Energy and utilities organizations are facing a rapidly changing business environment. With growing cyber threats on one side and complex regulatory requirements on the other, organizations find themselves struggling to strike a balance between managing and monitoring numerous auditable tasks and compliance activities related to FERC, NERC, ERO, NRC and other regulatory requirements. In such a scenario, developing and enforcing relevant policies and procedure, implementing a robust compliance program and adopting the right risk assessment methods will help manage the growing number of compliance programs.
Organizations can be gauged on their governance risk culture by the policies and procedures that they implement. Policies and procedures establish accountability and responsibilities and ensure compliance. For policies to be properly implemented, enforced and managed, one of the most important elements required is to have a well-designed policy management lifecycle process. The policy development cycle helps you to manage and maintain policies and utilize them appropriately. Some of most important processes of policy management lifecycle process are discussed below.
Before you begin on developing policies, you first need to identify the policies that you want implemented. In this process, you will avoid hoarding meaningless and unnecessary policies within the organization. Relevant policies can be identified by taking into account the corporate environment, the risks the organization is exposed to, and the regulatory landscape. Here are some guidelines to ensure that the policies are developed properly:
Effective implementation of policy starts with the manner in which the policies and procedures are written and is the next step after policy development. The important action points during the policy implementation process are:
During the policy enforcement process, there needs to be a high level visibility of all enforcement procedures so that oversight gaps can be identified and resolved. You also need to:
Every organization looks at establishing a compliance program and one of the fundamental elements that go into structuring a compliance program is defining and implementing the policies the organization. Once this is done, you need to follow a disciplined approach to build a compliance program that is aligned with the policies, procedures, and regulations set by the regulatory bodies, and at the same time ensures that the growing regulatory demands are met.
The energy and utilities industry has seen a surge of transformation due to technology, regulations and competition. And more than ever, it is crucial for energy and utilities organizations to implement and manage a robust compliance program that is aligned to the specific challenges faced by your business enterprise and efficiently adapts to the changing regulatory environment.
Most compliance programs go through four stages, the most crucial being the first two:
In the initial stage of the compliance program, you need to gather vital information by:
The vital information gathered in the first stage is utilized in designing the compliance program. The design stage has three integral phases Ã¢â‚¬" initial, secondary, and final.
The fundamentals in the initial design phase are to:
During the secondary design phase you need to:
The final design phase involves:
Once the first two stages have been successfully completed, it is time the compliance program is rolled out across the organization. During the implementation stage you need to ensure:
After the compliance program has been implemented, it needs to be monitored on a regular basis through:
Conducting Regulatory Risk Assessments
Every year, energy and utilities organization have numerous and newer challenges to tackle. Be they, the introduction of stringent reliability standards introduced by regulatory bodies such as NERC, FERC, OSHA, EPA, or the increased exposure to cyber thefts and attacks due to the Smart Grid technology. Organizations need to have a well-defined approach to mitigating these risks and stay clear from penalties and hefty fines.
Regular risk assessments enable you to focus on critical areas of concern, and prioritize the use of resources to maximize response and recovery efforts. The Risk Assessment Matrix (RAM) is a logical extension of the risk assessment process that helps organizations identify critical processes, threats that would impact those processes, and the vulnerability of those processes to the threats. The six-step process will help you implement RAM and achieve a risk-based compliance:
NERC Standards Compliance and Reliability Standard Audit Worksheets (RSAWs)
Another area of compliance that needs to be regularly monitored and continually assessed for risks is NERC. Through the years, there has been a rise in standards as well as risks associated with NERC. From 83 standards in 2007, today there are more than 300 compliance standards. Non-compliance with any NERC standard could invite penalties based on the severity and impact of the non-compliance activity on the reliability of services. Most organizations have elements to manage NERC compliance, including:
The Reliability Standard Audit Worksheets (RSAWs):
The NERC developed RSAWs as an assessment and documentation tool in the Compliance Monitoring Program for each regional entity. The RSAWs can be used as part of internal audits to help determine that there is sufficient evidence to verify compliance with the requirements of each standard before regulators come in for an inspection. The worksheets provide a logical order for organizing documents, and a formal communication method with the compliance enforcement authority.
The Role of Technology in Managing Compliance and Policies
The best defense against the pressures of regulations and risks is to manage and monitor your compliance program efficiently and establish processes to prevent non-compliance from happening. Technology enables organizations to adapt a compliance program that is efficient, agile and cost-effective and also provides:
Collaborative Environment: A typical compliance environment has a multitude of regulations that need to be followed and a number of people managing and monitoring a host of compliance processes. Employing the appropriate technological tools can enhance collaboration across your organization, enable seamless sharing of information, break down redundancies and duplicated efforts, and improve cross-enterprise co-ordination. This kind of a collaborative environment also affords an enterprise-level view to closely track compliance processes and enable real-time risk detection and mitigation.
Integrated Compliance Processes: Energy and utilities organizations have standards like FERC, NERC, ERO, EPA, PCI, and SOX to comply with. Each of these standards consists of many further sub-requirements. Technology enables you to implement an integrated compliance framework that maps all these compliance requirements, standards, and policies with the corresponding risks, controls, control tests, documents, and compliance processes to simplify and strengthen end-to-end compliance management.
Disciplined Methodology: Technology automates many cumbersome compliance processes, thereby saving valuable costs, and accelerating and strengthening compliance management Ã¢â‚¬" right from implementing policies, to mapping these policies to compliance processes, to tracking policy exceptions, and managing policy risks. With the help of technology you can assign and escalate tasks to the relevant users implement specific follow-up activities to track, escalate and confirm task completion.
Centralized Repository: There are numerous compliance standards, policies and procedures that need to be implemented. With the help of a centralized library, you can efficiently and easily store, maintain, and access these policies and standards and also provide easy search capability. With this information access, you can fulfill requests by external auditors to provide documentation and evidence that validate that you have met a specific compliance requirement, and controls are in place to ensure ongoing compliance.
A robust compliance and policy management program not only earns you the respect of regulators, but also improves your credibility in the market, and ups your competitive advantage. The key is to develop relevant policies and procedures, and manage them through a proactive, risk-based, and integrated compliance program. Leveraging technology can improve the effectiveness of the program by automating various compliance activities, tracking compliance metrics, and helping you stay on track with regulatory deadlines and changing regulatory reforms.