To understand what the function of a compliance officer is, before conducting a legal and compliance search for an officer, one must first understand what the term compliance means. The term compliance means carrying out tasks as per a set or a prescribed regulatory framework, or set of rules. In terms of a company, compliance usually works in two systems. First and foremost, there is internal compliance, which the company sets for itself and its officer (such as internal rules and regulations, the frameworks that the HR prescribes, etc), and secondly, the external compliance requirements. The external regulatory and compliance system includes those rules and regulations usually set by various governing authorities such as the Company Laws in place, Securities commission, various other rules, laws, and regulations, etc.
There are many tasks that the compliance officer must fulfil effectively to ensure that the company operates safely and without any glitches. Some of the main duties of the compliance officer are as follows.
1. Managing risk effectively: One of the most important tasks that fall within the purview of a compliance officer, both in terms of legal compliance as well as regulatory compliance is to ensure that they handle risk effectively. By communicating with different levels of the enterprise, such as the level of the employees, with the management, and higher-level executives, a compliance officer's duty includes being able to identify what the major risks that the company faces are, and taking adequate steps to address these risks.
2. Ensure that the requisite controls are put in place: It is not only sufficient to identify the risks that might plague the organization, it is also important to have a system to deal with these identified risks. This is another important role and function of a compliance officer. Not only are they required to identify the risks that the company faces, but they are also required to come up with an effective system to address these risks in a manner that will not affect the working of the enterprise adversely.
3. Ensure both internal, as well as external compliance: As stated earlier, compliance can be either internal or external. There are plenty of external disclosures that a corporate enterprise has to make to regulatory authorities. Some examples of such disclosures may include litigation above a threshold level in case the company invites public subscriptions to their shares, annual disclosures of company accounts, risk disclosures, etc. Similarly, to ensure the smooth working of the enterprise, companies usually have internal systems, checks and balances in place as well. Apart from having to come up with these internal disclosures, the duty of a compliance officer also includes ensuring adherence to such regulatory compliances and disclosure requirements.
Therefore, due to all of these reasons, having a compliance officer is a non-negotiable requirement for a modern company.