Much has been said and reported about the cost of regulatory compliance, but not so much about the benefits of compliance as a driver of quality and competitive advantage through creating better processes and controls.
The SRA’s report Attitudes to regulation and compliance in legal services showed that the majority of firms surveyed felt the benefits of complying outweighed the costs, and not simply as a means of avoiding regulatory action.
Only a tiny minority thought that there were no benefits from instituting a compliance regime. So what are the advantages of creating and embedding a compliance culture in your firm?
Firstly, it helps with avoiding regulatory breaches and breaking the law and suffering the consequences of those actions. There’s the added benefit that you save the firm time, money and grief in having to deal with any breaches.
Secondly, a good, strong compliance regime can boost the firm’s attitude to its business purposes. Once the firm has created and communicated clear and consistent messages about what standards it expects from everyone in the organisation, with compliance fully embedded in key performance indicators (KPIs) and rewards, it can help ensure that the firm’s standards are clear, regularly updated and understood.
Also, dealing with operational risk makes good business sense as it allows organisations to assess their weaknesses and strengths and make improvements in processes and working practices.
As Warren Buffett said: ‘It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.’
Another indirect benefit of compliance can be securing backing for change and strategic management.
With the SRA’s current focus on financial stability, the regulatory requirement set out in Principle 8 ‘to run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles’ gives managing partners the backing to get control of costs, streamline operations and ensure that all processes are as effective as possible, which helps to create a better client service and cost management to increase the bottom line.
Compliance may be seen as a necessary evil to some, but embracing it as a route to improved business practices can result in advantages that more than outweigh the cost.
It’s like the gym - everyone grumbles about the cost of membership when they don’t bother to go. But we all know that getting on the treadmill, hitting that squash ball or swimming those lengths will not just make us feel better today, it’s a workout that is helping us to live a longer, healthier life.
Jeanette Lucy is the director for compliance, quality and learning with law firm network LawNet