In today's complex regulatory environment, compliance has become a key concern for businesses across all industries. While compliance programs are often viewed as a necessary evil, they can also provide significant benefits to organizations that are able to implement them effectively.
One of the key decisions that organizations must make when designing their compliance programs is whether to take an integrated or integrative approach. In this article, we will explore the distinction between these two approaches and their respective advantages and disadvantages. We will also consider which one is better to support performance and outcome-based obligations.
Let's start with integrated compliance:
Integrated Compliance
An integrated compliance approach involves incorporating compliance requirements into the day-to-day operations of the business. This approach is often seen as a more traditional approach to compliance, where businesses focus on meeting regulatory requirements and avoiding legal penalties. An integrated compliance program typically involves a set of policies and procedures that are designed to ensure that employees understand their obligations and responsibilities under the law.
Advantages of an Integrated Compliance
One of the main advantages of an integrated compliance approach is that it helps to ensure that businesses are meeting their legal obligations. By incorporating compliance requirements into the day-to-day operations of the business, organizations are able to ensure that they are meeting their obligations without having to spend significant amounts of time and resources on compliance-related activities.
Another advantage of an integrated compliance approach is that it helps to create a culture of compliance within the organization. By emphasizing the importance of compliance and making it a part of the organization's core values, businesses are able to create a sense of shared responsibility among employees for meeting regulatory requirements.
Disadvantages of an Integrated Compliance
One of the main disadvantages of an integrated compliance approach is that it can sometimes be viewed as a "check-the-box" exercise. In other words, businesses may focus more on meeting regulatory requirements than on actually understanding and managing their compliance risks.
Another disadvantage of an integrated compliance approach is that it may not be sufficient for organizations that operate in highly regulated industries. In these industries, businesses may need to take a more proactive approach to compliance in order to stay ahead of emerging regulatory risks.
Now let's consider an integrative compliance approach:
Integrative Compliance
An integrative compliance approach involves embedding compliance into the broader strategic goals and objectives of the business. This approach is often seen as a more forward-looking approach to compliance, where businesses focus on identifying and managing compliance risks in order to achieve their strategic objectives. An integrative compliance program typically involves a more holistic approach to compliance that considers the business's broader risk profile and how compliance risks fit into that profile.
Advantages of an Integrative Compliance
One of the main advantages of an integrative compliance approach is that it helps businesses to manage their compliance risks in a more proactive manner. By embedding compliance into their strategic goals and objectives, organizations are able to identify and manage compliance risks in a more systematic and strategic way.
Another advantage of an integrative compliance approach is that it helps businesses to create a competitive advantage. By managing their compliance risks more effectively, businesses are able to differentiate themselves from their competitors and gain a reputation for being responsible and ethical.
Disadvantages of an Integrative Compliance
One of the main disadvantages of an integrative compliance approach is that it can be more time-consuming and resource-intensive than an integrated approach. In order to effectively manage compliance risks, organizations may need to invest significant amounts of time and resources into developing and implementing their compliance programs.
Another disadvantage of an integrative compliance approach is that it may be more difficult to implement in organizations that have a siloed approach to management. In order to successfully embed compliance into the broader strategic goals and objectives of the business, organizations may need to break down silos and promote greater collaboration and communication across different departments and functions.
Summary
The choice between an integrated and integrative compliance approach is a critical decision that organizations must make when designing their compliance programs. Both approaches have their advantages and disadvantages, and the decision ultimately depends on the organization's risk profile, industry, and strategic goals. An integrated approach can help ensure legal compliance and create a culture of compliance, but it may not be sufficient for highly regulated industries.
On the other hand, an integrative approach can help manage compliance risks more proactively and create a competitive advantage, but it may be more time-consuming and difficult to implement in organizations with a siloed approach to management. Ultimately, a successful compliance program should be tailored to the organization's unique needs and risk profile, and should be regularly reviewed and updated to ensure ongoing effectiveness.
ASPECT | INTEGRATED COMPLIANCE | INTEGRATIVE COMPLIANCE | BETTER FOR OUTCOME / PERFORMANCE-BASED OBLIGATIONS? |
Focus | Meeting regulatory requirements and avoiding legal penalties. | Embedding compliance into the broader strategic goals and objectives of the business. | Integrative Compliance |
Polices and Procedures | Set of policies and procedures designed to ensure that employees understand their obligations and responsibilities under the law. | More holistic approach to compliance that considers the business's broader risk profile and how compliance risks fit into that profile. | Integrative Compliance |
Culture of Compliance | Emphasizes the importance of compliance and makes it a part of the organization's core values. | Helps businesses manage their compliance risks in a more proactive manner. | Integrative Compliance |
Risk Management | Focused on meeting regulatory requirements, but may not be sufficient for highly regulated industries. | Helps identify and manage compliance risks in a more systematic and strategic way. | Integrative Compliance |
Resource Intensity | May not require as much investment of time and resources, but can be viewed as a "check-the-box" exercise. | Can be more time-consuming and resource-intensive, but can create a competitive advantage | Neither is better, as the optimal approach depends on the organization's needs and risk profile. |
However, an integrative compliance approach may be better suited for performance and outcome-based obligations. This is because an integrative approach involves embedding compliance into the broader strategic goals and objectives of the business. By doing so, organizations can identify and manage compliance risks in a more systematic and strategic way, which can help ensure that performance and outcome-based obligations are met.
Additionally, an integrative approach can help organizations create a competitive advantage by managing their compliance risks more effectively, which can ultimately lead to better performance and outcomes.
It is important to note that the choice between an integrated and integrative compliance approach ultimately depends on the organization's risk profile, industry, and strategic goals, and a tailored approach should be taken to ensure ongoing effectiveness.