3Ps of Stepping Up Your Compliance Program - People, Process, and Product

Introduction

Amid growing pressures from corporate boards and top management for a strong compliance posture, massive regulatory fines and penalties continue to make the headlines.

Earlier this year, the US Securities and Exchange Commission (SEC) slapped more than $81 million in penalties against 16 firms for their failure to maintain and preserve electronic communications. In August 2023, the regulator imposed $289 million in penalties on 11 Wall Street firms for “widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications.”

The first question that comes to my mind is: Could this have been avoided? Yes, of course!

For a successful and robust compliance program, it is important to level up the three core elements – people, process, and product. These are the critical building blocks of not only compliance but also the overarching governance, risk, and compliance (GRC) program.

Let’s look at how organizations can improve these three elements:

People

For a compliance program to be effective, it is essential that not only the compliance team but also employees across departments and business units are aware of the different compliance mandates, regulatory updates, and actions that can potentially lead to compliance violations.

It is important to note here that the “people” element is also crucial from a regulatory standpoint. In the US, laws and regulations such as the Sarbanes-Oxley Act (SOX), Dodd-Frank Wall Street Reform and Consumer Protection Act, and others hold compliance officers and executives accountable for non-compliance or compliance violations. Earlier this year, the Financial Crimes Enforcement Network (FinCEN) imposed a civil penalty of $100,000 on a former compliance officer for “willful violations” of the Bank Secrecy Act (BSA) and its implementing regulations.

Here are some of the key measures that organizations can take to build a compliance-first workforce: 

• Document regulatory and policy requirements
• Define and document employee responsibilities and accountabilities for ensuring compliance depending on their role
• Conduct compliance training to improve employee awareness
• Establish open and effective communication channels that help employees promptly raise any issue or concern
• Encourage reporting of potential violations, such as misconduct, fraud, etc., even anonymously

Process

Establishing and reinforcing robust, well-defined processes—compliance framework, strategy, policies and procedures, and more—are critical for a successful compliance program. In today’s rapidly evolving regulatory landscape marked with frequent new regulations and regulatory updates, the agility of the compliance program is particularly important. Organizations must embrace a responsive and agile approach that enables them to easily revise corporate policies and controls in line with regulatory changes.

An important process of compliance management is implementing and monitoring organizational controls. Controls could range from regular fire drills for employee safety and hotlines for reporting abuse or discrimination to due diligence of third-party vendors to ensure their adherence to compliance. Organizations should have well-defined processes to regularly test and monitor these controls to proactively identify and address any gaps or weaknesses.

Product

Technology-based software products are the most important element for ensuring continuous compliance in today’s complex regulatory environment. Technological breakthroughs have triggered a paradigm shift towards automated, autonomous compliance. Organizations should embrace and adopt technological advancements and automate compliance processes wherever possible. Automation enables compliance managers to eliminate cumbersome administrative tasks and instead focus their time and attention on more value-added activities, such as analyzing audits to identify areas of improvement.

Here are some areas where organizations can benefit from technology-based software products:

• Simplified Relationship Mapping

  A strong compliance program is supported by a well-mapped-out view of various regulations and regulatory requirements, policies and procedures, risks, assets, controls, and business functions. Organizations can leverage technology-based software solutions that enable them to establish the relationships between these elements in a centralized repository for a holistic, 360-degree view of the compliance posture.

• Optimized Control Environment

  The effectiveness of a compliance program is directly related to the efficacy of organizational controls. Organizations today need to adhere to multiple regulations, which often result in duplicate, overlapping, and even conflicting controls. While managing such a complex control environment is already daunting, the challenges are exacerbated when organizations rely on a manual, excel sheets-based approach that inevitably results in oversight and blind spots.

  Strengthening the compliance program requires streamlining the control environment. This can be achieved by harnessing the power of automation and AI-powered tools, which help perform automated, continuous testing and monitoring of controls, and gain insights into duplicate and redundant controls, patterns of under- and over-testing of controls, and more. These actionable insights are critical for optimizing the control environment and enabling better-informed and timely business decisions. 

• Efficient Regulatory Horizon Scanning

  Today’s global organizations are required to be compliant with various laws, regulations, and standards from regulatory authorities worldwide. Given the rising number of new regulations and frequent regulatory updates, staying on top of the fast-evolving regulatory landscape has become extremely challenging. AI-powered tools help organizations simplify the process by regularly scanning the regulatory horizon to capture relevant updates and alert concerned personnel. These solutions further accelerate the compliance process by providing insights into the impacted policies, controls, and business functions.

• Systematic Issue and Action Management

  Technology-based solutions help streamline capturing, investigating, and resolving all non-compliance issues. It accelerates issue management and reduces the repeat occurrence of issues through a closed-loop remedial action process. AI-powered capabilities can enhance the process by providing recommendations for categorizing similar issues and action plans based on past issues. Automatic alerts and notifications, delivered to the appropriate personnel, keep the process on track and ensure that all issues are taken through timely investigation and remediation.

• Timely Reporting

  Organizations need to regularly provide comprehensive reports to the board, regulators, investors, and other stakeholders to demonstrate their strong compliance posture. Technology-based solutions can standardize and automate the reporting process by enabling organizations to generate reports based on key compliance metrics and powerful dashboards that provide real-time visibility into the overall compliance status.

  For a deeper dive into the key strategies that can help you avoid compliance fines, download our eBook “How Strong Is Your Compliance Program?”

How MetricStream Can Help

MetricStream Compliance Management helps organizations adopt an integrated approach to ensure compliance with cross-industry regulations in a manner that minimizes redundancies and costs while strengthening visibility into compliance posture. It streamlines various compliance activities and processes, including:

• Mapping regulations to processes, assets, risks, controls, and issues
• Identifying, prioritizing, managing, and monitoring areas of high compliance risk
• Performing control testing and monitoring
• Creating and communicating corporate policies
• Identifying, capturing, and managing regulatory updates
• Generating reports with drill-down capabilities

Want to see it in action? Request a personalized demo today!