Compliance teams are tasked with ensuring the business – from employees to dealings with third parties – comply with relevant regulations. How? With an effective Compliance Management System.
Compliance Management Systems are made up of all of the measures, structures, policies, training, and processes that you establish to make sure your organization doesn’t find itself facing fines or legal sanctions and to ensure overall organizational well-being.
Failing to put in place an effective Compliance Management System can be costly.
One only has to look at some of the huge fines organizations have faced when things have gone wrong. Take Meta’s €1.2 billion fine for breaching GDPR. Or the $81.3 million in OSHA penalties faced by BP following the infamous Gulf of Mexico oil spill.
In short, a Compliance Management System is one of the most necessary elements of organizational success. That’s why getting it right is so important.
In this article, we explore the key elements of a Compliance Management System, share some important principles to work by, and discuss what tools and processes you might need to ensure the essentials, while also taking a look at those that can help you take your Compliance Management System to the next level.
The key elements of a Compliance Management System
What your Compliance Management System looks like may differ depending on which industry you work in, and what country your organization operates in.
For example, for third-party risk in the US, you might use explanations in the U.S. Foreign Corrupt Practices Act or the U.S. Department of Justice’s recommendations as a starting point.
If you’re in the UK, it’s worth highlighting the UK Bribery Act which defines what to consider when implementing a Compliance Management System.
Likewise, if you’re in the construction, health, or financial services industry in any country, the level of scrutiny of your company is much higher than almost anywhere else.
Ultimately, however, the core fundamentals of an effective Compliance Management System should be the same, no matter which country your organization operates in.
Even if you’ve already got a well-established system in place, it’s worth refreshing your memory. Later, we’ll also share some more advanced approaches.
First, here are the fundamentals your Compliance Management Program should include.
Needless to say, one of the most important parts of any Compliance Management Program is defining policies that tell your employees what they need to do (and not do) at work.
These can differ depending on which sector you operate in.
For example, if you’re in the healthcare industry, you’re likely to have policies on The Health Insurance Portability and Accountability Act, or HIPAA as it’s more commonly known.
If you work for a bank, you’re likely going to need policies on protecting the integrity of corporate financial data.
Or if you work for a construction company, you’re going to spend a lot of your time reading and interpreting national and state-specific OSHA guidelines.
Generally, though, whichever industry you operate in, at the very least you’re going to need policies for data protection, health and safety, anti-bribery and corruption, a code of conduct, social media, and some form of employee-specific HR policies.
In many organizations, you’ll find that you end up with hundreds of different organizational policy documents. This can, of course, be difficult to manage, and for your employees to find the information they need.
More on how to solve this shortly.
As you know, having corporate policies alone is not enough. You also need to educate your employees on what they mean, how to live by them, and what the consequences are for breaching them.
The most common way to achieve this is by running regular training sessions. This can be in the form of in-person training, though increasingly, they’re done online through e-learning platforms.
Some regulators require that these sessions be refreshed regularly (often every year).
However, compliance training alone doesn’t work.
According to Gartner, 42% of employees don’t recall their company’s gift and hospitality policy. And in 2017, Entrepreneur found that 70% of employees admitted to forgetting the contents of company training in less than 24 hours.
While you need to train your employees on your policies, given the statistics, you should go one step further.
A tool like BRYTER’s Policy AI solution can help ensure employees actually understand and follow policies by giving them an AI-assisted chatbot where they can easily ask and get answers to their compliance questions, for example.
Compliance monitoring, auditing, and risk analysis
Another critical element of your Compliance Management System is compliance monitoring. If your system is to be successful, you need to regularly review and improve it.
Why? Because as we know too well, legislation changes all the time. Likewise, internal needs change, too. And, of course, some regulators require that you have a monitoring process in place.
New legislation is also being rolled out at a faster rate than ever. Take the EU’s new Corporate Sustainability Due Diligence Directive or, updates to OSHA which are set to come into force in 2024, or historically, the organized chaos that ensued around 2016’s GDPR.
Because of this, you need to check your system for weaknesses, vulnerabilities, and risks. You need to audit your policy documents continuously to ensure that they meet these ever-changing regulations.
This requires a huge amount of time and resources to monitor, and make the required changes – but again, there is an opportunity for technology to make this more efficient.
Software like BRYTER’s Policy AI lets you upload your policies to your own Policy Domain, and stress-test your policies against changing regulations without the need to read through hundreds of policy documents.
A culture of compliance
Culture is a word that gets thrown around a lot in many organizations. But though often overlooked, creating a culture of compliance is arguably the most important element of any successful Compliance Management System.
A successful Compliance team has to be embedded within a business. Because no matter how many policies you create, or how many e-learning notifications you send, if you’re not visible, you’re less likely to be remembered.
