2nd CMS Compliance Barometer: Companies step up their compliance activities

• CMS Compliance Index climbs by 3.8 points
• Companies are creating better compliance structures after learning lessons from
  recent scandals
• Compliance officers continue to see significant shortcomings in compliance
  awareness among employees and Management

Berlin – When it comes to compliance issues, German companies are more professionally organised and better resourced than last year. However, significantly fewer companies feel that their compliance system gives them adequate protection against risks. Those are the findings of the representative cross-sector survey for the CMS Compliance Barometer, carried out for the second time by commercial law firm CMS Germany. The CMS Compliance Index rose appreciably by 3.8 points compared to the previous year and the findings were consolidated into a score of 67.9 out of a possible 100 points.

“The Compliance Index measures the extent to which compliance is embedded in Major companies. In view of the various compliance scandals that have come to light recently, the increase in this year’s index is a clear indication that companies are attaching greater importance to compliance and have introduced specific measures in this area,” said Dr Harald W. Potinecke, partner at CMS and coordinator of its German Compliance Group. For the survey, leading market research institute Ipsos conducted anonymous interviews with a representative sample of compliance officers from 176 large companies (with at least 500 employees).

More companies with their own compliance department

An increasing number of companies are setting up departments solely to deal with compliance matters. In 2015, 28% of the companies surveyed had a dedicated compliance department; by 2016, this figure had risen to 36%. However, for many employees compliance is still not their main role. In three out of four companies, compliance activities are carried out by employees from other divisions, in most cases from the legal or controlling departments.

The number of companies with a code of conduct or compliance guidelines has increased compared with the previous year, and just over two thirds (69%) of companies now have a training programme designed to communicate behavioural requirements around compliance. Last year, only 46% of the surveyed companies offered a compliance training programme.

Companies guard against crisis situations

Companies are much better prepared for crises than they were in the previous year. 88% of the surveyed companies have now defined clear lines of responsibility to help them coordinate and resolve suspected cases and actual breaches (2015: 79%). Similarly, 78% of companies have created workflows and checklists for use in crisis situations, and half of the companies surveyed have issued guidelines on dealing with investigating authorities. The number of companies conducting internal investigations has also increased significantly, from 51% in 2015 to 62% in 2016. Compared to last year, companies are now much more likely to draw on the services of external providers in their investigations – almost half the companies surveyed carry out internal investigations using external advisors.

Mid-sized companies underestimate compliance risks

Risk awareness among companies has also increased significantly compared with the previous year, but only 49% of the surveyed companies (2015: 63%) feel that their existing compliance system enables them to deal effectively with risks. Data protection remains the greatest compliance risk for respondents. 28% of those surveyed stated that data protection is the biggest risk facing their company (2015: 22%). While competition law issues and corruption are less of a compliance priority for mid-sized companies, major companies take corruption and competition violations very seriously, especially in view of the potential for fines that could threaten their very existence. “This shows that mid-sized companies still aren’t taking corruption and competition law seriously enough, even though these issues often present the greatest risks in practice. SMEs should therefore review their priorities and risk analysis processes as a matter of urgency,” advised Dr Tobias Teicke, compliance expert at CMS in Berlin. In contrast, companies are increasing their focus on special issues such as data security and industrial espionage: 22% of surveyed companies now state that data security and industrial espionage are among the three biggest risks they face – up from just 6% in 2015.

Compliance awareness still lacking among Management

Overall, companies see themselves facing even greater pressure than in the previous year. The
respondents regard increasing statutory regulation, the growing importance of special issues, ever tougher liability standards and the expectations of business partners as key compliance challenges going forward. But pressure is not only coming from the state: 68% of the companies surveyed believe it is more important than ever to be able to provide proof of a functioning compliance system to business partners. The existence of a dedicated compliance system is also becoming increasingly relevant when doing business with companies in other countries.

Many compliance officers believe their colleagues present the greatest challenge: 86% of those surveyed say that the biggest internal challenge is establishing genuine awareness and acceptance of compliance issues among employees and company management. Only 31% of the surveyed companies see a real awareness of compliance issues among their employees. “Compliance needs to start in the minds of employees. The success of a compliance system is highly dependent on making employees aware of proper conduct, and ensuring that
compliance rules are fully embedded and lived every day,” said Florian Block, compliance expert at CMS in Munich. Management’s awareness of compliance issues is also now viewed more critically by the officers surveyed: the recorded level of compliance awareness among management is down to 81% from 88% in the previous year.

The survey and the CMS Compliance Index are published annually, providing a comprehensive overview and insight into the current state and progress of compliance in major German companies.

Press Contact
presse@cms-hs.com