Steven A. Lauer on the Compliance Department Budget and Value Maximization

Steven A. Lauer on the Compliance Department Budget and Value Maximization

Traditional notions of compliance budgeting no longer apply to today’s rigorous requirements. As a result, the compliance officer needs to make a case for funding, as does every other corporate principal. Necessary to maximizing the value of an "effective" compliance program is establishing the place of compliance in the company’s budget and budgetary process. In this Emerging Issues Analysis, author Steven A. Lauer cautions that shortchanging the compliance function arbitrarily risks greater governmental intrusion into a company's operation than the "savings" so recognized would suggest.
 
The author writes:
 
     Gabe Shawn Vargas establishes a viable basis with which to construct a budgetary foundation for an effective compliance program. See Gabe Shawn Varges, Budgeting and Cost Control Strategies and the Compliance Program, in 1 Carole Basri, Corporate Compliance Practice Guide: The Next Generation of Compliance § 24.01 (Matthew Bender 2009). As valid and reliable as that construct may be, however, it must rest, in turn, upon a more basic concept: the value of such a program. Moreover, in order to serve as the basis for such a program, that value must be agreed upon by the relevant corporate constituencies.
     To determine in advance, however, how much a program contributes--or can contribute--to achieving a company's business goals represents a much greater challenge. Many try to do so by proving a negative, akin to the process suggested in the preceding paragraph, by delineating the effects of compliance lapses elsewhere and arguing, in essence, that "there but for the grace of God go we." Such an argument likely will fall on deaf ears, especially in a trying financial environment such as this. A more positive case will be more successful.
     In short, while addressing the budgetary issues raised by Gabe, work to establish, in the mind of corporate management, the ways in which the compliance department and program assist the company to achieve its business goals most expeditiously and, from both legal and governmental perspectives, securely. Too sharp a budgetary knife can result in cutting off too much, to the company's long-lasting regret.
 
 
 
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