Andrea Falcione, Managing Director for Performance GRC at PricewaterhouseCoopers LLP (PwC), shared information about the elements of PwC’s ethics and compliance program in a talk at the Society of Corporate Compliance and Ethics (SCCE) Northeast Regional Conference last November. The focus of the talk was on how to measure the effectiveness of an ethics program.

PwC’s ethics and compliance program consists of 11 key elements, she reported, each aligned to the U.S. Federal Sentencing Guidelines. PwC subdivides those elements as follows:

Business Performance: to include enforcement and discipline, resource and performance management, auditing, reporting, and aspects of monitoring, analysis, and response.

Business Management: to include monitoring, analysis, and response, (which overlaps the business performance category), communication, training, and policies and procedures.

Business Strategy: to include oversight and responsibility, risk assessment, and tone at the top.

It is important to measure the results of those or other program elements. According to Falcione, there are three areas of a compliance and ethics program to measure: design (the program encompasses what it should), implementation (the program was implemented as designed), and impact (each element, as designed and implemented, is working the way it should).

Overall indicators of program effectiveness, she said, include the following:

• Management support of/buy-in to initiatives and other meaningful involvement by management in the program
• Adequate staffing and other resources
• Authority within the organization
• Independence from business units, traditional reporting lines
• Focus on ethics and proactively shaping organization’s culture – not just on procedural compliance
• Embeddedness within organization’s processes
• Alignment with growth objectives and strategic plans
• Coordination with other assurance functions (e.g., Risk Management, Legal, Internal Audit)
• Quality of implemented practices – leading versus standard versus sub-standard

On the measurement front, there is good news. As shared by Falcione in her talk, 74% of respondents to PwC’s 2015 compliance testing survey reported they regularly assess the effectiveness of their ethics and compliance programs. Over half the respondents use one or more of the following metrics; these are the top four metrics used out of 21 reported:

• Compliance audit results (77%)
• Risk assessment results (71%)
• Training completion rates (59%)
• Hotline/helpline metrics (55%)

Other metrics, in descending order of use, include compliance self-assessment results; results from a regulatory visit; customer and other third party feedback/complaints; and employee questionnaires or culture surveys; employee self-disclosures; external benchmarking results; and internal benchmarking results. Continuing the list, some respondents use business metrics related to compliance; cost of non-compliance; training competency tests; cost of compliance program activities; aging and litigation of enforcement activities; input from business partners/satisfaction surveys; and exit interview responses. The remaining few metrics used include training trend analysis; internal customer Compliance Service Level Agreement metrics; and volume and content of press and public statements.

Effective ethics programs will incorporate many if not all of the 11 elements listed above and will be measured by at least several of the types of metrics reported above. While there is room for improvement, it is heartening that ethics and compliance programs are moving beyond the check-the-box approach to a broader systems approach.

Ethical Advocate provides comprehensive ethics and compliance solutions, including ethics and compliance training and confidential and anonymous hotlines.

References

Falcione, Andrea. “How to Measure the Effectiveness (or Lack Thereof!) of Your Compliance and Ethics Program,” presentation to SCCE Northeast Regional Conference, November 13, 2015. http://www.corporatecompliance.org/Portals/1/PDF/Resources/past_handouts/Regional/2015/Boston/Falcione_2.pdf