Vital link: the evolution of the CCO
Leadership StrategiesLegal, Risk, and ComplianceDevelopment and Transition
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December 02, 2018
Leadership StrategiesLegal, Risk, and ComplianceDevelopment and Transition
The Financier Worldwide cover story, “Vital link: the evolution of the CCO,” references the firm’s research and quotes Russell Reynolds Associates Consultant Jennifer O’Connell on the ever-evolving role of the Chief Compliance Officer. The article is excerpted below.
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Financier Worldwide

From relative obscurity to a place at the top table, the role of the chief compliance officer (CCO) has evolved rapidly in recent years to become a vital link in the corporate chain. 

Indeed, the role’s importance has grown to such an extent that today’s CCO oversees all company policies, procedures, products and services in order to ensure compliance with increasingly complex regulatory requirements. 

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While the clamour to have a CCO on board is generally viewed as a fairly recent trend, there are many who feel that compliance should have always been top of the agenda. “There are many examples over the years of the decline of businesses due to a compliance breach,” says Jennifer O’Connell, head of European legal, regulatory and compliance practice at Russell Reynolds Associates. “However, compliance is a relatively new focus for many organisations, with some still without an independent compliance function. In such instances, compliance is typically covered by the legal function.” 

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For many practitioners, compliance, if used and structured properly, should be viewed as a competitive advantage and a business enabler. “This requires a high-quality compliance function able to deliver on that and educate the wider organisation,” says Ms O’Connell. While this should be a matter that is foremost in senior managers’ and the board’s minds, it must also be a topic that is accessible to and understood by everyone in the organisation. This is where many CCOs and organisations fail.” 

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Regulatory scrutiny

Although there has been a rapid escalation of responsibilities pertaining to the role in recent years, regulatory compliance remains the raison d’être of the CCO. “Compliance is a wide ranging and highly complex topic, with the potential to bring down organisations if they get it wrong,” acknowledges Ms O’Connell. “While the focus on the CCO role predominantly started with financial institutions, the reality is that this is a topic that all businesses need to take seriously. 

“Expecting existing legal or risk functions to pick up responsibility for building and running an effective compliance function is a risky approach,” she continues. “That said, it is essential that all functions work closely together to ensure there is appropriate assessment and mitigation of risk. There needs to be a relationship of both independence and codependence.” 

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“The question of culpability should depend on the nature of the compliance breach and what caused it,” says Ms O’Connell. “The SM&CR has sought to place a greater burden and potential culpability on individuals, but breaches are rarely as black and white as the regime implies. It is also important to think about the impact the SM&CR and automatic assumptions of responsibility have on hiring, as individuals are becoming less keen on taking on such roles and companies often have to pay significant sums for top talent, which can feel unnecessary when there is no obvious burning platform.” 

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That said, it should be noted that the CCO tends not to be paraded as a public scapegoat in the event of non-compliance. Instead, companies can and often do take the opportunity to refresh their personnel in the wake of a breach. “When a breach happens they usually want to hire a well-known and respected ‘name’ in the space in order to send a message to the market,” suggests Ms O’Connell. “A top quality CCO will then expect to see genuine buy-in from the board and the executive committee around the topic of compliance.” 

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“The CCO should be an essential role within any business,” believes Ms O’Connell. “Its importance is only likely to increase and in time the candidate pool will deepen as the approach businesses take diversifies, allowing them to make subjective risk-based assessments and be less constrained by existing practices. This will require bold and courageous CCOs.” 

To read the full article, click here.