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The Compliance Index Model

The Compliance Index Model

How to highlight the value added by compliance.

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Senior Manager, Financial Services

KPMG AG Wirtschaftsprüfungsgesellschaft

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Compliance programmes can be expensive. But are they worth the investment? In practice, it is often difficult to measure how successful the related measures are. Their success only becomes evident over time – if at all; and the contribution made by individual measures is often hard to quantify.

Help is provided by the Compliance Index Model. The model is the result of two empirical studies conducted at the Frankfurt University of Applied Sciences with the support of the Frankfurt Institute for Risk Management and Regulation (FIRM). It provides information on which measures help to achieve a higher degree of employee compliance within the organisation. 

The Compliance Index Model (shown in the figure below) is a cause-and-effect model featuring employee compliance drivers on the left side (perceived programme orientation, perceived programme integration, and ethical leadership), employee compliance (Compliance Index) in the centre, and outcomes of employee compliance on the right side (employees’ willingness to report rule breaking behaviour, and compliance risk). 

The impacts (arrows) of these dimensions on one another is measured with the help of standardized employee surveys. Looking at the dimensions and impacts, users can determine which drivers of employee compliance, if improved, would have the most effect on compliance risk.

With a view to making targeted improvements to employee compliance and thus to the Compliance Index, the model can be used to construct concrete, data-driven action portfolios highlighting specific areas of managerial attention and action to make effective use of existing resources such as budget, time and staff. By repeating the measurement at a later point in time, managers can monitor how effective the derived measures have been and thus highlight the valued added by compliance.

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