COMPLIANCE has long been a daunting task for businesses worldwide. From tax filings to financial reports, business registration and more, there is no doubt that all of these have caused headaches to business owners, accountants, and auditors every fiscal year. In fact, some people have started viewing these measures negatively, as exemplified by the quote, “Compliance is like a game of chess, except there are no winners, only people who don’t get fined.”
This begs the question: Can we convince business owners that compliance can be a catalyst for positive change? Beyond avoiding fines and penalties, compliance brings about benefits that can significantly impact a business’s success. By adhering to legal and regulatory requirements, businesses can enhance their reputation, mitigate risks, improve access to financing, expand into new markets, and foster a more responsible corporate culture.
How do we shift the mindset from mere compliance to a strategic advantage? The answer lies in recognizing that compliance is not just about avoiding penalties; it’s about building a strong foundation for sustainable growth. Embedding compliance into the core values and operations of a business allows companies to create a culture of integrity and accountability.
However, it’s also crucial for regulatory bodies to play a role in making compliance easier and more beneficial for businesses. This is where initiatives such as the Enhanced Compliance Incentive Plan (ECIP) of the Securities and Exchange Commission (SEC) demonstrate the potential for such policies to positively impact the business landscape.
Since the release of SEC’s amnesty program in 2023, there has been steady progress towards encouraging regulatory compliance. Extending an olive branch to non-compliant corporations, the program provided an opportunity to rectify violations with reduced penalties. The program was a significant and successful first step towards making compliance easier, with 81,700 companies availing in 2023. This, along with the push for digitalization through the Electronic Filing and Submission Tool, has significantly streamlined the compliance process and made it more accessible.
After the amnesty program ended in 2023, the SEC started imposing higher revised fines and penalties through SEC Memorandum Circular (MC) 06, series of 2024, to encourage strict and habitual compliance. Notably, this was the latest modification to the schedule of fines and penalties since the SEC guidelines on the imposition of fines and penalties for non-compliance with reportorial requirements were released in July 2002, 22 years ago.
The latest breakthrough toward pushing businesses to embrace a new mindset is the rollout of the ECIP. Through MC 13 -2024 on Aug. 30, 2024, the SEC once again affords non-compliant corporations another opportunity to remedy their violations at lower fees. Non-compliant corporations, including those placed under “delinquent” status, may settle unassessed or unpaid fines and penalties for a reduced fee of P20,000. Meanwhile, suspended and revoked corporations may settle 50 percent of assessed fines and pay the petition fee of P3,060. This is provided that applicants do their part and submit the corresponding supporting documents from Sept. 2 to Nov. 20, 2024.
The ECIP offers incentives for compliance, demonstrating that it is not only a regulatory requirement but also a strategic opportunity. In fact, the SEC itself, as a regulating entity, stated that it “continuously desires to afford businesses an opportunity to be in good standing relative to their reportorial requirements.” Allowing non-compliant businesses to restore their standing provides a pathway for redemption and encourages a more proactive approach to compliance.
If compliance were easy, there is no doubt that most businesses will choose to adhere to regulations without hesitation. However, the reality is that compliance can be complex, time-consuming, and costly. For businesses that fail to comply the first time, the consequences can be severe, creating a domino effect that makes it even harder to achieve compliance in the future.
In contrast, continuous compliance creates a positive ripple effect. Establishing a foundation of strong compliance not only creates a more streamlined and efficient operation but also eases the burden of adapting to future regulatory changes. This makes it easier for them to integrate with partners, suppliers, and customers, fostering stronger relationships and driving growth.
The ECIP serves as a valuable tool in this journey, sending a clear message that the regulations aren’t in place to make conducting business more difficult but rather a framework for a better business environment. This demonstrates the government’s commitment to supporting businesses while also ensuring that they adhere to important regulatory standards.
With the SEC making compliance easier, it also falls upon businesses to take proactive steps to embed compliance into their corporate culture. According to a Forbes article titled “Creating a Culture of Compliance: Why All Successful Businesses Must Do This and Where to Begin,” fostering a culture of compliance requires a top-down commitment from leadership.
As a partner for audit and assurance for P&A Grant Thornton, I’ve witnessed firsthand how businesses that prioritize compliance can achieve significant benefits. Our role goes beyond simply helping our clients comply with requirements — it also involves providing strategic guidance and support to help them build a strong compliance culture.
This includes setting clear expectations, providing adequate training, and implementing effective compliance programs. Additionally, businesses should encourage open communication and a culture of reporting misconduct, ensuring that employees feel empowered to raise concerns without fear of retaliation.
Adhering to the ever-changing regulatory landscape will come naturally when compliance is integrated into the fabric of the organization. Cultivating a culture of compliance allows employees to understand and adhere to compliance standards; they can work more effectively, identify potential issues early on, and make informed decisions that align with the company’s legal and regulatory obligations.
The future of corporate compliance in the Philippines looks promising. I commend the SEC for these initiatives that make doing business in the country easier, faster, and more convenient. As businesses continue to evolve and adapt to a changing regulatory landscape, it is essential that they prioritize compliance not only for compliance’s sake but as a strategic imperative. Let us play our part in ushering in this new era for corporate compliance — one where it isn’t seen as a hassle but rather a necessary cornerstone for success.
Yusoph Maute is a partner for audit and assurance at P&A Grant Thornton. One of the leading audit, tax, advisory, and outsourcing firms in the Philippines, P&A Grant Thornton is composed of 29 partners and 1,500 staff members. We’d like to hear from you! Connect with us on LinkedIn, like us on Facebook at P&A Grant Thornton, and email your comments to [email protected]. For more information, visit our website at www.grantthornton.com.ph.
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