Best Practices to Strengthen Your Company’s Gift & Entertainment Policies
Gift and entertainment (G&E) policies can be a tricky road to navigate. With the corporate gift market growing at a swift rate, Peter Juhng looks at the best practices every company should implement to improve its G&E policies and avoid unnecessary risks.
In 2022, the SEC surpassed the 2021 enforcement figures as well as the 2020 enforcement figures, with a total of $6.4 billion issued in penalties. Many of these enforcements can be traced back to G&E policies – or rather, their absence.
With the corporate gift-giving market growing by 6.6% annually and SEC fines related to G&E infractions increasing significantly, reducing the risks associated with gifts and entertainment is of growing importance. By 2025, this market segment could increase from $258 billion to $312 billion, which further underlines the need to take all necessary steps to improve company policies
Company G&E policies outline what is acceptable, what isn’t, and why it is so important that employees follow these rules: to avoid breaching anti-bribery laws, which can result in fines or more serious censure. But even with a policy in place, it will be hard to minimize risks without the appropriate implementation measures.
As gift-giving, wining, and dining remain time-honored traditions in the world of business, steering clear of pitfalls that could result in a tangled web of repercussions is more important than ever. Corporate entertainment is a fundamental component of many business strategies, corporate entertainment is often unavoidable. But failing to strengthen company compliance policies is preventable. No matter what a business’s policies currently look like, solidifying its rules can help protect it from increasing risk in an ever-growing market.
1. HAVE A CLEAR AND DOCUMENTED POLICY PLAN
While it might seem simple enough, having a clear and documented plan can be more challenging than it seems. Policies can be confusing or contradict each other if they haven’t been looked over with a magnifying glass. Companies can seek legal counsel or consult experts in the field to get a better understanding of how they should outline their policies. It can become even more complicated if there are offices based in multiple jurisdictions. With laws differing from country to country, the company may have to adjust its policies to each individual base or find an overarching solution for the whole company.
The clearer the policies and approach to gifts and entertainment are, the easier it will be for employees (in every role, at every level) to follow. It can save significant time and money if policies are readily available and do not require an expert to understand. If an employee happens to cross a boundary stipulated in a policy, all the organization’s bases will be covered. Policies can be easily referenced and maybe save a few headaches.
2. INVEST IN COMPLIANCE SOFTWARE
Of the many ways to reduce the risk of breaching gift and entertainment policies, investing in compliance software is frequently the most effective. This could mean investing in an updated version or making a first-time investment. Whatever the challenges that a business may face, it can assist in monitoring employee activity, enforcing company policies, collecting data, and identifying trends.
Finding a system that integrates smoothly and can mold to the company’s needs is also an important consideration. An effective automated compliance program should bolster what is already in place – not worsen the situation. Compliance software reduces human error and identifies suspicious activity before it is detectable by compliance officers. It can also approve or deny submitted requests if they are counter to company policies. Automated systems can also detect abnormal patterns and alert compliance teams faster.
3. IMPLEMENT AN EMPLOYEE TRAINING PROGRAM
Even if a company has instituted clear G&E policies, training employees is critical for boosting their rate of effectiveness. Ensuring everyone within the company clearly understands the rules and expectations helps reduce the risk of breaches occurring. This gives employees a chance to ask questions, clarify policy details, and get an in-depth understanding of what is expected of them. Considering the importance and popularity of gifts and entertainment in the business world, employees will need to be familiar with their company’s compliance rules and have them ready for when they are needed.
Companies using compliance software must also make sure their employees are well-versed in the program – from reporting gifts received or given and entertainment they are partaking in, to understanding how the automated system works with their companies’ policies. A better understanding of the software leads to more willingness to use it, reduces mistakes, and increases the accuracy of records.
4. CREATE A STRONG CULTURE OF COMPLIANCE
A proactive employee base supported by an effective training program is the foundation on which the organization can start building a culture centered around compliance.
Whether a company uses compliance software or not, the compliance team is there to make sure that everything is running smoothly, and that nothing falls through the cracks. Having a team that is precise and has an in-depth knowledge of company policies, laws, and regulations means any discrepancies can be found sooner rather than later. This could save a company from considerable penalties and enforcements, and ultimately from reputational damage and potential loss of business.
The compliance team must also be equipped with a platform that provides an efficient setup to better monitor all employees. This will allow them to pick up on suspicious behavior quickly and let them perform their job at an exceptional level. Integrating compliance software with HR programs is just one of the ways companies can do this, helping to identify where higher risks exist and giving the team access to any previous records relating to gifts and entertainment.
5. BUILDING POLICIES FROM THE GROUND UP
While strengthening company policies that are already in place is an important part of reducing compliance risks, building the right policies from the ground up is vital to a long-lasting and profitable business. When the policies are being written, there are a few key items that should be included to minimize future complications.
Policies should be up to date with the latest G&E guidelines given by the SEC. Understanding the government’s laws and regulations will help a company establish a foundation for its policies and decide on what important procedures should be included. A business should also be knowledgeable of where they may encounter situations that require the reporting of gifts and entertainment. Being aware of specific areas related to their business where employees could face challenges and then tailoring the policies to better fit this, will aid in compliance. It is crucial that a company also recognize what procedures and software will fit their organization the best. Every business has a unique way of operating and so creating policies and using software that molds into this will make it simple to see where strengths and weaknesses may lie.
Even when the rules are clearly defined within policies, actions related to gifts and entertainment always create increased regulatory risk. Studies suggest that companies take heed of a growing market, creating a compliance-centered culture and taking a proactive approach to reducing G&E risks with these key best practices can save a company more than just money. Investing in programs like StarCompliance’s gifts and entertainment solutions helps keep companies confident when building policies from the ground up or strengthening the ones that are already in place.
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