Compliance: time to get seriousJuly 11, 2016 / By
Compliance has become one of the biggest issues on the corporate agenda in recent years, alongside growing expectations that companies are held accountable for operating in accordance with particular laws and standards. When companies don’t comply with these rules, it can have a significant impact on the bottom line, ranging from hundreds of thousands to millions of dollars.
- JP Morgan Chase & Co. added more than 13,000 employees to its compliance staff to address new regulations after the financial downturn.
- A KPMG survey of pharmaceutical industry executives found that their top business concern was the changing regulatory environment and many view compliance as a responsibility for every employee, no matter their level or function.
- Over 82% of 4,300+ executives surveyed by IBM stated that managing and mitigating enterprise risk were essential and growing parts of their remit.
This directly impacts the way that companies transact, build, and manage their real estate portfolios. There is now increased demand for compliance expertise in related disciplines such as real estate facility management and project management. This requires understanding of compliance implications for real estate in four key, interrelated areas:
- Statutory and Regulatory–the laws, regulations and statutes that govern their activities in the countries where they operate.
- Operational and Financial – programs designed to minimise and mitigate enterprise risk.
- Contractual – the terms and obligations set out in various forms of contractual agreements.
- Ethics – responsibility to employees, shareholders, stakeholders, communities and the marketplace.
However, ensuring compliance is a complex undertaking. The sheer number of compliance requirements means that no one person can keep track of them alone. A Thomson Reuters survey shows that more than 1/3 of organisations spend at least an entire day per week tracking and analysing regulatory change!
Adding to the challenge, many real estate portfolios include locations across industries, jurisdictions and geographies, which adds further layers of regulatory, contractual and cultural complexity and risk. Meanwhile, the regulatory environment is constantly evolving, particularly in developing countries where the adoption of new regulations often occurs at a rapid pace. According to Thomson Reuters, there were more than 50,000 regulatory and compliance updates in 2015 alone.
To address the complexity, companies must invest in people, processes and tools to ensure that regulatory compliance objectives are met. Fortunately, an expanding list of standards has been developed to help guide companies in meeting their compliance objectives, including:
- Regulatory standards are rules or directives that are administered by a government agency or national body. Voluntary consensus standards, developed by accredited domestic and international bodies, are “highly-recommended” but not mandated by law. These standards provide guidance on “what needs to be done”.
- Guidance and technical standards provide a framework or best practice to ensure quality of service or products, while management system standards outline a set of procedures that can be followed to meet objectives. These standards provide guidance on “how to do it”.
For a more comprehensive look at the various standards, view JLL’s International Standards Guide.
Meeting compliance requirements is a rigorous and complex task, which requires extensive research, a robust strategy and careful actions. Whether a company has just commenced its journey on the path of compliance or already has a strong program in place, there are many resources available that can be used along the way. Consulting a compliance professional can be a good first step.