Despite being one of the most important areas of doing business, research has shown that more than half of Australian businesses struggle with compliance. However, failure to comply with industry regulations can have serious and dire consequences that result in heavy fines, trading restrictions and sometimes even jail time for directors.
Legislation and regulation is constantly changing and it can be daunting for businesses due to the level of documentation and frantic activity that often surrounds compliance audits. This can make the process be seen as less of an ongoing quality control mechanism and rather, a costly reactive imposition with little benefit.
The reasons that businesses often struggle with managing regulation can include:
Ineffective storing of information: The corporate knowledge, including how companies comply with regulations, is stored in the heads of experienced staff, or in multiple disconnected documents often of different formats, rather than being turned into a well-managed and linked corporate asset that can be used by all employees in a consistent way and on a daily basis
Non-standardised reporting/documenting: There is no standardised reporting and documentation across the business which leads to a higher risk of mistakes
Lack of awareness and understanding: There is little awareness of the breadth of impacts any changes to regulations may have on the business operations, technologies and employees. Employees may also lack understanding of how business process is linked to regulation, making it difficult to understand what needs to change when a regulation is modified
Processes and documents aren’t updated: Further businesses and systems changes means processes and associated documentation are not continuously improved and kept up-to-date in a way that complies with regulations.
For highly regulated and complex organisations, often the best way to manage changing regulations is a modelling approach. This will allow organisations to consistently record all the relationships between regulations, operational procedures, systems and staff. A modelling approach will also allow senior executives to better understand the impact of the change on the entire organisation.
Developing a comprehensive model of the business’ operations will allow businesses to clarify responsibilities and link all compliance obligations to the related operational processes and systems. It will also show the relationships between employee roles, business operations, strategies, objectives as well as compliance obligations. The system that results from this work is often called a “Business Management System” (BMS).
Once an organisation’s procedures have been modeled, when new regulations are introduced organisations will be able to accurately:
Understand their obligations. By having an accurate organisational model, businesses will be better positioned to recognise what they will need to do to achieve compliance and how this applies to their operations
Understand how specific procedures, IT systems, roles and employees will be affected by the regulation change
This approach gives those responsible for regulatory obligations a direct line of sight to all the process steps and staff members responsible for satisfying that obligation. In the reverse direction, process performers can see what regulations are being satisfied by the various steps they perform so they can better understand the consequence of their work.
Changing industry and sustainability regulations can be onerous. However, organisations that adopt a modelling approach to managing compliance will benefit from being able to better respond to changes in regulation as well as drive efficiency and more successfully execute business strategies.
Holocentric’s Modelpedia software helps organisations to operationalise strategy, manage business transformations and achieve operational excellence, by providing a business management system that helps capture, understand, change and optimise their business – from strategy, people, processes and procedures to compliance obligations. Holocentric software stores information in a single location and makes it accessible, easily understood and personalised to suit the needs of each user.