If Your Company Were a House, the Ethics and Compliance Program Would Be the Roof

Six hours into the winter snowstorm that is pummeling the Northeast, I’m grateful to be inside my warm house while watching inches of snow accumulate outside. And while I lament the lack of insulation in our old Victorian home, I’m thankful for an intact roof that is keeping the expected 27 inches of snow from getting into our house.

What we typically notice about a house are the architecture, layout, décor and furnishings, which are akin to a company’s industry, organizational structure, business units and functions. Rarely do we pay attention to the roof.

Responsible homeowners know that regular maintenance of the roof is crucial in keeping away snow, wind and rain. Responsible companies too, understand the importance of an effective ethics and compliance program in fending off compliance risks and ensure that their programs are well-built and well-maintained.

A leaky roof may be invisible from the outside, but water is still getting in when it rains. Similarly, an ineffective compliance program may not be discernible from the outside by a company’s clients, partners or investors, but damage is still being done.

A homeowner may detect a leak and patch the roof promptly. If a company has a healthy speak up culture, employees would be able to report such “leaks” so compliance issues can also be quickly remediated. The longer issues go undetected and unaddressed, the more serious the damage, for the house and the company.

And if a homeowner wants to add an extension to a house, they must also build a new roof for that section of the house. Companies that engage in acquisitions or create new business units without expanding their ethics and compliance programs are like building that extension without giving it a roof.

The roof on our house consists of sections made of different types of materials – slate for the main house, tar for the bay window and asphalt shingles for the entryway. Maintenance requires specific treatments for those materials, and complete replacement may be needed every few decades, depending on the material. Companies also need to tailor their ethics and compliance program to address their different business units, or to consider major overhauls if a program established years ago no longer serves the current business.

And for companies still on the fence about whether to invest in an ethics and compliance program, they should consider whether they would live in a house with no roof.