In short, if you’re not embedded within your organization, your Compliance Management System will be less successful and will inevitably lead to hidden risks across your business.
So, how does one go about creating a culture of compliance?
It starts with the basics. Engage employees from the start. Ensure you and your team are open and accessible. Set clear processes. And most importantly, make it easy and stress-free for your employees to get answers to their compliance questions.
Benefits of a Compliance Management System
Implementing a Compliance Management System ultimately helps you ensure your organization adheres to the rules and regulations in your industry, as well as your own internal rules.
It helps you do it consistently, and it ensures that compliance as a function is seen as business-critical.
With the right technology and approach, it can also help make life easier for your employees.
Here are a few benefits of an effective Compliance Management System.
Reduced risk of fines
We all know that failing to comply with regulations can lead to some costly outcomes.
Take cybersecurity, for example. IBM’s Cost of a Data Breach 2023 Report indicates that data breaches cost businesses an average of $4.45 million, a 15% increase over three years.
It’s not just hard cash, either. Criminal sanctions. Cease and desist orders. Falling stock prices. It can cripple your organization’s resources and reputation.
Thankfully, having an organized, tech-enabled Compliance Management System in place massively reduces the number of compliance violations.
A complete audit trail
Having a complete audit trail is critical to ensuring you comply with national, international, and industry-specific regulations – and demonstrating to regulators that you are complying.
It’s essential when you undergo your quarterly or yearly internal audit to assess if you’re operating correctly.
You must have a full audit for when things don’t quite go to plan.
Without a Compliance Management System in place, and the right technology to support it, audit trails can inevitably be time-consuming, expensive and stressful to create.
So, having an effective Compliance Management System in place in advance, which creates an audit trail automatically is a huge time-saver when it comes to reporting.
Higher employee engagement
Through the implementation and adoption of a compliance culture, you’re able to increase employee engagement.
Not only in the sense that your compliance team itself is more embedded, and thus feels a closer bond with the organization. But, with an AI-powered compliance chatbot like BRYTER’s Policy AI, you also enable employees to get answers to their compliance questions fast, without causing bottlenecks for them and your team.
What tools do you need for an effective Compliance Management System?
Running an effective compliance program is challenging – both in terms of time and resource. Without the help of technology, we’d struggle to deal with the complexity and volume of work required.
Where can you look to leverage technology for an effective Compliance Management System?
Some of the most frequently employed solutions include the following.
Compliance Management Software
Compliance management systems are integral tools that help organizations bring together their compliance-related tasks into a unified interface.
They enable you to track regulatory obligations, manage internal policies and procedures, and keep an eye on compliance controls, all from a single dashboard.
These systems don’t just give you a snapshot of your compliance posture; they offer in-depth, real-time insights and simplify the creation and retrieval of compliance reports.
Regulatory Reporting Software
Regulatory reporting software automates the preparation and submission of regulatory reports.
These tools are designed for precision, minimizing the likelihood of manual errors, and they significantly reduce the time required to fulfil reporting duties.
This allows for a smoother compliance process, ensuring that organizations stay on top of their regulatory requirements with efficiency and reliability.
Risk Assessment Tools
Risk assessment tools serve as the radar for navigating the compliance landscape within an organization.
They help in identifying and evaluating potential compliance risks, gauging the severity of these risks, and determining which areas require immediate focus.
Moreover, they streamline the process of creating detailed risk reports, which are crucial for both strategic planning and for maintaining transparency with regulators.
These tools are essential for an organization’s risk management strategy, ensuring that risks are not just recognized but are also appropriately prioritized and addressed.
Data Analytics Platforms
Compliance officers can tap into data analytics platforms to uncover irregularities, discern patterns, and track trends that may signal potential compliance issues.
These tools sift through vast amounts of data to spotlight areas that may require closer scrutiny, thereby enhancing the compliance monitoring process and empowering organizations to proactively address concerns before they escalate.
Policy AI provides immediate, precise answers to compliance queries, revolutionizing how compliance teams operate.
It amplifies the effectiveness of company policies by enabling quick AI-driven responses to questions, with the option of review and approval by Compliance Officers. Upload policies to your secure domain, ask questions in any language, and get accurate answers with document references.
This platform enables you to analyse your policies to identify any gaps or contradictions and compare your policies against external regulations and industry best practices.
In essence, Policy AI simplifies compliance, offers a reliable audit trail, and equips teams with the tools to manage compliance efficiently and securely.
Compliance Management System – Embracing the Essentials and Going Beyond
A robust Compliance Management System (CMS) is a fundamental pillar of organizational success. In this article, we’ve explored the core elements of a well-functioning CMS, emphasizing the vital role of policies, training, monitoring, and fostering a culture of compliance.
We delved into the benefits of a solid CMS, highlighting its ability to minimize risk, optimize audit trails, reduce fines, and boost employee engagement.