The Compliance Revolution: How Compliance Needs to Change to Survive

Praise for The Compliance Revolution

"Staying ahead of the change curve is essential for maintaining a successful and viable business. With the paradigm shifts we are experiencing in regulatory regimes and resultant systems of governance, this book is timely and offers highly perceptive road maps for organisations and their compliance functions to respond in a sustainable manner that engenders trust and confidence. David writes with honesty and directness that is refreshing and consistent with the standards of ethical practices he advocates."
Vicky Kubitscheck, CRO and Compliance Director, Police Mutual (insurance) Group; author of Integrated Assurance: Risk Governance Beyond Boundaries

" David Jackman was in the forefront of the movement to introduce an ethical dimension into the compliance sphere. Many a corporate failure would have been prevented if boards and senior management weighed the ethical implications of their decisions. The Compliance Revolution makes an important contribution by explaining how ethics, regulation and compliance can co–exist. The book breaks new ground by offering practical guidance, tools and examples to ensure that boards are driven by ethical considerations as well. It is a much–needed publication for board directors, compliance and ethics professionals, senior managers and even regulators."
Dayanath Jayasuriya, President′s Counsel; former Chairman, Securities and Exchange Commission and Insurance Board of Sri Lanka

"This is a brave attempt to posit a theory of change for the compliance function. The scene is financial services, and compliance with regulation, but the theory and practice will apply to any sector and to the additional tasks of a compliance function. Whether you wholly agree with the over–arching thesis or not, this book will help you develop your own theory of compliance, its role, and how it must change or evolve to succeed."
Robin Ford, Regulatory consultant; former Executive Commissioner British Columbia Securities Commission; former Chief Counsel, Insurance UK Financial Services Authority

"David has made the abstract concepts simple and easy to grasp. It′s both thought provoking and inspirational for those intending to or are pursuing a career in compliance. There are fundamental truths which I fully agree ′when ethics are real and effective, the quality of compliance will be high.′ The power of a right compliance culture cannot be underestimated. David highlighted succinctly the pitfalls to avoid and how important continuous stakeholder engagement is for an organisation to maintain the right compliance mindset. And, for the compliance professionals, how necessary it is to be clued in to the operations."
Adeline Koh, Head of Regulatory & Compliance for Asia Pacific region of a global insurance group

Preface xi

Acknowledgments xiii

About the Author xv

PART ONE Theory

CHAPTER 1 New Compliance 3

The Challenge 3

Turning Point 4

Traditional Compliance 4

New Compliance 5

Shared Journey 5

CHAPTER 2 General Model of Regulatory and Compliance Development 7

Introduction to Development Models 7

General Model of Regulatory and Compliance Development 8

International Comparisons 11

Example of the UK 11

Using Regulatory Toolkits 13

Conclusion 14

Endnote 14

CHAPTER 3 Is Compliance Worth the Money? 15

An Unfortunate Unconformity 15

The 2008 Global Financial Crisis 16

Legacy of Failure 18

Post–2008 19

Increasing Compliance Spend 22

A Line in the Sand 22

Future Challenges 24

Conclusion 24

Endnotes 25

PART TWO Practice

CHAPTER 4 Ethics 29

Definitions 29

Ethics in Regulation and Compliance 29

An Ethical Framework for Financial Services 30

Ethics in Business 31

How Should a Compliance Practitioner Approach Ethics? 32

Ethics at Work versus Ethics at Home 33

Steps Towards Developing Ethics 33

Main Tools for Identifying and Applying Corporate Ethics 35

Three Critical Steps in Establishing Ethics 35

Ethics in Regulation 56

Principles and Ethics 57

Advantages and Disadvantages of Principles 58

Principles–Based Regulation 60

Conclusion 65

Endnotes 66

CHAPTER 5 Culture 67

Pro–Compliance Culture 68

What Is Culture? 69

What Is a Values–Led Mind–Set? 69

Changing and Embedding Culture 70

How to Change Culture 74

Creating Crucibles in Regulation Examples 77

Regulatory Methodologies 80

UK Indicators 83

Fair Dealing in Singapore 88

Measuring Culture 89

Conclusion 93

Endnotes 93

CHAPTER 6 Good Governance 95

Why Does Governance Matter? 96

What Is Corporate Governance? 97

A Model of Good Governance 101

Ten Principles of Good Governance 102

Conclusion 131

Review: The State of Corporate Governance 131

Endnotes 138

CHAPTER 7 Outcomes 139

Why Is This Step Up So Significant? 139

What Is Outcome? 141

Why Is Outcome So Important? 142

Development Matrix 147

Outcomes in Singapore Regulation 149

Outcomes and Enforcement 150

Conclusion 151

Endnotes 152

PART THREE Purpose

CHAPTER 8 Community 155

Importance of Community 156

Role of Companies 156

Social Usefulness of Banks 158

Role of Compliance 159

Definition of Community 160

Community Principles 161

Sustainable Communities Principles What Do They Mean? 162

Development Matrix 164

Corporate Social Responsibility 167

New Reporting Standards 167

Behavioural Economics 168

Vulnerable Consumers 171

Conclusion 174

Endnotes 174

CHAPTER 9 Corporate Faith 175

What Is Corporate Faith? 176

Managing Corporate Faith 177

The Value of Corporate Faith 177

Dimensions of Corporate Faith 179

How Faith Develops 183

Corporate Faith into Practice 184

Professionalism 184

Judgment–Based Compliance 186

Conclusion 186

CHAPTER 10 Corporate Maturity 187

What Is Maturity? 187

Maturity and a Direction of Travel 189

Unconditionality 194

The Underlying Process 195

Corporate Maturity Framework 197

Cavitation 198

Connecting the Five Stages of Development with the Five

Levels of Maturity 199

Conclusion 199

Index 201

DAVID JACKMAN is a non–executive director, writer, lecturer and TV and radio commentator and has his own consultancy, intotheclearing.com, specialising in helping firms to work ′Beyond Compliance′. He also founded the Ethics Foundation and the ′Ethics Mark®′ for value–led businesses, which he is launching in Singapore.