Your favorite buzzword and mine, compliance, was born in scandal.
It may surprise you to learn that the first organization to put compliance on the agenda was not some slick “good governance” consortium. No, the corporate world’s understanding of compliance began at the very un-slick United States Sentencing Commission (USSC).
An independent agency within the US judiciary, the USSC began operating in 1987. Its primary purpose was (and is!) to develop sentencing guidelines for federal criminal cases. The USSC’s sentencing guidelines are a critical aspect of compliance in the context of corporate criminal liability.
Of course, sentencing guidelines are by definition focused on those who have already been convicted of crimes—in other words, sentencing guidelines are about punishment, not prevention.
But in the early 2000s, massive corporate scandals destroyed two behemoths: Enron and WorldCom. In the wake of those catastrophes, it became apparent that waiting for non-compliers to get caught was not enough.
Compliance culture began shifting toward a more proactive stance.
This evolution had a profound impact on how corporations are run. In 2013, Casey Mulligan, an economics professor at the University of Chicago, wrote in The New York Times:
For good or for bad, the costs of complying with federal regulations are probably accumulating more rapidly than taxes.
Given that regulatory compliance consumes billions of dollars and millions of employee hours every year, it’s worth understanding what precisely compliance management is, and how to handle it both effectively and efficiently.
What is Compliance Management?
Compliance management ensures that organizations adhere to all laws and regulations, as well as industry-wide standards and internal policies. An effective compliance management solution will help your firm mitigate risk and maintain compliance with constantly evolving legal and ethical requirements.
The importance of compliance management has grown significantly in recent years, due to the increasing complexity and volume of regulations that are an everyday part of doing business.
Failing to meet your compliance obligations may result in severe consequences, such as financial penalties, business disruptions, legal actions and potential damage to your company’s reputation.
What are the Benefits of a Compliance Management System?
Compliance management helps businesses stay in line with laws and regulations applicable to their industry. This reduces the risk of legal disputes and fines, ensuring that the company operates within the bounds of the law.
Many aspects of compliance management can be systematized, which helps streamline the process and ensure nothing falls through the cracks. Well-managed compliance processes can lead to better efficiency, reduced errors, and lower operational costs. Compliance measures can help prevent fraud, unethical behavior, and other forms of misconduct within the organization. They also help safeguards intellectual property rights and ensures that proprietary information remains secure.
By identifying and addressing compliance risks, companies can proactively minimize potential threats to their operations, finances, and reputation. Maintaining a strong compliance record enhances a company’s reputation and fosters trust among customers, partners, investors, and other stakeholders. This can lead to increased customer loyalty and improved brand perception.
Compliance can be a differentiating factor in a crowded market. Customers often prefer to do business with companies that demonstrate ethical behavior and a commitment to compliance.
For all these reasons, an effective compliance management system is essential for companies to navigate a complex regulatory landscape, maintain ethical business practices, and protect their interests and reputation. A well-implemented compliance program not only helps companies avoid penalties and legal issues but also provides a strategic advantage in the market.
The Pillars of Compliance Management
A comprehensive compliance management solution typically consists of numerous key components that work together to ensure effective adherence to laws, regulations, and internal policies. These pillars provide the foundation for a robust compliance program. The specific details will vary based on the industry, size of the organization, and the specific regulatory environment.
But speaking generally, these are the fundamental pillars of a compliance management solution:
Policies and Procedures
Developing and implementing clear and comprehensive policies and procedures that outline the company’s commitment to compliance in areas such as data privacy, anti-corruption, anti-money laundering, and so on.
Risk Assessment and Management
Conducting regular risk assessments involves evaluating the compliance vulnerabilities and prioritizing them based on their potential impact. Once identified, appropriate risk management strategies and controls can be put in place to mitigate these risks effectively.
Training and Education
Training programs should be tailored to specific roles and levels of responsibility, helping employees understand compliance requirements and best practices.
Monitoring and Auditing
Regular internal audits and assessments help identify any gaps or weaknesses in the compliance program and enable timely corrective actions.
Reporting and Documentation
Detailed records of compliance training, risk assessments, audits, and corrective actions provide evidence of the company’s commitment to compliance.
Incident Response and Remediation
Effective investigation and response of security incidents, appropriate disciplinary actions, and the implementation of measures will help prevent similar incidents in the future.
Compliance management is a dynamic and evolving process. Regularly reviewing and updating compliance policies and procedures, based on changes in regulations and best practices, ensures that the program remains effective and up-to-date.
Leadership and Culture
A strong commitment to compliance starts at the top. Leading by example and fostering an ethical environment will encourage employees to prioritize compliance in their own actions.
Third-Party Due Diligence
Many companies work with vendors, suppliers, and business partners, making it essential to assess the compliance posture of these third parties.
By incorporating these pillars into their compliance management solution, companies can establish a robust and effective compliance program that reduces the risk of legal and ethical violations, fosters a culture of integrity, and enhances trust with stakeholders.
Why Automate Compliance Management?
I know what you’re thinking. Compliance with regulations doesn’t sound like such a big deal, right? Maybe it’s tough to get yourself into compliance initially, but once you are there… you’re there. Right?
Not so fast.
Consider this: one essential type of regulation with which you must comply is centered around software updates. You know, those annoying “patches” that the engineers in your IT department are forever “applying” to your system. To be legally in compliance with the standards of most industries, your firm needs to stay up to date on every patch, for every type of software you use, every single day.
“How hard could that be,” you ask?
According to the good folks at The Stack, there were 26,448 software vulnerabilities discovered in 2022–an increase of about 59% on the previous year.
This is not something that even your best employee can handle alone.
Another good reason to automate? Remember what we noted earlier: regulatory compliance consumes billions of dollars and millions of employee hours every year.
Focus on the “millions of employee hours” part. Automation can reduce these hours down significantly: that alone is often reason enough to put a compliance system in place.
Cue cyberCTRL: Compliance Management and More
Compliance management is one of the core functions of a GRC system. GRC, which stands for Governance, Risk and Compliance, is a tool that, once in place, can make this work easily. Or, at least, much easier!
A good GRC system takes the frequently disparate tasks of compliance, risk management, and governance and brings them under one roof, and in doing so dramatically cuts down on inefficiencies, waste, and risk. It does so by using the GRC Capability model of Learn/Align/Perform/Review.
As part of TMG’s technology management services, we have had the opportunity to evaluate many GRC systems—some better than others, some extremely expensive and some less so. Over time, my team and I came to realize that our clients needed something more than the core GRC functions. What was needed was a system that can accommodate dozens of frameworks (e.g. NIST CSF, NIST PF, ISO, etc.) and have:
- Workflow/Project Management Engine: a way to track and monitor tasks, audits, and training
- Document Management: a robust and fully-featured document management system with audit trail and complete version control
- Continuously Updated Default Best Practices, Policies, Standards, Procedures, and Guidelines: a subscription to an industry best practices repository of knowledge allowing you to draw upon the experience of many, and tailor it to your organization
- Compliance/Audit Readiness Assessment: a fully auditable path for all functions including compliance
- Framework Cross-mapping and Crosswalling: the ability to leverage work done in one framework and automatically mapping it to another
When all the evaluations were done, what emerged was our industry-first solution: cyberCTRL. We built cyberCTRL using best-of-breed engines, integrating them, and adding all the features that our experience told us are necessary for our clients to succeed.
Intrigued? We would love to show you the results of our work. Give us a call and we will set up a personalized demo for you and your team.