Synopsis

Discuss about the Kmart Australia Compliance Management Systems.

Entities irrespective of their scale or nature have definite commitment and responsibilities towards their numerous stakeholders. As a result compliance management systems become crucial so as to operate as per the regulatory standards and to maintain the quality of its services.  A sound Compliance Management Systems (CMS) help in managing risks and comes under the purview of the Board or Governing council of a respective entity. The paper has reviewed the CMS in practice at Kmart, one of the leading retailers in Australia. By the help of pertinent secondary data information has been gathered and their efficiency has been evaluated. The paper has finally outlined effective recommendations that will be helpful in improving the present state of affairs.

The present internal compliance setup at Kmart can be stated to be a holistic one as it encompasses different policies aimed at diverse areas within the society as well as the organisation itself. Thus compliance requirements have been categorised into internal and external compliance practices. The employees working for the organisation are the ones who are influenced by internal frameworks and the level of compliance. Internal compliance area is human resource policies and other policies of safety within the workplace. The company believes in providing excellent shopping experience to their customers by promoting the human values (Need, 2006). The company adheres to frameworks implemented by the International Labour Organisation (ILO) both within Australia and other overseas locations. Ethical Sourcing Programme by the company illustrates the commitment by the company in respecting the labour codes and promoting human rights. The company also undertakes precaution to reduce risk from fire and related operational activities. Within external compliance parameters include compliance with the law, environmental compliance, record keeping and other associated areas. Measures of sustainability by the company include reducing energy usage, developing the community programme, developing strategies so as to promote eco-friendly operations and safeguarding the health and safety of the employees (Iraldo et l, 2009).  The industry compliance requirements for Kmart stem from the Australian Consumer Law. Since the company is engaged in the retailing sector some of the key frameworks that are obligatory to operate include Competition and Consumer Act, 2010, Australian Consumer Law, Food Standards Code. Moreover the newly enacted Food and Grocery Code of Conduct is also an important law that needs to be abided by Kmart while dealing with suppliers (Bonazzi et al, 2009).

Present Compliance Requirements

Kmart’s operations include general merchandise along with electrical photographic equipments. In the recent past there were several issues related to products and safety of operations. Moreover the company has come under scanner related to sourcing of the products. In this regard the audits carried out by the company indicate that the most common issues include working conditions in the factories as well as attempted bribes. The Workplace Health and Safety regulations in Australia require certain standards that are to be adhered to by the entities while operating. Some of the main areas covered by the Workplace Health and Safety Guidelines (WHS) are scalding from hot liquids/surface/steams, prevention of workplace discrimination and electrical safety (Darnall and Edwards, 2006). Thus it may be seen that the areas most affected include health and safety of the employees and product efficiency. Any such breaches in the compliance will attract penalty and therefore calls for effective mitigation policies.

Implications of non adherence to standards as prescribed by the government include fines and penalties. In cases that involve grave violations licenses may be cancelled. In case breach of standard is found related to safety standards a maximum fine of $1.1 million can be imposed. Companies are also required to comply with mandatory reporting failing which a maximum penalty of $ 16650 can be imposed. Australian Competition and Consumer Commission further direct the companies to immediately stop the circulation of the goods and removing it completely from the supply chain (King and Marks, 2008). Hence it may be seen that there are serious consequences for Kmart in case there is a breach. Apart from pecuniary impact the company will be seriously affected by the impact to the goodwill and brand image.         

The company has implemented Ethical Sourcing Code and follow up audits are conducted so as to ensure adherence to the standards. Another initiative by Kmart is the UGR (Unwritten Ground Rules) that help in creating and maintain a high performance culture within the organisation. Apart from UGRs Kmart has implemented rigorous performance reviews, conferences, updates and learning programme to foster growth and harmonisaiton. In the year 2014 Kmart carried out 1120 audits in the factories of its suppliers (Kmart, 2016). Most common concerns that were identified by the audit were unwarranted overtime and deficient or incomplete records. Importance to product safety can also be gauged from the fact that the company carries out extensive testing of its products at laboratories. The company had recalled four products in 2015 and twelve in 2014. The retail industry is a highly competitive one and any form of negligence can lead to long term damage to an organisation. Kmart thrives to be the most respected retail organisation in Australia by the dint of effective compliance management system both internally and externally. It can be also mentioned that these checks and protections at Kmart is in sync with the organisational culture and value (Brenner, 2007).        

