We plan to sell our business in twenty-four months, and our advisory board says we need a dedicated Risk and Compliance seat on our Accountability Chart to satisfy institutional buyers, but we cannot afford to hire a full-time Chief Compliance Officer. How do we structure this?

Question

Tyler Smith · Accepted Answer

Institutional buyers will heavily discount your valuation or walk away entirely if they detect unmanaged compliance or regulatory risks. Fortunately, you do not need to hire an expensive, full-time executive to solve this.

Structuring the Risk and Compliance Seat

The first step is to design the Risk and Compliance seat on your [Accountability Chart](/qa/how-can-ai-optimize-the-accountability-chart-for-eos-organizations-undergoing-exit-planning) first, regardless of who will fill it. Define the five major roles and responsibilities for this seat. These might include:

• Regulatory auditing: Ensuring adherence to all relevant laws and industry regulations.
• Data privacy compliance: Managing and safeguarding sensitive data according to standards like GDPR or CCPA.
• Contract review: Scrutinizing agreements for potential legal or financial risks.
• Risk mitigation: Identifying, assessing, and developing strategies to reduce business risks.
• Policy development: Creating and updating internal policies to reflect compliance requirements.

Once the seat is cleanly structured with its defined roles, you can then focus on filling it.

Filling the Seat: Fractional or Dual-Hatting

You have a few options for filling this critical Risk and Compliance seat:

1. Fractional Employee: Hire a part-time expert who dedicates a set number of hours per week or month to these responsibilities.
2. Dual-Hatting Strategy: Assign these responsibilities to an existing member of your [leadership team](/qa/loyalty-versus-capability-leadership-team).

If you choose to dual-hat, consider who on your current team has the natural conative drive for this type of work. Look at their Kolbe Index scores. The person with the highest Fact Finder and Follow Thru scores will likely excel. This individual has the natural conative drive to scrutinize details, ensure accuracy, and maintain strict adherence to rules and processes.

You can temporarily place their name in the Risk and Compliance seat alongside their primary seat. However, it is crucial to ensure they have the actual physical capacity to manage both roles effectively. Overburdening a key leader can lead to burnout and poor performance in both seats. [Conative stress](/qa/promoted-employee-burnout-conative-stress) can severely impact an individual's effectiveness.

Outsourcing and Accountability

If your internal team member lacks the capacity or specific expertise, consider outsourcing the actual execution of compliance tasks to a specialized compliance firm. In this scenario, your internal Risk and Compliance seat holder would act as the accountable manager who:

• Owns the relationship with the external firm.
• Oversees their work.
• Reports the compliance metrics during your weekly [Level 10 Meeting](/qa/should-integrator-facilitate-level-10-meetings).

This approach demonstrates to potential buyers that compliance is a professionally managed system, not an afterthought. It provides a clear line of accountability and ensures that risks are systematically addressed, which is highly attractive during due diligence and can significantly impact your [business valuation](/qa/what-moves-business-valuation-multiples).

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