Why Compliance?
Businesses are facing the extreme cost and operational pressures as regulatory bodies are continuously increasing mandatory compliance management system. The financial crisis of 2008 and the rising number of financial frauds being reported of late have pushed the case for further monitoring by regulatory bodies. For businesses though, finance is just one of the areas for compliance management and monitoring. They have to be equally vigilant to compliance needs from a regulatory, financial, operations and human resources perspective. The rules of engagement may differ for each department and there will be a lot of hard work required to implement these systems, but the long term benefits justify the need for such systems. It is not a question of staying under the radar anymore but one of building a culture of practising the values that the organization stands for.
And an increasing number of organizations are already experiencing and reporting these benefits. In a report from Accenture, “Compliance at a Crossroads: One Step Forward, Two Steps Back?”, respondents agreed that
- Compliance does provide benefits and was open to the idea of refining their existing policies for better results.
- They agree that compliance will optimize operations in order to manage a more complex set of risks under tighter resourcing conditions.
- As more Compliance organizations strengthen their operations, meaningful results should continue to be delivered against more complex stakeholder expectations and within a clearly defined mandate.
Benefits of Compliance Management
Organizations that use a compliance management system derive far greater benefits than those using manual processes – automation is the key here. It ensures better monitoring, training and refining of processes and quick implementation of policy changes. From an organization perspective, compliance offers a ton of business benefits.
Greater Efficiency
Compliance monitoring throws a lot of statistics that can be used to analyze the organizations’ efficiency at various levels. The need for centralized monitoring has also resulted in the integration of multiple departments which previously used to work in Silos. This helps in reducing duplication of efforts across departments and saves a lot of money. But more importantly, it provides a dashboard that aids in the optimization of resources and deployment of underutilized resources to other critical areas. This, in turn, improves the efficiency across different departments of a business unit and the larger organization.
Quality improvement
The primary objective of any compliance program is to prevent the possibility of failure and raise the flag for refinement of policies well in advance. If you read the wordings, it actually means that compliance can be a big contributor to quality improvement. Reviews lead to recommendations for refinement, which in turn create better policies leading to better quality output. Just think about the benefits that can be achieved simply by refining the process in a timely manner. Compliance is like the early warning system at the front end and the refinement engine at the back end – both work together to deliver better results and improve over time.
Avoid legal risks and future Costs
This is a no-brainer. Compliance management system took centre stage after the financial crisis exposed weaknesses in the regulatory monitoring process. Legal expenses and settlements have led organizations to bankruptcy and we have already seen a number of cases in the past decade. For the ones that survive, legal battles dent the reputation and image of the organization, heavily impacting the bottom line. Well-oiled compliance machinery ensures processes are being followed and significantly reduces options to bypass legal requirements.
Build Trust. Build Loyalty. Serve Better
Just like organizations have to ensure they are dealing with legally compliant third-party vendors, today’s customers are equally concerned about the brands they want to be associated with. A tainted image does heavy damage to customer relationship. Rumours and bad news travel faster than you can imagine and it is very little you can do to control it. It becomes extremely difficult and time consuming to repair your image than to build one.
Following and practising a culture of compliance helps in building goodwill and fan following. It provides an opportunity to demonstrate your concern for the environment and your desire to give back to the community. Mind you, the results won’t be overnight but then we all know that building trust and loyalty is a long term process.
CSR initiative
Complaint organizations have a great story for the society. In many ways, it can be an ongoing narration of how you have been improving the processes, the business benefits and the social impact of such actions. A quarterly communication on the progress of these initiatives may well be a big addition to the corporate social responsibility initiatives of the organization. Stories like these fuel perception and help in building the image of the organization.
Compliance officers will continue to grapple with the complicated risk landscape and continuously changing regulatory requirements – that will never change. However, organizations that can complement statutory compliance with a good ethical climate are the ones that will derive maximum benefits. A strong compliance foundation backed, implemented and practised by top management is the key to achieving this objective.
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