At one point, Uber was the epitome of how start-ups can clock up disruptive and exponential growth. At the very next moment, the smooth sail appeared pretty much tumultuous, especially for a venture that had seemingly conquered the peak.
Putting an otherwise shining beacon for aspiring tech start-ups to shame at the beginning of 2017 was a host of female engineers uncovering the rampant and formidable practice of sexual harassment in the enterprise.
The whistle-blowing was then followed by an investigation of alleged Foreign Corrupt Practices Act (FCPA) violations, CEO exit and a disclosure of data breach of 57 million customer records.
While the disclosures led to a tsunami of shockwaves, it is crucial to also pinpoint that the CFO of Uber had quit back in 2015. The company dragged the next two years with the remaining top-level finance executive, the ordeal only ending in his exit as well. The new CEO was then left looking for a CFO, in order to bring in about some “adult supervision.”
Startups, in their effort to acquire super growth and expand across diverse markets, have become vulnerable to a host of compliance and ethics risks. In fact, the faster a young venture grows the quicker they run the risk of being struck down with the compliance hassles.
Prosecutors are not influenced by the stellar growth figures. And instead, can easily examine if the model is working and in case it is not, identify the actual pitfalls that one would wish to keep under the wraps.
The compliance paradigm: omnipresent across the organization
Ethical compliance will fail an organization if it is made to be the sole responsibility of a select few. While the risks of non-compliance run heavy, startups would require certain company-wide overhauls in order to get it right.
People: lookout for an expert
Oftentimes, the workings of present-day, early-stage startups may resemble different people juggling several hats, all at once. While not conforming to a traditional corporate hierarchy may work in the favour of a young enterprise for a little while, certain roles and profiles warrant special knowledge and expertise. The job of a CFO would be a prime example.
It is not a common sight to see CFO as part of the founding team of a young enterprise. The entry of a CFO is marked at a much later stage in the overall journey of a start-up.
However, instead of limiting a CFO’s role to one bringing about adult supervision, a start-up can expect to gain a lot by getting an expert for the job. The finance officer is not only the custodian of wealth but also helps businesses keep a clear conscience.
Presence of a CFO ensures crucial tasks like compliances, accounting, looking over the regulatory framework of businesses, amongst others, are taken care of from the very first day.
The financial officer brings in crucial insights, helping start-ups take decisions meant at ushering the organization to optimum growth and development. In order to get the compliance and ethics right, start-ups should get the right person, with an expertise and required skill-set to handle the job.
Procedures: it is not about ticking checkboxes
When it comes to ethical compliance, there is a stark difference between policies and procedures. While policies may govern the very core of start-up operations, procedures allow for the fulfilment of these policies.
For instance, as a policy a start-up may not indulge in bribery, unlawful sharing of data or customer information etc. Procedures, as means to an end, may vary for different business units, governed by the various socio, economic and political environment of different geographies.
Oftentimes, startups view compliance as a mere exercise of ticking off the required checkboxes. While this approach may help them get through the initial stage, they risk a head-on collision with staggering scrutiny once greeted with the growth.
Instead of focusing only on the product or customer acquisition, startups need to have the right processes in place.
Drawing a clear input and output layout, installing checks at various steps, overseeing procedures that enable such policies will help start-ups make compliance an integral part of the very fabric that constitutes the organization.
System: automating ethical compliance
In the age of tech innovation and disruption, there is no reason why ethical compliance needs to be a rigid, tedious and time-consuming task for start-ups. In fact, a host of available software and systems aim to simplify compliance for startups.
Young ventures can deploy management information systems, in order to facilitate tracking. Start-ups can further incorporate and analyse key data, such as audit reports, hotline statistics, compliance exception reports, transactional records etc to gauge any risks in compliance.
Additionally, start-ups can collect and study data regarding negative mentions in various mediums, social media sentiments about the brand and other data sources, to better understand the attitudes and perception of people.
This information, when made available to different teams and verticals, will bring in more transparency, also ushering in a culture of compliance and respecting ethics in the workforce.
The core of compliance: communication and collaboration
Ethical compliance for start-ups cannot exist in silos. Different teams comprising the start-up should efficiently work with each other, in order to ensure compliance. Employees look up to founders and others in key leadership positions to lead by example and make ethical compliance a priority.
When the CFO and CEO not only insist upon compliance but also walk the talk, it would inspire the workforce too. At the same time, it is important for people in leadership positions, especially the CEO and the CFO to be accessible and demonstrate a willingness to listen and resolve any conflicts, efficiently.