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How to increase stakeholder value through corporate compliance

Stakeholders know the importance of corporate compliance to a company's success. Properly gauging stakeholders' expectations can help ensure compliance efforts will satisfy them.

Every organization has at least one stakeholder that has an interest in the business succeeding. Stakeholders can...

range from the business owners to government agencies to competitors, and can be instrumental in helping an organization achieve its strategic objectives through investments, knowledge, staffing and influence.

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 But to ensure continued stakeholder support, business leaders must consistently demonstrate their commitment by analyzing external and internal environments to ensure that the organization is addressing the right issues and achieving its objectives. Sharing the results of these analyses with stakeholders helps maintain positive relationships by managing their expectations and agreed-upon objectives.

Increasing stakeholder value is the goal of these activities and is necessary to understand the values and issues stakeholders have in order to keep everyone on board.

Achieving corporate business objectives is the best way to increase shareholder value, but there are other useful initiatives as well. One of them is to demonstrate corporate compliance with established standards, regulations and business practices.

How corporate compliance supports stakeholder value

When considering the competitive nature of business, stakeholders want evidence of activities that boost the firm's competitive position. They also want initiatives that reduce risks while also increasing performance and profitability. Finally, they want evidence that the firm is "playing by the rules" and maintaining best practices.

Let's consider one example. Suppose there are two competing manufacturing firms with an equal amount of market share. One firm decides to obtain ISO 9001 accreditation, which denotes a companywide commitment to quality processes. Does this mean the other firm is less productive or provides a lower-quality product? Not at all, but displaying graphics indicating ISO 9001 compliance demonstrates that the one firm is confident enough in its processes that it is willing to be evaluated against a very rigorous worldwide standard.

Would the ISO 9001 firm's stakeholders be pleased about this? Quite likely, although being compliant doesn't necessarily translate into market leadership, sales success or revenue growth. ISO 9001 compliance indicates that the firm has decided it will conform to accepted practices, regulations or standards. It does this to:

  • Demonstrate to stakeholders that the business is run effectively and in accordance with established best practices, standards and regulations;
  • Ensure that the firm is continually improving and refining its business operations, such as staff performance, commitment and motivation;
  • Improve overall performance, remove uncertainties and expand market opportunities;
  • Prove to its customers that the firm can be trusted to deliver on promises;
  • Reduce the likelihood of potential internal and external audits from key customers, suppliers and other stakeholders; and
  • Satisfy requirements from major customers that need evidence of competent performance.

Compliance with Sarbanes-Oxley Act legislation is important, but it's also the law and must be addressed. Lack of corporate compliance with SOX legislation could affect stakeholder value, especially if the firm is cited. From a "good business practices" perspective, SOX compliance is pretty much mandatory. Compliance with ISO 9001 or ISO 14001 (environmental issues) or ISO 27001 (information security) is desirable but not mandatory. Stakeholders may want the organization to pay closer attention to these and other standards to be consistent with their expectations.

Transforming compliance into stakeholder value

There is a range of different business issues that must be addressed to provide stakeholder value. Some stakeholders may have specific focal points, such as IT or manufacturing processes. Others may take a broader, more strategic view. Assuming you want to increase shareholder value through compliance, the following steps can simplify the process.

Understand your stakeholders' interests in the business. Make sure you know their expectations, e.g., "more sales" or "better customer service" or "faster product delivery." Once you know their interests, figure out what needs to be done in order to achieve them. This may include the need for compliance with specific laws, regulations and standards.

Understand stakeholder influence on your culture. Your organization and its value set are key ingredients for success, and stakeholders can influence these values. Once you have identified your stakeholders' expectations with regard to the business culture, examine how corporate compliance initiatives can help satisfy them.

Listen to your stakeholders. Successful organizations typically get their energy, values, attitude and approach to the business from senior management, and this can also include stakeholders. Find out what your stakeholders expect, and deliver it.

Beyond simply obtaining certification of compliance, organizations must consider investing time and resources to stay compliant and demonstrate a commitment to continuous improvement.
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Stakeholders can reinforce core value. Stakeholders may have a strong influence on the company's core values, especially if they were involved in the firm's formation and launch. Corporate compliance may be a very important core value to stakeholders, and it's essential to know that.

Assess and benchmark compliance. How does a firm know it's compliant? Organizations can assess their compliance by engaging qualified third-party organizations to evaluate and certify compliance with specific standards and practices. Documented evidence of compliance can be shared with stakeholders.

Obtain certification of compliance with appropriate standards. Support for legislation, regulations and standards such as the ones cited in this article can demonstrate a commitment to corporate compliance. Beyond simply obtaining certification of compliance, organizations must consider investing time and resources to stay compliant and demonstrate a commitment to continuous improvement. These items can all reinforce stakeholder value.

Demonstrating a commitment to increasing stakeholder value is an important part of running a business. Achieving compliance with recognized industry benchmarks further demonstrates a commitment to the firm's success. Astute stakeholders recognize the importance of compliance to the company's success. Be sure to understand your stakeholders' expectations so your compliance efforts will satisfy them.

Paul F. Kirvan, FBCI, CBCP, CISSP, has more than 20 years' experience in business continuity management as a consultant, author and educator. He is also secretary of the Business Continuity Institute USA Chapter. Let us know what you think about the story; email editor@searchcompliance.com. Follow @ITCompliance for compliance news throughout the week.


This was last published in July 2010

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