Your Compliance Management Can Make All the Difference


Compliance management includes the organization’s processes and policies that have to adhere to applicable rules and regulations. Thus, an effective compliance management can immediately inform the enterprise risk management process of any significant compliance risks. For instance, corruption risk is one of the major issues for multinational corporations.

So in order to be effective, compliance management needs monitoring, measures and metrics that will offer assurance to the board of directors and the executive management who had established these procedures and policies in hope of fostering compliance management process. Without the effective management of compliance risks, the organization is simply reactive, at best, and can be noncompliant, at worst.

For a majority of companies, complex accountabilities based on compliance have developed in an ad hoc manner over period of time. Since new procedures and policies are developed, they are added into the existing management structure, thus forming quite a few elements of compliance management that have become common in many companies. These include, reduced organization transparency, high audit costs, inefficient communication, redundant queries of risk and process owners, lack of automation, outmoded infrastructure and unstable control environments.

Acknowledging these elements as a status quo does come with a cost, since it can contribute to an inefficient and ineffective control structure.

However, the true cost of compliance comprises of three different elements:

1. The cost of efforts when referring to internal compliance that consist of particularly identifying functions that are embedded into the processes.

2. The cost of inadvertence throughout all levels of the organization.

3. And the cost of noncompliance, which includes loss of brand equity, loss or revenue, penalties fines and many others.

If the management would undertake a quality perspective on managing compliance with the same zeal it does with improving other core operating processes, cost could substantially be reduced in key area, since confidence is gained knowing that compliance risks are effectively being managed.

There are however, certain key elements of an effective and efficient compliance program that the board and executive management might want to consider such as:

Board Inadvertence

A positive understanding of over-sighting particular compliance programs and significant compliance risks by the board or by one of its member can help build an effective tone at the top of the hierarchy.

Executive Management Oversight

Management and coordination of the compliance program by an elected senior executive is crucial for an organization that consists of diverse and complex operations.

Reporting Mechanisms, Policies, Procedures and Standards

These particular elements need to be kept up-to-date and should be documented as well as should be communicated to employees throughout the organization.

Due Diligence and Risk Assessment Activities

The process of risk identification should integrate precise considerations of compliance risks. Appropriate subject oriented experts should be responsible for monitoring changes in the environment as well as identifying amendments required in certain compliance risk area(s), for which they are accountable.

In conclusion, companies need to make sure that their established procedures and policies offer a reasonable assurance that the organization is following the processes according to the laws and regulations and internal policies.

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