Financial Services
What is a compliance management system and its importance?
Compliance is the foundation of good corporate governance for any modern business. However, the concept of compliance management has to go beyond just appointing a compliance officer and has to be an integral part of every facet of the organisation. But what is a compliance management system, and why is it important?
What is compliance management?
Although it may sound complicated, at its core, compliance management is a collection of tools, processes, and policies that help an organisation ensure every single one of their operations and products comply with the relevant regulations, security standards, and industry standards. The compliance management process aims to detect and prevent any compliance violations and safeguard the business from penalties and consequences of such violations.
A compliance management system (CMS) is an integrated system – encompassing processes, internal controls, functions, tools, and necessary documents – to help the business understand and meet its compliance requirements. A CMS can be a great tool to assess, organise, remediate, and report any non-compliance and vulnerabilities within your business’ infrastructure.
Why are compliance management systems crucial for businesses today?
Compliance management systems are essentially the roadmaps that ensure your business does not stray from the right path and safeguard its interests. This includes avoiding any fiscal penalties and fines while ensuring you maintain the reputation and trust among the customers. Effective compliance management strategies ensure your operational practices, products, and services meet the relevant regulatory and industry-specific requirements, ensuring the overall resilience of your business in today's dynamic world.
On the other hand, you may face massive penalties and reputational damage if you fail your compliance duties. Some of the biggest cases demonstrating the cost of compliance violations around the world include:
- The Siemens bribery scandal in 2006 (securing historic sanctions of $1.6 billion)
- VW diesel-gate in 2015 (costing the company more than €30 billion in fines, penalties, and buyback costs globally)
- The Cum-EX scandal in 2020 (resulting in €14 million fines along with the order to repay €177 million to the state)
These are just some of the cases that demonstrate how compliance management processes can help businesses safeguard their interests, avoid penalties, and protect brand reputation in contemporary international markets.
Establishing a compliance management process
There is no denying the fact that compliance management is a crucial strategic asset for any modern business organisation. However, some factors can make compliance management challenging, including:
- Dynamic compliance and security landscape
- Organisational environments and infrastructure distributed across multiple platforms
- Large and complex environments and teams
However, if you work with a reputable compliance management service provider, you can easily overcome these challenges to establish a compliance management process for your organisation. Here are some tips that can help you get started on the journey to compliance management:
Getting everyone on board
First and foremost, you need to get everyone – from leadership and subject matter experts to team members and employees – on board and make sure they understand why compliance management is critical. This clarifies the aim of the process and sets the right tone across the organisation.
Conducting a risk assessment
The next step is to conduct a risk assessment, allowing the senior leadership to understand the most significant risks and provide guidance to eliminate, mitigate, or remedy them.
Conducting a policy audit
A policy audit can help you understand what policies and procedures you already have in place, helping you identify any gaps and update the compliance management process accordingly.
Providing employee training
Simply having compliance management policies in place is not enough. You need to provide proper training to ensure every employee understands the policies and how they might affect their everyday work.
Establishing monitoring and review processes
Establishing a monitoring and review process can help you ensure your compliance management process stays relevant with the changing regulatory landscape, future-proofing your CMS.
Building accountability
Last but not the least, you need to build accountability into the compliance management processes with procedures in case an employee fails to comply. This can include protocols or disciplinary guidelines that you must enforce consistently.
Following these steps, you can implement a compliance management process and system that can offer you benefits like compliance efficiency, visibility, scalability, adaptability, risk mitigation, enhanced reporting, and better consistency while fostering a culture of compliance and staying a step ahead of the competition.
How can Infosys BPM help?
Establishing effective compliance management policies can be challenging. However, working with the right compliance management services provider can help you leverage next-gen technology-enabled solutions to keep up and comply with the dynamic regulatory and compliance landscape. With Infosys BPM, you can easily navigate the challenges of heightened regulatory scrutiny, evolving regulations, siloed systems, and lack of skilled personnel to ensure compliance management across every facet of your business.
