The LRN ethics and compliance risk management practices report

The LRN Ethics and Compliance Maturity Model
The preceding discussion provided a high-level view on adopting best practices across the
entire ethics and compliance risk management cycle, but more importantly, how to begin the
transition to becoming a self-governing enterprise. LRN has developed a far more detailed
roadmap that spells out a four-phase program to mature a company’s ethics and compliance
process, moving it step by step towards a values-based corporate culture.
This model recognizes that companies pass through stages on the way to ethics and
compliance maturity. The model is thus based upon a progression from compliance to
ethics divided into four segments or levels, each of which is characterized by numerous
common practices and activities. While at the first two levels, companies focus on mastering
compliance, as follows:
• Little c companies – These companies are just getting started on the journey; their focus
is on implementing the basics of sound compliance program to ensure regulatory and
legal compliance.
• Big C companies – These companies have been able to implement full-fledged
compliance programs and high visibility initiatives within the organization.
Next, ethically-sensitive companies are those that are ready and willing to invest the energy
and commitment to go beyond the compliance phase, implementing numerous steps that
focus on embedding ethical values and principles into company policies and the workforce.
• Little e companies – These companies have highly evolved compliance capabilities that
drive adherence to corporate policies and rules as a means towards managing risk.
• Big E companies – These companies have leadership that recognizes that rules can only
do so much; they move toward fostering an ethical culture as the best prescription for
enduring success. They make the highest commitment to a “do it right” philosophy that
bolsters a self-governing culture. They view ethics and compliance as part of an overarching
business strategy to drive company performance.
The chart in Figure 1 offers a brief description of the four maturity phases and their
distinguishing characteristics of the ethics and compliance program.
LRN Market Maturity Model – A New Perspective
Figure 1
The transition from a little c to a Big E company requires many building blocks: executive
sponsorship, oversight, education, and well established policies. The maturation of the
ethics and compliance program is accompanied by increasing sophistication in its program
activities. As the companies mature, they typically expand their ethics and compliance
LRN | 2008 Ethics and Compliance Risk Management Practices Report | 42