Everything You Need to Know About Compliance Management

Importance

Regulations and standards play a crucial role in protecting people and their environment. While some companies find these as impediments to their operations and profit, there is no denying their significance.

The key to success is collaborating with government agencies and industry leaders and creating compliance-related methodologies to abide by the rules that shape the business landscape. Here are the top reasons why compliance management is vital for organizations:

• Facilitates Risk Mitigation – Acquiring a deep understanding of regulations helps compliance officers, risk managers, and legal teams determine, avoid, and deal with business risks. With regular risk assessments that follow internal policies and regulatory frameworks, companies can reduce the likelihood of adverse events and operate more efficiently.
• Upholds Ethical Standards – Ethics focuses on doing what is morally right beyond legal requirements. By incorporating ethical values into the company culture, corporate leaders, middle management staff, and frontline workers operate with responsible and sustainable practices in mind.
• Ensures Legal Protection – An effective compliance management system creates clarity and legal certainty within an organization. Aside from demonstrating their adherence to regulations, businesses can minimize legal risks and protect themselves from expensive fines, penalties, and permanent sanctions.
• Establishes Better Reputation – Demonstrating a commitment to transparency, ethical conduct, and responsible business practices safeguards the brand’s image and integrity. This particularly rings true when more and more consumers prioritize sustainability today.
• Guarantees Competitive Advantage – By looking at compliance as an opportunity instead of a burden, companies can set themselves apart from other industry players. Since trust is effectively built, they can drive loyalty, attract the best talent, and focus on driving growth.

World-renowned Edinburgh Airport and highly acclaimed restaurateur Trippas White Group understand the importance of operating within the legal framework despite its stringency. By upholding best practices, maintaining quality in every single workflow, and utilizing a digital solution that streamlines compliance tasks, these companies ensure safety, security, sustainability, and customer satisfaction.

Components

The first step in compliance management is understanding its key components. These are essentials when creating a framework the organization can use to guide them when executing compliance-related tasks.

Policies and Procedures

This is the foundation of compliance management as it outlines the rules, guidelines, and expectations so employees can ensure lawful and ethical conduct. Policies provide clear instructions on compliance-related matters, including workplace safety, data privacy, and anti-corruption. Procedures detail the steps workers need to follow so they can abide by operational and ethical guidelines.

Policies and procedures should be well-written and clearly defined as these standardize organizational behavior and provide a reference point for employees when navigating complex compliance issues.

Risk Assessment

This process involves identifying, analyzing, and evaluating potential risks that may impact the organization’s operations. By conducting risk assessments, managers can understand the risks better through quantitative and qualitative analysis and prioritize their resources and efforts. Here are some factors to consider:

• Specific regulatory requirements
• Industry standards
• Business processes (specifically deviations from standards)
• External threats (e.g., privacy breaches, environmental-related issues, etc.)

Education and Awareness

Training programs are essential so employees can fulfill their obligations effectively. These inform employees about relevant laws, regulations, internal policies, and the consequences of noncompliance.

Compliance training should be targeted, depending on the industry, the location of the operations, and the workplace culture. Despite the gravity of the subject, companies should deliver engaging courses to increase participation from workers, subsequently empowering them to make informed choices while they execute their daily duties.

Monitoring and Reporting

Companies should be able to track compliance activities, detect potential violations, and take corrective actions as needed.

Regular monitoring involves reviewing compliance processes. It ascertains that every team member follows the established policies and procedures. Reporting mechanisms allow employees to speak up when they observe negligence or outright violations, confidentially or not, without fear of retaliation.

By establishing a robust monitoring and reporting system in place, managers acquire timely insights into the company’s performance and intervene proactively to address issues before they escalate.

Internal Controls

Internal controls are procedures implemented to mitigate risks, ensuring compliance with regulations and standards. These are three main classifications to take note of:

• Preventative controls aim to deter errors from taking place. It includes policies and procedures, employee training, and resource allocation.
• Detective controls are designed to track and investigate nonconformances. Some examples are internal surveillance, reporting, and risk evaluation.
• Remediation means addressing the misconduct or deficiency so that it would not happen again. It involves impact assessments, imposing sanctions, and bridging the gaps in the compliance system.

By establishing robust internal control frameworks, organizations can reduce the likelihood of compliance breaches, enhance operational efficiency, and demonstrate accountability to stakeholders.

Compliance Frameworks

There is an inordinate amount of laws and standards that govern companies across industries. Some are straightforward. Others are more complex. All of them undergo changes as the business landscape evolves. Knowing which applies to the company is a critical step in developing the company’s compliance management system.

• Sarbanes-Oxley Act (SOX) is a federal law in the United States that promotes financial transparency and accountability in publicly traded companies. This regulation requires companies to implement stringent financial reporting and internal control mechanisms to prevent accounting fraud.
• General Data Protection Regulation (GDPR) is a European Union regulation that protects the privacy and data rights of EU citizens. It impacts a wide range of industries, such as tech, healthcare, and e-commerce, to name a few.
• Health Insurance Portability and Accountability Act (HIPAA) protects patient’s health information and ensures the security of electronic health records (EHRs). This 1996 regulation requires healthcare providers, health insurance plans, and clearinghouses in the US to maintain confidentiality during the handling, storage, and transmission of patient information.
• Information Security Management Systems (ISO 27001) is applicable to all organizations that aim to manage and mitigate information security risks.

• Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 to reform the US financial industry in response to the 2008 financial crisis. Dodd-Frank protects consumers from abusive practices, particularly in trading, mortgage lending, and payday loaning.

Best Practices

Regulatory challenges are inevitable. However, with a firm foundation and carefully thought-out systems, the company can comply with these laws and sail through regular audits. These best practices can also help:

• Stay Informed – It is hard to keep up with constantly changing regulations. It is even more complex when the company operates in different regions. However, companies can keep abreast of new laws or updates by subscribing to industry-related publications, participating in forums, and engaging with compliance experts.
• Conduct Regular Audits – Schedule internal audits quarterly or biannually, focusing on key risk areas. Aside from standardizing the process, hire qualified and objective personnel to document and report the findings to all stakeholders.
• Get Support from Corporate Executives – Leadership buy-in is vital for the success of any business initiative. Top management can demonstrate their commitment to various compliance efforts through adequate funding and staffing. They will also be able to hold employees accountable when they lead by example.
• Foster a Culture of Compliance – The only way to reinforce compliance principles is through continuous education and skills development. Comprehensive compliance programs should not just cover up-to-date regulations, standards, and internal policies. These should also be tailored to different roles within the organization.
• Utilize Technology – Invest in software solutions that monitor daily activities, document incidents, identify and evaluate risks, generate reports, and keep vital records. By streamlining workflows, the company can collect accurate data, increase efficiency, and easily share relevant information with all stakeholders.