Compliance obligations were created with the intention to help organisations be more effective, lower their risks, conform to economic or environmental issues and be more community oriented, leading to the long-term financial health of a business.
But with the constant changes to regulations and the level of documentation plus the frantic activity that often surrounds compliance audits, the process is often seen as less of an ongoing quality control mechanism and more of a costly imposition with little benefit.
Some of the problems often associated with governance and compliance include:
- No standardised reporting and documentation across the business which leads to higher risks of mistakes
- Increased costs and resources required at time of audit
- Treated in isolation and on an ad hoc basis, compliance only offers short-lived quality control
- Uncertainty about the systems needed to properly manage the process
- Little awareness of the breadth of impacts any changes to regulations may have on the business operations, technologies and employees
- The corporate knowledge including how companies comply with regulations is stored in the heads of experienced staff rather than being turned into a corporate asset that can be used by all employees daily
- Insufficient support for continuous improvement means processes and associated documentation are not continuously improved and kept up-to-date in a way that complies with regulations
- Little understanding of how business process is linked to regulation, making it difficult to understand what needs to change when a regulation is modified.
These compliance issues concern so many operational areas within a business – from hiring, employee rewards and payroll to occupational health and safety, IT, financial reporting and operations – that they can cause severe headaches if they are not taken seriously. They can damage the business’ reputation internally and within the marketplace and lead to fines and penalties. As such, compliance should be an intrinsic part of a company’s risk management.
So how can companies integrate their governance and compliance obligations in a way that has no adverse impacts and improves the effectiveness of the business?
An integrated approach
The answer to most problems linked to compliance lies in the integration of regulations and reporting systems into the organisation’s day-to-day operations.
Not only do governance and compliance activities need to be implemented in the context of operations, but also in a way that is agile enough to move with business transformation or continuous improvement initiatives. In other words, operations and regulations need to be linked so they can improve and change in concert and in a symbiotic way.
The solution is a comprehensive model of business operations which monitors, manages and measures requirements, clarifies responsibilities and links all compliance obligations to the related operational processes.
Eight essential compliance components to include in your Business Management System:
1. Monitor changes in legislation
Business and finance leaders must keep up with the latest changes to legislation which might affect their business operations. These changes need to be interpreted and recorded in your business management system.
2. Define compliance requirements
Use your business operations model to identify which processes are impacted by changes in regulations and to identify the gaps between where you are at now and where you need to be to address compliance requirements.
3. Assess the risks
Your business management system should capture every detail of the organisation in a way that helps you understand how changes might affect each part of the business. For example, new technology brings new risks, new processes and potentially new compliance issues. As such, having a clear visual representation of the relationships between people and processes will help you assess the potential risks any transformation will have on your organisation and communicate these across the business.
4. Document standard procedures
Without a defined process for maintaining and keeping controls up-to-date, your procedures will soon be made uncompliant due to normal changes in your business environments. A central system or repository where regulations, standards, procedures and templates are kept and linked to show relationships will ensure consistency, fast response, quality control and it will save you time and resources.
5. Integrate compliance into your business operations
Compliance doesn’t need to impose costs upon your business activities – it can strengthen them by being integrated into the way you do business. By using a process model as an auditable, high-integrity representation of operations, the organisation can highlight on a day-to-day basis processes, information and responsibilities required to meet standards. With this approach organisations will always be ready for an audit.
6. Create check points and accountability
An effective way to ensure ongoing monitoring and company-wide adherence to the business’ obligations is to integrate compliance-related key performance indicators (KPIs) in employees’ position descriptions and tasks. These can even be added to your business’ reward structure to increase accountability and buy-in.
7. Measure the impact
To improve accountability surrounding your compliance obligations, you must have a system that allows traceability from the strategy down to specific tasks and back again. You should be able to measure the degree of implementation and the success of your efforts by performing a cost-benefit analysis of the entire strategy.
8. Share your policy and standards across the organisation
Effectively disseminating your company policies and standards across the organisation is part and parcel of your governance and compliance obligations. Any employee should be able to easily access a web portal or a similar application to see the processes and relevant regulations that relate to them to help them understand what they are meant to do and why.
Organisations that manage governance as an integral part of the health of their business benefit from the effective integration of quality and compliance systems into day-to-day operations.
