Compliance has really taken root in Japan?

Hiroyuki Okamoto

It was not until the Financial Services Agency (then Financial Supervisory Authority) had publicized the first inspection manual for the banks in 1999 on their website and started to conduct on-site inspections for the relevant financial institutions that the katakana transliteration of "compliance”, “konpuraiansu" drew public attention and became widely known in Japan.

Although more than ten years have passed since then, its conceptual origin and historical background have been little studied and clarified so as for us to accurately understand "konpuraiansu " by absorbing not only its letters but its spirit. What is worse, even the exact meaning of the " konpuraiansu " has not been commonly shared nor accepted. Its uncertain concept and vague image has been flooding into Japanese business society and causing misunderstanding to the people who are trying to work observing the “compliance”, which has resulted in our chaos.

Currently does it seem that the term “compliance” has been often heard and spoken in our daily communication unconsciously as if it were originally Japanese word. If I may venture to say, the relevant concept, logic, ideas and history rested behind the "compliance" originated in the western society have not been fully discussed and studied by the financial experts/scholars and the industry participants in Japan.

The katakana transliteration of "compliance”, “konpuraiansu" has been so widely recoginzed in Japan to mean only "regulatory compliance". “Regulatory Compliance” literally means “hourei junshu” (法令遵守). It is very
often used in Japanese as substitute for the katakana loanword of “konpuraiansu".

“hourei”(法令)means “laws and regualtions” and “junshu” (遵守) literally means "adherence, compliance, observance," etc. Coupled with these two, “hourei junshu” (法令遵守) mean "regulatory compliance.” Indeed some cautious Japanese people including myself try to say “hourei-tou junshu” (法令等遵守) by adding “tou” meaning “etc.” after “hourei,” but it still remains misleading.

In less than a decade "compliance" has been recognized as a way of company management and has rapidly spread in the business society, extensively in the financial industry based on the leading guidance of the FSA. However, its definition is still ambiguous and it is still very fuzzy in its concept. Even when the "compliance" had been initially introduced to Japan, no one had tried to tackle this potential issue so seriously as to consider from the national perspective in the light of the future outlook whether such “made-in-USA” compliance should be taken for granted and could be adapted into the Japanese society so smoothly and quickly as to be rooted in there, not causing social disorder.

“Compliance” includes or means not only observing the laws but also observing wide-range social rules, the corporate philosophy of each company, and even business ethics, which covers such multilayered concept.

What the hell is business ethics? Not many CEOs in Japan could answer it in a proper way. Without understanding it could no one conduct compliance management.






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