Compliance Management

The research process carried out in understanding the compliance management system at Kmart was essentially a secondary research. Based on the existing articles on compliance management system the paper has articulated the existing compliance management framework as applicable in Australia. The paper has thoroughly analysed the reports published by Kmart in understanding the commitment of the company to sustainability and compliance. The research plan was developed after analysing certain strategy questions. These questions have been illustrated beneath:

What types of sources are suitable for the topic

What is the amount of research needed

Establishing the category of materials permitted for the research

Creating a timetable

Budget for the research was estimated to be $ 100 AUD and it was allocated as per the requirement of the research.

Based on the findings from the report it may be seen that Kmart has been fairly successful in maintaining compliance within the operational sphere. However the compliance management of the company can be further improved by implementing some recommendations as outlined below:

• Increased investment in safety
• Researching the competitors
• Implementing compliance solutions like dashboard, organogram, compliance calendar etc.
• Greater participation from the leadership team  

An efficient compliance management system comprises of three interlinked elements. These elements are respective Board, compliance programme and compliance audit. The purpose of the implementation planning is to enhance the compliance management system at practice at Kmart. The onus of the planning will be on the personnel since they are the cornerstone of any business. Compliance committee will be established after due approval from the Board for implementing and coordinating the plan. As has been mentioned above there are three vital and interdependent elements within the compliance management system. With a view to promote further compliance within the operational sphere formation of a Compliance Committee has been envisaged (McLaughlin, 2007). The plan requires thorough participation from the different managers, officers and employees.             

An effective compliance management system comprises of procedures, training, monitoring and complaint redressing mechanism. As highlighted above compliance solutions in the form of organogram, dashboard and virtual compliance room will be immensely helpful in bolstering compliance practices in the organisation. It may be stated that a formal written compliance programme works well and acts as training and reference tool for different employees (Kothari, 2006). Kmart will also benefit from regular compliance assessment and monitoring. There are various compliance management applications that will help the company in mapping and monitoring the compliance processes across departments. As such the compliance management system comprises of components, documentation and information system.

Evaluation of Present Compliance system

The process of implementation will encompass the elements of personnel, training, processes and administration. The Board of Directors has a significant role in ensuring sound implementation of the compliance management system. One of the significant problems that have been analysed by the audit programme is the cases of bribery. As such implementation of anti bribery programme will go a long way in ensuring success of the organisation (Racz et al, 2010). At the same time it may be opined that ensuring awareness among the employees is crucial in the success of the compliance management system at the organisation. The Compliance Committee, under the stewardship of the Chief Compliance Officer, will be responsible in putting the plan into action. An effective anti bribery programme will be the one that provides detailed workflows and complete integration so that it becomes easy for the officer to enable compliance management at various levels. Training of the associated personnel will be a key process in delivering the needed compliance system in the organisation. Administration process will encompass budgeting as well as resources required for sound implementation (Hopkins, 2011). The budgeting process is an important step and will include pre-budget, budgeting and post-budgeting sessions. The action schedule of the programme has been denoted by the following table:

One of the benchmarks within the compliance systems is the Australian Standard-3806. AS 3806 calls for developing, implementing and maintaining effective compliance programmes within public and private sector entities.  The compliance management system as outlined in the above section caters to the AS 3806 standard since it enforces compliance by the company within the operational sphere. Other than AS 3806 the compliance system as fabricated adheres to the AS/NZS ISO 31000:2009 Risk Management        principles and AS ISO 10002:2006 Guidelines for complaints handling. Implementation of the compliance system will ensure commitment from the top management since it will require the active participation of the board and its subsequent adherence by the employees and other staffs (Brenner, 2007). Moreover such implementation of the compliance system will help in aligning the company policies with the organisational goals.

