Two of the most significant developments in the financial industry over the last few decades have been the advances of new technology and compliance functions.
Business entities across the globe must follow and maintain government and professional standards, while the regulations and standards enforced on every organisation make compliance an ongoing headache
Compliance has always been and will always be one of the top priorities and concerns of CFOs and financial directors. Regulatory reforms following the global financial crisis of 2008 compelled finance heads all over the world to make substantial investments in risk and compliance – both in terms of technology and headcount – to prevent and remediate regulatory issues.
With the consequences of failing to comply with laws, regulations and standards having such a high potential cost, compliance is clearly a very big issue for organisations. The cost of non-compliance outweighs anything that might be gained from cutting corners. Non-compliance means being slapped with hefty penalties not to mention consequent reputational damage. The penalties for non-compliance have also grown substantially. As governments clamp down on business laws, the possibility of fines and penalties have prompted organisations to take compliance more seriously and hire the right talent and engage with the right compliance software and compliance systems to ensure they remain within the law.
Compliance management is the process by which financial directors and CFOs plan, organise, control, and lead activities that ensure compliance with laws and standards.
The activities entailed by compliance management include:
- Internal audits
- Third-party audits
- Security procedures and control
- Preparing reports and providing supporting documentation
- Developing and implementing policies and procedures to ensure compliance
Compliance management is an integral part of an organisation staying on the right side of the law and begins with a compliance benchmark. Here are the bases covered by compliance management:
- Understanding the organisation’s process in order to know whether there are any market trends or new legislation affecting their industry
- Ensure employees understand how to adhere to compliance
- Align the business functions with compliant procedures
- Review processes and operations to make sure compliance requirements are met in all business tasks and activities
- Correct and update violations where necessary and relevant
There are two approaches to compliance management: lay down the law and be an enforcer or leave room for judgement calls and some flexibility. It’s up to individual organisations to plan for, implement, and enforce compliance.
Despite a general shift towards regulatory convergence and industrial standardisation, a recent flurry of sweeping legislative acts and updates has created a series of new hurdles for organisations operating in a range of key jurisdictions.
Read more:What is compliance software