What makes the compliance team effective?

Compliance has been one of the major areas of growth within the legal profession in recent years, particularly throughout the covid-19 pandemic. Firms now hire compliance specialists to provide support to their compliance officers,  the owners and employees in the firm. However, simply having a compliance team is not enough. The function and the role-holders need to be effective.

In order to be effective, a firm’s compliance team must complement the business in which it operates. This, in turn, requires everyone in the business to work in a supportive manner with the compliance team rather than fighting against them or not involving them in decision-making. Easy for me to say! How is this achieved in practice?

My reflections on what is needed for the compliance team to be effective are based on my experiences over the past couple of decades. I have witnessed a noticeable change in attitude to regulatory compliance and almost a revolutionary transformation in firms’ attitudes to the business-end of their work. Why is this so?

In my view, it has come from the realisation that being a good lawyer is not all that is needed to survive and prosper in the legal services industry these days. Among other things, a good lawyer must work in a compliant way among like-minded colleagues and this strengthens the need for an effective compliance team and the employment of compliance specialists. Effective compliance supports firms to deliver services of a proper standard and in an ethical manner.

Maintaining standards

Without a commitment to understanding and upholding regulatory compliance standards, the firm will quickly lose favour with the Solicitors Regulation Authority (SRA) with consequences for the ongoing survival of the business. After all, the introduction to the SRA Code of Conduct for Firms references an objective to “create and maintain the right culture and environment for the delivery of competent and ethical legal services to clients” in all authorised law firms.

Without this, the firm may find their authorised status is subject to scrutiny. This, in turn, may have financial and commercial repercussions for the business owners. This means compliance is good for business. Who could argue anything else?

Of course, reaching this position of harmony between the compliance team and the rest of the firm, does not simply happen because an individual is given a compliance title and a desk within the building.

Thus, much work is needed in order to make the compliance function an effective one.

Clarity about purpose

It is necessary to be clear about the purpose of compliance so colleagues understand that its function does not hinder the provision of legal services.

Perhaps more specifically, it is necessary to explain the need to be compliant with regulatory standards in language that is easy to relate to (hint: using SRA-speak rarely appeals to anyone, not least partners who will need to budget for compliance and colleagues who may feel it is a distraction from their day jobs).

The message can be conveyed quite simply: your firm is only able to open its doors, and invite paying clients over the threshold, while it is regarded as a safe harbour for legal services. You need to comply with regulatory standards to stay in business. Having in-house compliance resources supports longevity.

Compliance team accountability

Of course, the role of the compliance team is to facilitate the right behaviours within the firm which make longevity achievable. Ultimately, it is the owners of the business who own responsibility for compliance. The Code of Conduct for Firms usefully talks directly to the managers (i.e., the firm’s owners) at paragraph 8.1 and says “you are responsible for compliance by your firm with the Code”.

Let’s face it, the owners have most to lose (both financially and in terms of their reputation) if things go wrong, so why wouldn’t they accept the need to promote a compliance culture within their business? It is one less thing they need to worry about if they are satisfied they can rely on their employees to do the right thing. Having an effective compliance team which has the authority to give out advice will be instrumental in supporting regulatory and ethical decision making.

Owners’ behaviour

It is risky to suppose a ‘do as I say, not as I do’ attitude will work. The owners need to lead by example. Hiring a compliance team and then not acting in an aligned manner helps no one in the firm.

This requires a commitment to a consistent and united response on this topic. Behaviours which exemplify such an attitude include having a zero tolerance approach to the lowering of standards; not turning a blind eye to the colleagues who are mavericks, or regard themselves as rainmakers and immune to compliance as a consequence, or are too difficult to manage; supporting colleagues who may have ethical dilemmas, encouraging openness and accountability; and conducting arguments about compliance behind closed doors and out of earshot of employees. It also extends to the acknowledgement that regulatory risks must be considered when making commercial and strategic decisions about the business.

Involved in decision-making

Of course, all businesses must make commercial decisions, take strategic risks, consider business plans and profitability every day. Law firms are no exception. However, law firm owners also have to consider whether a decision has a regulatory twist or repercussion. So, doesn’t it make sense for the compliance team to be privy to this level of decision-making and to facilitate the making of informed choices through a discussion of regulatory impact?

This is not to say the compliance team is the decision maker (it isn’t, and this point has already been made); rather that they should add their subject knowledge to the deliberations. An effective compliance team will be used by the firm in this way and will have access to the most senior decision-makers at the right time in the decision-making process.

Compliance for survival

This concept has been a change in firm dynamics for many practitioners. It is not unusual for the compliance team to be seen as a drain on finances and resources, a necessary evil, or even a team that stifles growth. In fact, an effective compliance team serves a completely opposite purpose. By facilitating compliance with regulatory standards, and supporting ethical behaviours, the team is encouraging and supporting the longevity and continuing success of the firm. This means the personnel employed in the team must have soft skills, as well as technical know-how. They must be ‘go to’ and approachable. They must be able to influence people and be good communicators. They should position themselves in such a way that they will always know what’s happening in the firm.

An effective compliance team will demonstrate its value to the business every day. It is created to ensure the working environment is a safe place in which colleagues can be employed, protected from regulatory censure, and able to work in a way that promotes profitability and sustainability.    

Tracey Calvert is a consultant Oakalls Consultancy Limited oakallsconsultancy.co.uk

Copyright & permissions