Lesson 1: Focus on the Biggest Risks

Planning for 2014 is likely pressing on your mind, or it will be in a short time. You will be faced with answering a key perennial question--how should your organization allocate it’s compliance training budget and what topics should you focus on?

Opinions about which risks are most pressing are often shaped by surveys on litigation, enforcement trends, major scandals, new legislation, and existing compliance requirements. Add in stories told by vendors about what you must be doing, and the picture can get fuzzy.

The problem is that in the heat of a media frenzy or uptick in enforcement, it’s easy to lose sight of some of the most prevalent and pressing compliance risks facing organizations today—HR and workplace respect issues.

These are risks that are common across all your employees and when left unaddressed can destroy your culture and brand reputation. Don’t believe it? Take a page out of the Paula Dean cookbook – her very public racist comments and slurs have caused some real damage to her own brand and the Food Network’s image.  The Food Network just publicly announced that it will not renew Paula Deen’s contract when it expires at the end of the month. And one of her largest sponsors, Smithfield Foods, is also calling it quits with Paula Dean.

Most Pressing Compliance Risks Are HR Related
NAVEX Global’s proprietary database of hotline reports is the largest in the world, providing the best visibility into reported misconduct in thousands of organizations across all industries and companies of all sizes. For the last five years running, by a staggering margin, the most often reported misconduct falls in the category of Human Resources, Diversity and Workplace Respect—this category includes five key areas of risk:

1. Discrimination
2. Harassment
3. Retaliation
4. Diversity
5. Wage and Hour

So how do the numbers stack up? HR tops the list and HR issues are raised more often than all other categories combined.[1] Here is how the numbers break down:

• 69% Human Resources, Diversity and Workplace Respect
• 17% Business Integrity, Bribery, Corruption, Fraud
• 7% Environment, Health and Safety
• 6% Misuse, and Misappropriation of Corporate Assets
• 3% Accounting, Auditing, and Financial

The frequency with which reporters cited HR issues was:

• 4X the rate of business integrity issues like bribery, fraud, or corruption,
• 10X the rate of environmental, health, or safety issues,
• 10X the rate of misuse or misappropriation of assets, and
• 20X the rate of accounting, auditing or financial reporting issues.

Making Sense of the Numbers
When it comes to HR issues, there’s a lot that employees have to say. And the reality is that employees are more likely to experience harassment, discrimination, or a wage and hour violation, than they are to be involved in a bribery and corruption scandal. It makes sense that the frequency of reported concerns would be higher for HR issues. The problem is that many organizations discount the importance of a holistic and comprehensive approach to compliance training by leaving HR training out of the compliance mix.

HR issues are not always small, insignificant matters that can be addressed quickly, or can be swept under the rug. When insufficient attention is paid to these issues, when training is not effective, policies and practices are allowed to continue despite questionable legal positioning, the compliance hit to an organization can be enormous.

A couple major indicators suggest that a focus on HR Issues is vital to a strong corporate compliance program.

• EEOC Charge claims remain at record highs, with retaliation claims topping the charts.[2]

• Retaliation appeared in 38.1% of all charges, followed by allegations of race(33.7%) and sex (30.5%) discrimination.
• Workplace harassment filings represented 24% of all charges filed with the EEOC.

• Nearly 25% of companies in the US and UK reported discrimination as the litigation area that saw the greatest increase in the past 12 months; they expect claims to grow.

• The EEOC’s continued focus on systemic discrimination puts increased pressure on organizations to make sure that their policies and procedures are legal.

• In 2012, 52% of companies cited being hit with Labor and Employment class actions, compared to 26% consumer, 14% securities, 10% mass tort, and 9% antitrust/competition.[3]

• Wage and Hour class actions are the most common employment law class action and average settlements are around $4.8 million.[4]

An Integrated Approach to Compliance Training
As the compliance function continues to evolve, organizations will be pressed to incorporate a broader array of organizational risks under the compliance umbrella. Closer alignment with HR or possibly greater oversight over the most substantial HR risks is likely to be part of the compliance department of the future.

And like other pressing compliance risks, on-line training can help mitigate risks associated with harassment, discrimination, and wage and hour.

Incorporating full-length training (that complies with state laws on training and that is rigorous enough to help develop legal defenses at the state and federal level) should be augmented with short bursts of learning that periodically remind employees about your organization’s expectations. Developing a curriculum map (like the example in the graphic on this page) will help you spread the training throughout the year, and ensure proper coverage of HR issues.

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