The pressure for organizations of all sizes to comply with regulatory governance and compliance has grown and grown over the past 10 to 15 years. Compliance has always been important, of course, and businesses have invested in compliance software and their own internal compliance teams to ensure that they remain compliant.
But since the financial crisis of 2008, there has been greater pressure for businesses to demonstrate that they are governed correctly and are conducting business in away that is seen as correct and fair. More regulation has been introduced to make this happen, in Financial Services (FS) initially but then also in a range of other sectors.
This has resulted in compliance being perceived as more important than ever.Non-compliance could mean that an organization must suspend trading, it could result in a massive fine or could cause enormous reputational damage, damage that many businesses could find hard to recover from.
Organizations in 2019 treat compliance much more seriously than they once did and are subsequently willing to invest in the right GRC tools and GRC software. But businesses can still fall foul of regulatory requirements. What are five of the most common reasons for non-compliance?
1- Lack of leadership
For an organization to remain compliant, whether on industry-specific regulation or for wider regulation such as GDPR, then it is essential for the CEO and other board members to make it clear that compliance is a priority for their organization.
Part of this is a resourcing issue, making sure that compliance teams are equipped with the right GRC software to do the job effectively and are partnered with the right GRC vendors to ensure that they get the ongoing support and guidance that’s required.
But it also means demonstrating to internal, external stakeholders that the organization is taking compliance with the seriousness that it warrants. If the board sound vague and uncommitted about compliance, then that attitude will filter down to other employees. It will also create a perception with investors, shareholders, partners, customers and more, that compliance is not viewed as a priority.
2- Compliance is not aligned with organizational goals
Whatever an organization is trying to achieve with its compliance and broader GRC program, then it stands to reason that it should be closely aligned with what it is aiming for as a business. Compliance is there to support business goals and can play a prominent role in how an organization tells its story to the wider world.
Compliance relies to an extent on a company’s culture to support and foster the right attitudes – certainly without that, effective compliance can feel much harder. So organizations should incentive employees to live the values the company is aligned with, helping to connect the compliance function with the broader business.
3- There is no accountability in the business
Any function or department in any business needs an owner, someone who will drive that programme forwards, take responsibility for its success and be held accountable should things not work out as intended. That is especially true for compliance and GRC functions.
The price of non-compliance has become much greater than ever before and although success depends on many factors – a smart compliance team, the right GRC tools, compliance prioritized by the organization – it is important for someone to be accountable. Managers at every level of the compliance function must be accountable for their area or team, otherwise it sends a message that compliance is not considered to be that serious.
4- Compliance is seen merely as a box-ticking exercise
The nature of compliance has changed over the past few decades. It was once viewed a necessary but tedious task, something to get done but not to lose much sleep about, as the consequences of non-compliance amounted to little more than a slap on the wrist.
Viewed in this way in 2019 can lead to problems with achieving compliance, but it needn't do. Compliance has changed and can be much more than a defensive or reactive measure, showing genuine competitive difference for a company. GDPR is a good example – rather than doing just the bare minimum to be compliant, an organization could go the extra mile and really emphasis the measures it has put in place. This would help position it as a company that truly cares about its customers and the data it holds on them.
5- When compliance is approached from an old-fashioned perspective
Such a view of compliance might mean that analogue GRC tools are used to manage compliance requirements – Microsoft Excel is great for some tasks, but not managing international compliance programs. That view also refers to the outdated concept of compliance requirements having fixed beginning and endpoints.
Compliance is an ongoing process and needs to be managed as such. That’s why Oxial’s GRC solutions are proving so effective. It’s the right GRC software to match modern compliance requirements. It is digital and ongoing, cost-effective and innovative, ensuring that nothing gets missed and organizations always remain compliant.
6- Compliance is not integrated into the rest of the organization
Compliance must bridge the gap between regulatory requirements and the obligations they impose. These obligations must then be mapped to the associated risks they aim to mitigate, along with the controls the firm needs to implement to demonstrate compliance. This mapping is crucial for proving to regulators and clients that the firm has a robust risk and control environment in place to meet its regulatory duties.
However, this process is complex and requires a dynamic, systematic approach to ensure that regulations are accurately linked to the right business units, processes, controls, and risks. Only then can the firm clearly assess its compliance status with respect to specific regulations and identify any gaps. Additionally, this process informs the level of investment needed to achieve compliance and enables a cost-benefit analysis to optimize spending for broader business advantages.
For further information on how we help organizations all over the world remain compliant, feel free to contact us.
