A Comprehensive Guide to Compliance Management

What is compliance management?

We all know what it means to comply. However, what is compliance management?

Compliance management is the ongoing process of monitoring and assessing systems. Which business management systems: the systems that have been established at your business to ensure you comply with industry and security standards, regulatory requirements, as well as your own internal policies.

Simple enough, sure.

Yet, some organisations believe they can coast by without effective compliance management practices.

Compliance management challenges

Times of regulatory upheaval, though, only heighten the risk of compliance infractions.

Indeed, the years 2009 to 2012 saw more than 50,000 regulations sweep across the G20. That number rose to 50,000 in the year 2015 alone, according to the London-based think tank, JWG.

The cost of adhering to those regulations also rose. Compliance with the Dodd Frank Wall Street Reform and Consumer Protection Act cost banks USD 36 billion, according to the publication, Trade.

The sheer volume of regulations isn’t the only challenge to effective compliance management. A lack of compliance management system software is another.

Without an online compliance management system, teams become more reliant on manual structures, i.e., spreadsheets, Word documents, shared folders, etc.

These home-spun structures don’t, however, scale as firms get larger – their regulatory burden more onerous.

Too many companies are also managing compliance risks in silos – on an individual, risk-by-risk basis. What’s more, individual teams don’t always have the internal (communications) tools they need to properly integrate their knowledge base of compliance risk into their systems for managing risk.

As a result, business managers don’t get visibility into enterprise-wide risk, limiting them to a fragmented view of (sector-specific) risk, despite the high probability of bleed over between business lines.

Compliance management solutions

What can be done, instead, to achieve efficient, cost-effective compliance management? For starters, senior leaders should redirect their company’s compliance efforts and resources away from piecemeal interventions.

Instead, they should focus on implementing an enterprise-wide strategy. Pursuing that strategy entails identifying the areas in the organisation with the highest compliance risk, then recalibrating the compliance function to monitoring those risks.

Here, some concrete steps to turn enterprise-wide compliance management into a reality include developing a single, overarching framework for compliance across the organisation. That unifying thread, in turn, will govern processes taken and tools procured.

But how to achieve a comprehensive understanding of your company’s compliance risk? We suggest the following:

• Run regular risk assessments. The best practice in the field is to run regular risk assessments, particularly after major business changes (e.g., COVID). Barring largescale shocks, businesses should run assessments at least annually, looking out for minor tweaks to statutes, standards, regulations, and court rulings that can affect compliance requirements.
• Factor in third-party risk. Business partners need to be part of this calculus, as well. Vendors and contractors deemed unethical in the past also increase compliance risk. They should be factored into a company’s risk-monitoring framework.
• Move on to analysis. After isolating all potential compliance risks, teams will move ahead and analyse those risks, asking themselves how likely an individual risk is to occur, and the potential impact of that risk were it to become an incident.
• Introduce standardised risk methodologies. Then comes prioritisation. That means triaging risk based on pre-established criteria. Companies don’t have infinite resources to deal with identified compliance risks. Instead, they will have to use a standardised risk methodology, usually a risk matrix, to determine which risks they will seek to control. That assessment is often made based on (proportional) levels of risk.
• Sign off on appropriate risk controls. The compliance decision maker, usually a C-level executive reporting directly into the Board’s audit committee, will need to sign off on risk controls. Those are the actual strategies and tools teams will implement to manage high-level risk and promote compliance, either by mitigating the risk or eliminating it altogether.
• Ensure constant improvement. To make this staged approach work, teams will need to ensure that their processes, policies, and procedures are all standardised. Further, they will need to ensure that the centralisation of the compliance function is reinforced by training and education, as well as clear reporting methods and mechanisms, which keep due diligence and risk assessment efforts current.

The benefits of governance, risk and compliance software

How to operationalise the best-practice compliance management solutions above? That’s where digitised governance, risk and compliance software comes in.These platforms collect real-time risk data from multiple stakeholders, across the organisation. They are also based on ISO standards, as well fully customisable.

With everything from a simple pre-task assessment through to an organisational risk register, the solutions make it easy to capture risk data and provide the analytics to derive rich insights.

What else? These solutions also provide better bang for your buck, a consistent set of common GRC features that can be used in out-of-the box, safety and security management software.

Relevant features include:

Finally, effective compliance management is most difficult in moments of crisis and regulatory upheaval, like the present. But that doesn’t negate the reality of everyday threats to compliance management.

Understanding those threats is the first step to mitigating their effectiveness. After that, implementing cohesive compliance risk management strategies, in tandem with technology investments, is the best way to capture the risk data that provide the requisite analytics and insights needed to keep your organisation safe and compliant.

Sources: 

Tom Groenfeldt, Forbes: Taming The High Costs Of Compliance With Tech. Available at https://www.forbes.com/sites/tomgroenfeldt/2018/03/22/taming-the-high-costs-of-compliance-with-tech/?sh=531894495d3f.

Norlida Abdul Manab, International Review of Business Research Papers: Enterprise-Wide Risk Management (EWRM) Practices: Between Corporate Compliance and Value Creation. https://www.researchgate.net/profile/Norlida_Manab/publication/267817755_Enterprise-Wide_Risk_Management_EWRM_Practices_Between_Corporate_Governance_Compliance_and_Value_Creation/links/57c2742508aeb95224d749b7/Enterprise-Wide-Risk-Management-EWRM-Practices-Between-Corporate-Governance-Compliance-and-Value-Creation.pdf