Mitigating Regulatory Risk with Integrated Compliance Management Approach

Introduction

The growing focus on data privacy and protecting the rights and interests of customers and key stakeholders has resulted in a flurry of regulations at the global, national, and state level. The already complex regulatory landscape that organizations are required to wade through saw a fresh wave of regulations and numerous regulatory updates in the past year due to the COVID-19 pandemic.

To put things in perspective, banking sector companies today have to handle an average of 220 regulatory alerts per day compared to just 10 regulatory alerts per day back in 2004. The numbers are expected to only surge going forward as regulators will spare no effort to protect against the risks posed by rapid digitalization, volatile geopolitical environment, and other uncertainties.

Government regulations get translated into corporate policies which form the very foundation of a strong compliance program. With the mounting number of regulations and regulatory updates, ensuring an effective compliance management program has become a daunting proposition for organizations. A considerable number of firms still use the traditional approach and often end up in different policies, templates, and layouts that are scattered, inconsistent, and redundant, leaving most of the employees unsure about the latest policy applicable to them.

Regulatory Risk Mmanagement

Regulatory risk management is the proactive process of identifying, assessing, and mitigating the financial, operational, and reputational risks that changes in laws, regulations, or standards may pose to a business, industry, or market.

Integrated Compliance Management

To mitigate regulatory risk in an efficient manner, organizations need to adopt an integrated approach to compliance management. But how?

There is no one-size-fits-all approach to compliance. It depends on each organization’s unique set of requirements which depend upon multiple factors such as the industry it operates in, the number of regulations that it must comply with, the maturity of the compliance program, the jurisdiction it is based out of, and many more.

However, there are certain core elements of a compliance program that every organization follows:

• Obligatory Rule Mapping: Creating and maintaining a repository of regulatory obligations and mapping them to policies, risks, controls, and processes.
• Regulatory Change Management: Identifying, tracking, and analyzing regulatory changes and assessing their impact on business.
• Compliance Risk Assessment: Identifying compliance areas within the organization that are high risk and then managing and monitoring those high-risk areas on priority.
• Compliance Control Assessments: Testing and continuous monitoring of compliance controls to ensure their effectiveness and alignment with evolving regulations, policies, and standards.
• Policy and Document Management: Creating, updating, and aligning policies with evolving regulatory requirements and ensuring that employees, third-parties, and partners are aware of the latest applicable policies.
• Case and Incident Management: Establishing consistent procedures for case and incident planning and administration, recording, triaging, routing, investigating, tracking, and closure.
• Compliance Advisory: Evaluating compliance functions to identify any loopholes or gaps, preventing compliance breaches, and devising mitigation and remediation measures in a quick and efficient manner.
• Regulatory Engagement Management: Managing various regulatory engagement activities, including examinations, meetings, and requests for information, and engagement-related documentations.

These processes, along with the technology that supports them, a common data architecture, and a risk-based approach, enable organizations to respond in an agile manner to the fast-changing regulatory landscape.

Having said that, a strong compliance program is one that is enforced with a culture of compliance across an enterprise. Particularly in the current remote working setup, compliance teams need to be thoughtful and purposeful in building a culture of compliance. A top-down approach is critical to that end—the impetus should come from the executive management and board. Clear policies and procedures, effective communication, along with recognition and disciplinary measures, will help set the expectations for individual employee behavior in the workplace and encourage a compliant mindset.

MetricStream offers a comprehensive suite of products and solutions to help organizations streamline and simplify both regulatory and corporate compliance. The products address multiple aspects of the compliance function, including a centralized library of compliance obligations, compliance assessments, as well as policy management, regulatory change management, regulatory engagement management, and case management. With automated workflows, analytics, and dynamic dashboards, MetricStream products and solutions deliver real-time visibility into the compliance posture of the organization.