Maintaining organizational integrity and resilience hinges upon effective compliance monitoring.
It safeguards against financial penalties, reputational damage, and legal action. It fosters a culture of ethical conduct and robust risk management.
The risks of not getting compliance right are huge. Failing to effectively monitor compliance can lead to outcomes like TikTok’s 2023 €345 million GDPR fine.
This guide delves into the who, what, why, and how of building an effective compliance monitoring program, empowering your organization to navigate the ever-shifting regulatory landscape with confidence.
What is compliance monitoring?
Compliance monitoring is an ongoing process that ensures your organization’s day-to-day activities adhere to all laws, regulations, and internal regulations you set.
Monitoring compliance is also a regulatory requirement in some jurisdictions and industries. The International Organization for Standardization (ISO), for example, requires organizations to detail their compliance monitoring plans.
In most cases, compliance monitoring involves the following elements:
- Identifying relevant regulations and policies: This includes understanding the legal and regulatory landscape that your organization operates in, as well as any internal policies that you have in place.
- Assessing risks: Once you know what regulations and policies apply, you need to assess the risks of non-compliance. This includes considering the potential for financial penalties, reputational damage, and legal action.
- Implementing controls: Once you’ve identified the risks, you need to put in place controls to mitigate them. These controls can be manual or automated, and they can involve things like training employees, monitoring activity, and conducting audits.
- Monitoring and reporting: It’s important to continuously monitor your controls to make sure they’re effective. You should also report on your compliance activities to stakeholders, such as management and regulatory bodies.
Compliance monitoring is business-critical for all organizations, regardless of size or industry.
However, it’s especially important for organizations that operate in highly regulated industries, such as finance, healthcare, and manufacturing.
Why is compliance monitoring important?
Compliance monitoring is the cornerstone of organizational integrity and resilience. It safeguards against the financial and reputational repercussions of non-compliance, while simultaneously fostering a culture of ethical conduct and robust risk management. Here’s how:
- Reduced risk of fines and penalties: By proactively identifying and addressing compliance risks, you can reduce the likelihood of being fined or penalized by regulatory bodies.
- Proving compliance with regulators: As noted in the previous section, compliance monitoring is a regulatory requirement. Failing to undertake compliance monitoring could leave you in breach of those regulations.
- Improved reputation: A strong compliance program can help to protect and improve your organization’s reputation in the market.
Who’s responsible for compliance monitoring?
In most enterprise organizations, the person with the ultimate responsibility is the Chief Compliance Officer. But to some degree, the responsibility for compliance is shared.
- Dedicated Compliance Team: Often larger organizations have dedicated teams specifically tasked with establishing and executing the compliance monitoring strategy. This team orchestrates the process.
- Individual Employees: Every employee, regardless of their position, plays a vital role in adhering to regulations and company policies. They need to actively participate in following established procedures.
- Management and Leadership: Senior leadership should set the tone for a culture of compliance through clear expectations, training, and accountability measures.
Ultimately, everyone within an organization shares a degree of responsibility for compliance monitoring. However, the specific roles and responsibilities can vary depending on the size, structure, and industry of the organization.
How to create a compliance monitoring program
A modern, successful compliance monitoring program needs to not only establish processes and ensure regulatory compliance but should also be repeatable, and scalable.
Over the past year, BRYTER has spoken to hundreds of senior compliance leaders. The commonality? They all utilize technology to help facilitate their compliance monitoring.
To create an effective compliance monitoring program, best practice suggests you should:
Conduct a compliance audit
- Assess current state: Review existing policies, procedures, and controls to identify gaps and areas for improvement. You can use a tool like BRYTER’s Policy AI to make this easier.
- Evaluate risk profile: Map out the different types of compliance risks your organization faces based on industry, size, and operations. Determine the likelihood and potential impact of each risk to prioritize monitoring efforts.
- Gap analysis: Compare your current practices to relevant regulations and best practices to identify discrepancies and areas needing further attention. Again, you can use Policy AI to make this process simpler.
Stress-test your policies
- Simulate scenarios: Conduct mock audits, penetration tests, or role-playing exercises to identify how policies and controls would hold up under real-world pressure. This could involve simulating fraud attempts, data breaches, or unethical decision-making scenarios.
- Identify vulnerabilities: Analyze the results of the simulations to pinpoint weaknesses in policies, procedures, or training. This will help you refine your strategies and proactively address potential issues before they materialize.
- Revise and strengthen: Based on the identified vulnerabilities, update your policies, procedures, and controls to be more robust and effective in preventing non-compliance.
Identify potential risk areas
- Focus on high-impact areas: Prioritize monitoring for areas with the highest potential for negative consequences, such as financial penalties, reputational damage, or legal action. This could include areas like financial transactions, data security, privacy protection, or employee conduct.
- Review emerging risks: Stay updated on new regulations, evolving technologies, and industry trends that might introduce new compliance risks. Proactively assess the potential impact of these changes and adjust your monitoring program accordingly. Our Compliance Trends report is a good place to start.
- Consider internal factors: Analyze internal operations and identify areas where compliance issues are more likely to occur. This could involve looking at specific departments, employee groups, or activities with higher-risk exposure.
Monitor the success of your compliance program
- Track key metrics: Establish quantifiable metrics to measure the effectiveness of your compliance monitoring program. This could include the number of identified issues, time to resolution, compliance training completion rates, or audit findings.
- Update strategies: Based on the results of monitoring and investigations, adapt your compliance strategies as needed. This could involve refining policies, implementing new controls, or focusing monitoring efforts on specific areas of risk.
- Continuous improvement: Foster a culture of continuous improvement within your compliance program. Encourage feedback, involve stakeholders, and regularly evaluate the effectiveness of your strategies to ensure ongoing effectiveness.
How BRYTER’s Policy AI tool can help
Traditional compliance monitoring can be disjointed and resource-intensive.
Policy AI rewrites the script, enabling you to pinpoint potential gaps and vulnerabilities before they morph into critical issues. This proactive risk detection empowers you to address weaknesses before they become liabilities, enhancing compliance.
It also allows you to stress-test your policies against legislation. This not only allows you to create policies that satisfy regulators, but also empowers you to identify trends, refine policies, and continuously optimize your compliance efforts.