The paper has analysed the concept behind compliance management system and its subsequent application in one of the most popular organisations in Australia. From effective analysis of data it has been observed that the facet of compliance management system at Kmart is quite effective. However further scope exists for the company in improving the present compliance management system. Keeping in line with organisational mission and vision effective steps have been outlined that will help Kmart in ensuring compliances at various sites and workplaces. Successful compliance system calls for effective monitoring and at Kmart monitoring will involve the participation from the managers and the employees so as to make the process successful in the long run.

Research Process

The steps for the compliance management system at Kmart start with the active participation from the board. After the due approval from the board a Compliance Committee will be established that will be responsible for the implementation of the system at the organisation. Duties and roles will be assigned to key managers and personnel involved in the operations of the company. This will ensure that the programme is carried out without any glitch. Key Performance Indicators (KPI) will be further helpful in analysing the performances of the different individuals associated with the process (Zeng et al, 2007).

Once the system is implemented it is imperative for the organisation to measure the progress. As such the monitoring process will be helpful in scaling the performance of the system and help in devising necessary recourses so as to ensure organisational success. The process of monitoring can be bolstered by the implementation of technology. Another significant element in compliance management is that a compliance manager needs to have sufficient authority so as to access different departments and undertake corrective practices. Moreover constant training and instruction is necessary so as to make the compliance system a successful one (Bonazzi et al, 2009).

Results and analysis forms an important part in enhancing the efficiency of the compliance system. Results and analysis can be drawn from number of complaints, feedbacks and customer response. By the implementation of the compliance system compliance issues, both internal and external, can be improved. For instance Kmart can witness greater adherence to Unwritten Ground Rules that will subsequently improve organisational efficiency and ensure competitive advantage. Safe working environment can also be promoted by virtue of compliance management system (Need, 2006)  

Conclusion

The paper has discussed the issues related to compliance management system and its subsequent application in Kmart. Through effective identification of problem the role of compliance management system has been illustrated. From the discussion it can be observed that Compliance Management System is a continuous process and monitoring of the system at periods is crucial in the long term success of the compliance management system. Relevant standards within this domain have also been identified and recommendations have been outlined that can further bolster compliance management system at Kmart.

References:

Bonazzi, R., Hussami, L., & Pigneur, Y. (2009). Compliance management is becoming a major issue in IS design. In Information Systems: People, Organizations, Institutions, and Technologies (pp. 391-398). Physica-Verlag HD.

Brenner, J. (2007). ISO 27001: Risk management and compliance. Risk management, 54(1), 24.

Darnall, N., & Edwards, D. (2006). Predicting the cost of environmental management system adoption: the role of capabilities, resources and ownership structure. Strategic management journal, 27(4), 301-320.

Hopkins, A. (2011). Risk-management and rule-compliance: Decision-making in hazardous industries. Safety science, 49(2), 110-120.

Iraldo, F., Testa, F., & Frey, M. (2009). Is an environmental management system able to influence environmental and competitive performance? The case of the eco-management and audit scheme (EMAS) in the European Union. Journal of Cleaner Production, 17(16), 1444-1452.

King, W. R., & Marks, P. V. (2008). Motivating knowledge sharing through a knowledge management system. Omega, 36(1), 131-146.

Kmart (2016): Online accessed from https://www.kmart.com.au/social-responsibility accessed on 9/8/2016

Kothari, P., 2006. Integrated enterprise-level compliance and risk management system. U.S. Patent Application 11/407,838.

McLaughlin Jr, M. J. (2007). U.S. Patent No. 7,206,805. Washington, DC: U.S. Patent and Trademark Office.

Need, W. C. D. H. P. (2006). Human resource management: Gaining a competitive advantage.

Racz, N., Weippl, E., & Seufert, A. (2010, July). A process model for integrated IT governance, risk, and compliance management. In Databases and information systems. Proceedings of the ninth international Baltic conference, Baltic DB&IS (pp. 155-170).

Zeng, S. X., Shi, J. J., & Lou, G. X. (2007). A synergetic model for implementing an integrated management system: an empirical study in China. Journal of cleaner production, 15(18), 1760-1767.