The Compliance Challenge: An opportunity to innovate
The pressure is on to find more effective ways to keep on top of burgeoning regulatory, organisational and commercial compliance demands which, if neglected, can result in damaged reputations and stiff penalties.Typically compliance is viewed by organisations as a time consuming, complex and costly obligation with little upside. However with big-picture thinking, compliance burdens could translate into business benefits like improved productivity, increased customer satisfaction and overall competitive advantage.Changing market demandsRegulatory issues are usually first to spring to mind when broaching compliance, with organisations required to conform to government legislation that can cover anything from tax and labour laws, to export controls, to industry-specific regulations.Yet commercial and organisational compliance both play a critical role in the health and well being of businesses today. Often voluntary or even self imposed, compliance at this level tends to be shaped by market requirements.Commercial compliance can be used to achieve a competitive edge or it can simply be a business necessity. Supermarkets and their relationships with suppliers are one of the most high profile examples of partners pushing the need to conform; it’s a case of “if you don’t comply, you don’t supply.”Within a company, the need for operational efficiency and competitive advantage is often behind organisational compliance initiatives that are instigated by the organisation itself. These range from preserving shareholder equity or enhancing the brand through corporate social responsibility and sustainability.Ultimately, compliance comes down to managing risk for an organisation, whether the objective is protecting reputation and credibility, or ensuring economic sustainability and competitiveness within New Zealand or internationally.Silver liningThe challenges of managing compliance abound. According to a 2008 Gartner report, some of the key issues facing compliance managers include: reducing cost and complexity; developing and implementing common controls for multiple compliance mandates; selecting the right technologies; gaining positive performance benefits; and aligning compliance efforts with enterprise business requirements.In fact, a number of forward-thinking executives are already looking for ways to exploit regulatory requirements to their advantage. Along with the challenges created by compliance obligations, they see the opportunity to improve processes, create competitive advantage, and further integrate IT into the business to reduce non-compliance risks and improve ROI.Working the systemWhen it comes to process improvement, most regulations and standards require that organisations have documented and repeatable business processes, and that those processes have appropriate controls in place to prevent mistakes or fraud.Automated processes generally have more effective controls than manual processes. For example, with automated processes in place auditors can quickly, easily and frequently survey entire data universes such as financial records, rather than taking small samplings using a manual system.Although the primary justification for automating processes is to improve IT controls and the ability to repeat them, an added benefit is that this process improves efficiency and transparency.Ahead of the curveIn many industries, the early adopters of compliance functions end up with a competitive advantage. Service providers and exporters are especially well positioned to leverage this advantage. Other companies that stand to benefit from competitive advantage through early compliance include IT outsourcing firms, service bureaux, health insurance administration firms, financial services businesses, and food and beverage companies.Privacy is another significant concern for businesses and individuals today. Organisations can market their compliance with privacy regulations to build trust and confidence with consumers concerned over privacy issues and identity theft.Although many mandates do not specifically require IT-based controls, IT management often is pulled into the fray since it is easier to build compliance into IT systems. This increases the need for IT and business management to work closely together to solve the difficult task of making compliance a part of good business management practice.The complete solutionCompliance runs broad and deep through an organisation. So when it comes to deploying compliance solutions, it’s important to understand that along with the technology component, people and processes come into play as well. By combining these three elements, we are able to mitigate compliance risks and manage compliance requirements whether they are regulatory, commercial or organisational.
Compliance Defined
Managing compliance is a response to risk management driven by statutory or business necessities. It exists as:
Regulatory Compliance: Legislation that an organisation must obey in the course of doing business.Commercial Compliance: Requirements for doing business that come from partners, suppliers or clients.Organisational Compliance: Often internally mandated to improve operational effi ciency and increase productivity.
