5 Best Practices to Future-Proof Compliance

For high-performing organizations, the increase in regulations across the world is not necessarily a hindrance, but a key growth trigger. Regulations make it easier for businesses to expand into new markets globally, protect their interests, and grow at a good pace. Moreover, regulatory compliance, when done right, can be a strong competitive advantage that wins organizations the trust of consumers, investors, and other stakeholders.

Having said that, compliance isn’t getting any easier. Regulators are imposing stricter checks, even as compliance laws rapidly evolve and grow in line with fast-paced markets and technology advancements. Meanwhile, the increasing number of non-compliance and fraud related incidents such as falsification of revenues are evidence that simply implementing controls may not be sufficient. New demands and expectations are continuously being placed on compliance functions, including their working techniques and use of technology.

Against this backdrop, what sets high performers apart is the effectiveness of their compliance programs which enable them to leverage compliance as an opportunity rather than a burden. These programs play an important role in defining an organization’s culture - turning complex regulatory expectations into simple business language, meeting senior management’s demands, and helping stakeholders monitor whether or not the desired cultural model in an organization has been achieved.

Mature compliance management programs also catalyze the creation of cross-functional compliance teams that understand the impact of regulatory changes across the organization, and take proactive measures to manage risks. In doing so, they help the business perform better.

As compliance programs continue to evolve, the question is how can we make them future-proof? It is no longer enough to simply react to new regulations or compliance issues as they arise. Organizations need to be one step ahead, predicting risks, establishing controls proactively, and transforming compliance into a strategic function, rather than a tactical one. With that in mind, here are a few best practices that will help organizations achieve a state of future-proof compliance:

 

Define a Clear Compliance Vision and Strategy

“Communicating the organization’s compliance vision, strategy, and values to employees, cus- tomers, investors, third parties, and other stakeholders makes a difference to the ethical culture of the enterprise.”

 
As the regulatory landscape grows more complex, organiza- tions need to have a robust compliance vision and strategy that keeps them focused on what’s truly important – such as identifying and addressing the areas of highest compliance risk, and championing a culture of consistent compliance – all while striving to make compliance processes more efficient, less costly, simple, reusable, and reliable.

In high-performing organizations, compliance management programs are aligned closely to the business’s strategic vision and goals. The focus is on streamlining compliance manage- ment workflows, while also bringing together people, process- es, and technology, and defining clear lines of integration between them.
 
This kind of a strategy ultimately helps organizations create a compliance culture that is sustainable and flexible enough to adapt to future changes in regulations and business opera- tions. It also transforms the way compliance programs are perceived within organizations. Instead of being treated as just another check-box exercise, these programs become an important tool to drive value by protecting the organization’s brand and reputation, and preserving its credibility.

Changing the business’s mind-set about compliance will definitely help them adhere more effectively to legal and regulatory requirements. More importantly, it will turn compli- ance into a competitive advantage, giving the organization a genuine edge in the industry.
 

Leverage Compliance in Strategic Decision-Making

“A mature compliance function has a ‘seat at the table’ in assessing and influencing strategic decisions.”

 One of the biggest advantages of a high-performing compli- ance management program is that it helps organizations drive successful strategic ventures. It enables stakeholders to understand the compliance risks involved in major strategic decisions such as mergers and acquisitions which are typically important as they involve a lot of money. With timely compli- ance and risk insights, stakeholders can better identify the risks that could arise in such ventures, and take steps to avoid reputational or regulatory damage. A high-performing compliance management program also helps organizations assess behavioral risks, monitor the control culture, and integrate security and ethics into the core fabric of the company. All these capabilities make the compliance function an important strategic partner to the business.
 

Enable a Risk-Oriented Approach to Compliance

“Identify the areas of high risk, and prioritize the compliance monitoring program around them.”
 
A risk-based approach to compliance is about building and prioritizing compliance assessment efforts based on the areas of highest compliance risk in the organization. The focus should be on directing compliance resources to the areas of maximum concern. This approach leads to better resource distribution and greater efficiency.

An important aspect of a risk-based approach to compliance is the integration of regulatory requirements with an organiza-
 
tion’s internal policies. This kind of mapping or alignment helps stakeholders determine which business processes and geographies will be impacted by a certain regulation. It also helps them define an action plan to mitigate the associated compliance risks. In addition, it gives them better visibility into issue tracking, helps them understand the reasons behind these issues, identify failed controls, and resolve the problem swiftly by implementing appropriate action plans.

 

Predict and Detect Unknown Risks

“Compliance data is rich in business intelligence, and offers invaluable insights into business processes and performance.”

 
To truly add value, a next-gen compliance management program must adopt a forward-looking approach, focusing less on the issues that have already occurred, and instead looking ahead, anticipating the risks that could emerge, and spotting warning signs.
 
The key to predicting the unknown often lies in data. Most organizations have immense volumes of data that can be utilized to anticipate compliance risks using predictive data analytics and advanced statistical methods. These tools sift
 
through data in near real time, delivering critical intelligence about current as well as emerging risks.

Continuous monitoring and analysis of both structured and unstructured data can reduce risks for an organization in a big way. There are also collaborative compliance tools that can help in correlating different types of risks, and enabling the
 
early detection of compliance issues which, in turn, gives organizations the time and confidence to deal with these issues effectively.

Overall, data analytics are a valuable aid in compliance efforts, feeding useful and timely intelligence back to the organization.
 

Utilize the Compliance Chain to Drive Improvements

“Compliance experts utilize compliance data in ways that add value to their business and industry.”
 
By engaging regulators, auditors, and other stakeholders in compliance programs, organizations can build and maintain confidence in their abilities, and ensure that no compliance effort goes unnoticed. They will be able to provide assurance that steps have been taken to mitigate the risks of corruption, fraud, and non-compliance issues, thereby protecting clients, employees, and third parties. High-performing organizations often go a step further and share the findings of their compli- ance assessments and audits externally as well. These insights can help drive improvements across an industry.

Several countries have implemented an “audit standard” for compliance management programs. As an example, the International Organization for Standardization (ISO) published an anti-bribery management system standard (ISO 37001) to "help organizations fight bribery by establish- ing a culture of integrity, transparency and compliance.” These guidelines provide a solid foundation for organiza- tions to build high-performing compliance programs.

 

In a Nutshell

The global regulatory environment is always in a state of flux. While the US currently mulls over regulatory cuts particularly in banking and financial services, areas like cyber security, corruption, and bribery are witnessing increasing regulatory enforcement across the world. To thrive in this fast-changing environment, organizations need to establish a high-performing compliance management program with a well-defined vision and roadmap.

Achieving future-proof compliance is a state of being aware of possible compliance failures and how they could affect the organiza- tion. More importantly, it’s about positioning compliance to have a continuous strategic impact at the highest levels of the organiza-tion.