, demographic, and environmental changes shaping a new world of work, it becomes more important than ever to anticipate new and emerging health and safety risks."

Compliance proves to be an essential and strategic element for companies, ensuring the legal and ethical conformity of their activities. Beyond the simple application of laws, it embodies a culture of integrity and social responsibility, protecting the company’s reputation and performance. By promoting transparency and proactive risk management, compliance becomes a real lever of competitiveness and sustainability in an increasingly demanding economic environment.

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