Legal solutions to drive business development.


Compliance Mechanisms as a Business Management Tool 

By Mauricio Bove

The true concept of Compliance is not yet fully disseminated in Brazil. As a result, most Brazilian companies find it difficult to see Compliance as an apt solution to their business management problems, limiting themselves, at most, to complying with basic legal obligations. 

In this context, innovation in management, through Compliance mechanisms, hardly ever happens in a preventive way, but due to some internal or external circumstance, such as the attempt to mitigate penalties, recover the image and reputation or the need of fund-raising. 

It should be noted that Compliance, in addition to being the set of measures adopted by an organization to promote ethical conduct and compliance with laws and regulations, is also an important management tool.  

It is necessary to be clear that the effectiveness of a company’s Compliance program must be measured through the analysis of three essential mechanisms to minimize and manage risks: prevention, detection and response. These are actions that allow us to map the organizational processes of companies, in order to identify weaknesses that allow the occurrence of acts of corruption, fraud, use of personal data, money laundering, conflicts of interest, relationship with competitors, among others.  

Unlike the usual understanding, Compliance does not only assume a punitive and bureaucratic role, but has an essentially preventive function, creating policies and procedures to disseminate an ethical culture, in addition to training and communication actions so that the preservation of integrity, both of the company’s employees and of third parties involved, becomes the guiding principle of business activity. Its mechanisms play a decisive role in preventing risks in general, such as legal and reputational infractions and in hiring employees and third parties.  

Thus, it is worth shedding light on Petrobras’ integrity mechanisms, and, especially, on the recent episode of the succession attempts for the position of chairman of the Board of Directors and for the presidency of the company.  

Apparently, the reports from Petrobras’ Governance and Compliance Department on the record of the executives listed for the Board of Directors and the company’s presidency, pointed out that both of them would have difficulties in satisfying the committee’s criteria that would assess whether they would be able to occupy the positions for which they were appointed.  

Compliance mechanisms, including the Background check, which analyzes the past life of candidates, thus serve as a “wall” of protection for companies. They strengthen the management of organizations, the preservation of integrity, business valuation, increase of efficiency, competitive advantage and productivity gains.  

As demonstrated by the example of Petrobras, organizations must implement preventive mechanisms that minimize their vulnerabilities and, at the same time, strengthen the fight against corruption and irregularities. Based on international guidelines and the regulation of the Brazilian Anti-Corruption Law, it is possible to build a “wall of protection” to prevent, detect and remedy the practice of misconduct.  

As important as the “shielding” of companies, compliance procedures help to foster a culture of integrity, encouraging ethical behavior in people’s daily conduct. Although it is mandatory to comply with laws and regulations, ethical values must be lived in trivial everyday actions.  

We have been advising different companies, of different types and sizes, and, it is clear, in most of them, an initial difficulty in seeing the concept of Compliance as business management. Taking it into consideration, not only in the matrix of corruption risks, but in the business strategies, considering different aspects that involve decision-making, is fundamental for the survival of organizations.  

It is understandable, especially in the Brazilian case – generous in the production of economic and political crises – that most entrepreneurs are more concerned with critical issues and with short-term survival. However, although it seems obvious, for companies to be able to grow and profit, they must continue to exist, and few have this issue as clear as it needs to be.  

The practice of Compliance has become mandatory in the handbook of any sustainable organization, either public or private. To last and expand the business, companies need to be truly innovative and sustainable in all aspects of their decisions. It is important that they understand this context as soon as possible, while there is still time to do it.

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