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Enterprise Risk Management | Compliance Risk Management: Applying the COSO ERM Framework | 25

One issue of note in the DOJ framework is that the overall the data from the confidential reporting system (including
review of the C&E program is expected to include a monitoring and auditing results and other data) should be
measurement of the organization’s culture of compliance, used to identify gaps in the design or execution of the C&E
including seeking input from all levels of employees program. Research has consistently found, however, that
to determine how they perceive senior and middle in many organizations, only a small portion of misconduct
management’s commitment to compliance. issues are reported through the confidential mechanism, so
other feedback and data points must also be considered. For
Finally, in addition to monitoring and auditing, there are other instance, many employees report misconduct to supervisors
mechanisms that provide feedback on the performance rather than use the confidential mechanism. In the majority
of the C&E program. A confidential reporting mechanism of cases, these are handled by the supervisors and others
through which employees and others can report suspected in the organization; however, the data is not necessarily
misconduct involving the organization will identify specific tracked or reported to compliance, so there is no feedback
instances where investigation and remediation are required on C&E program performance. To get this feedback, some
and may identify opportunities to improve the program. organizations have policies requiring supervisors to report
Employees can also use this mechanism to seek guidance and such cases to compliance so they can be tracked and
ask questions about their work and the work environment. analyzed.

When investigations of reported allegations of misconduct Other mechanisms are information from exit interviews —
conclude that there is indeed misconduct, the organization where employees are asked if they have observed instances
should take appropriate steps to respond and to prevent of misconduct in the organization — periodic employee
further similar misconduct, including making appropriate surveys, and feedback from participants in compliance
modifications to the C&E program. Analysis of trends in training.

Table 5.2 Reviews risk and performance
Key • Monitor performance against compliance and ethics metrics and report at the management and board levels
characteristics • Update compliance risk assessments on a periodic basis
• Develop monitoring plans for high-priority risks, assign assurance responsibilities clearly across the three lines,
and set clear performance expectations
• Ensure that internal audit considers compliance risk in connection with its review of entity risk and
performance
• Periodically assess the organization’s culture of compliance
• Ensure that annual C&E program work plans reflect risk assessment (cross-referenced)
• Include appropriate audit rights clauses in third-party contracts to facilitate monitoring and auditing
• Obtain feedback from participants in compliance training, hotline reports, employee surveys, and exit
interviews
• Require that implementation of corrective action plans is an important metric monitored by management and
the board
• Perform root cause analyses for compliance risk events experienced

Principle 17 — Pursues improvement in enterprise rewarded with reduced fines and requirements in resolution
risk management agreements and prosecution decisions.
One of the key indicators of an effective C&E program is a
commitment to continuous improvement. Principles 15 and The CCO should meet periodically with the board, as well
16 explain the importance of using a variety of mechanisms as with the organization’s internal compliance committee,
to identify substantial changes in the organization and its if one exists. Together, they should address the results of
environment and to identify gaps in program effectiveness. performance reviews and the C&E program’s proposed
Merely identifying issues is not enough, however. Action action plan to address identified gaps in C&E program
must be taken to adjust and improve the C&E program. performance, as well as proactive improvements to the
Increasingly, regulators emphasize the importance of the program. In addition, the results of investigations where
organization demonstrating its efforts to review the program misconduct was found should be analyzed to determine root
and take action to ensure that it does not become stale. For cause and what adjustments need to be made to the C&E
many regulators, proactive efforts by the organization may be program and discussed with the respective committee.

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