Introduction
State, federal, and global regulators are actively increasing their supervision and enforcement of policies across industries. As the regulatory landscape continues to diversify and expand, organizations today face heightened compliance risks and have increasing responsibilities to meet these regulatory requirements.
New regulations and frequent regulatory updates in areas such as cybersecurity, fraud and financial crimes, data privacy, operational resilience, third-party management, climate disclosure, and more have made ensuring regulatory compliance an ever more pressing challenge. Speaking of the financial sector alone, financial institutions across 190 countries faced an average of 246 regulatory alerts per day in 2021, according to Thomson Reuters.
Failing to meet these compliance obligations may result in enforcement activities, colossal fines, and penalties, often running into billions of dollars. Depending on the failure and enforcement action, it could also result in serious reputational damage, business operations and output disruptions, diminished stakeholder trust and confidence, and even closure of the business, if the offense is serious enough. In 2021, a staggering $44.94 billion in fines was levied on businesses operating in the US and Canada, while $407 million was imposed on the UK and Europe-based organizations for various instances of non-compliance (excluding the General Data Protection Regulation, or GDPR). Last year, an e-commerce giant was fined $847 million - the highest to date - for allegedly violating Europe’s GDPR rules.
In recent years, regulators are also increasingly shifting their focus on individual accountability – imposing fines not just on the organization but also on chief compliance officers (CCOs) and executives for compliance violations. Recently, the Financial Industry Regulatory Authority (FINRA) imposed a $25,000 fine on the CCO of an international broker-dealer for failing to properly oversee the organization’s anti-money laundering (AML) program.
The volume of regulations and regulatory changes will only increase going forward, making it difficult for the already inundated compliance teams to keep up. A compliance strategy tightly integrated with a governance, risk, and compliance (GRC) framework and aligned with business objectives can significantly streamline compliance processes, create compliant and ethical workplaces, and help reduce compliance costs and penalties.
This eBook aims to provide compliance professionals with five actionable compliance management strategies that they can implement to avoid compliance failures and fines. It will also provide insights into how technology is a key underlying factor for future-ready compliance programs.
5 Strategies to Avoid Compliance Fines
Implementing a holistic and integrated approach to compliance will help standardize compliance management processes, taxonomy, and operations. This can reduce many of the redundancies across multiple control tests, policies, risk assessments, audits, and reports configured for meeting different regulatory requirements. Each regulation can be mapped to organizational objectives, business processes, and policies. With this approach, identifying risks and controls for each compliance requirement is streamlined, which helps identify similar compliance patterns across multiple business units and areas of compliance.
Here are five compliance strategies that can help you avoid compliance fines while strengthening your compliance posture:
- Build a Common Data Structure
A single compliance mandate may be applicable to more than one business function. And a common data architecture enables different teams within the organization to collaborate and work towards similar objectives. Instead of struggling with disparate silos of compliance data, they can leverage a single data model and common taxonomy to consolidate and map all the elements of their compliance universe.
By linking various elements of their compliance universe in a many-to-many manner, multiple business functions can share an integrated library of risks, regulations, controls, and objectives. This integrated model, in turn, simplifies the process of tracking the impact of regulations and regulatory changes on the business, creating a 360-degree view of the organizational compliance posture. It also becomes easier to answer questions such as:
- How will a new regulation affect organizational policies, risks, and controls?
- Which policy needs to be updated based on a change in regulation?
- What are the risks to meet regulatory requirements?
- Are there controls defined for these risks?
- What are the issues in meeting compliance?
- What are the top 10 compliance risks?
Technology can help by providing the foundation to build this data model and taxonomy. It enables compliance professionals to plot and understand the relationships between various compliance data elements at the click of a button, without having to juggle multiple cumbersome spreadsheets and documents.
- Track Regulatory Intelligence and Changes
To stay abreast of the numerous new regulations and regulatory updates, organizations need to refer to a variety of regulatory intelligence sources, such as regulatory agencies, trade associations, trade industry publications, national media, and specialized media. Instead of tracking all these sources individually, which is time-consuming and inefficient, a single and centralized content repository can pull and route authoritative regulatory content automatically to specific business units and compliance professionals for their analysis and review.
Integrating regulatory content sources that provide periodic feeds and updates on regulatory changes will help ensure that any updates to regulations are not missed. With a robust technology framework, regulatory changes can be fed into the organization as automated alerts, and then directly routed to a subject matter expert who can proactively act on them.
Analyzing the impact of these changes on various functions, updating policies, and communicating the same to the impacted organization are equally important aspects of managing any regulatory change. Advanced technologies, such as artificial intelligence and machine learning, can help automate this process to help compliance professionals more quickly identify the change and its impact on various business functions.
- Pursue a Risk-Based Approach to Compliance
A risk-based approach to compliance involves identifying risks related to compliance requirements within the organization, and then managing and monitoring them based on their priority. By measuring and rating compliance risks across business units, processes, and geographies, organizations can effectively plan and implement controls. Through risk scoring aligned to the organization’s risk profile and the potential urgency and impact of a risk, those requiring immediate action can be surfaced and acted upon quickly and accurately.
Compliance risk assessments help the organization understand the full range of its risk exposure and flag potential risk events, while also determining why those events may occur and how severe their impact could be. Through an effective assessment, the organization can map its compliance risks to controls, issues, specific business functions, processes, and other key elements, and ensure optimum allocation of resources to keep the risks in check. For instance, if there is a high likelihood of an information security violation occurring, the organization should proactively implement the necessary physical, administrative, and technical controls to avoid or respond better to a security breach.
- Effectively Report and Manage Issues, Observations, Cases, and Incidents
While compliance risk assessments, policies, and controls go a long way towards minimizing compliance issues, violations can still arise. When they do, there must be streamlined and consistent processes to record, investigate, track, and report these cases to closure. Establishing a simple framework with standard workflows to record the cases can help with the process, enabling compliance executives to easily track when a particular compliance violation occurred, the evidence that exists, or the priority level of the case.
Compliance managers are also required to report to the senior stakeholders on the status of compliance risks and controls, often on a real-time basis. Advanced reporting tools can be useful in these situations. Graphical dashboards, for instance, offer comprehensive visibility into the compliance risk management process with aggregate reports as well as individual status trackers. Automated alerts for events such as exceptions and failures help eliminate any surprises and make the compliance process predictable.
Equally important is to encourage frontline engagement to capture any issue or observation that they observe as inconsistent with the organization’s culture and compliance obligations and may need attention from senior executives. It is important to provide them with user-friendly tools and reporting channels to easily convey any issue with the option to do so anonymously. This helps organizations create and maintain a culture of compliance, enhance the ability to identify potential compliance blind spots, and address them before they snowball into bigger issues.
- Manage Regulatory Engagements in a Systematic Manner
Heavily regulated industries like banking and financial services, health care, pharmaceuticals, and energy & utilities are often required to follow a structured approach for managing their engagements with regulators. Technology can streamline the process in multiple ways. It can help track and prioritize requests from regulators, assign tasks to internal teams, and track them to closure from a single point of reference.
Technology allows all regulatory engagement data to be captured in a central repository, thereby making it easy to share, track, and access the data. Workflows can be easily defined and managed, minimizing inconsistencies or duplication of effort. In addition, graphical dashboards, reports, and metric cards can provide comprehensive and real-time intelligence on various regulatory engagements, tasks, findings, action plans, and trends. These insights can help stakeholders take informed steps toward strengthening the organization’s relationships with regulators.
How MetricStream Can Help
MetricStream offers a comprehensive suite of GRC products and solutions to help organizations streamline and strengthen both regulatory and corporate compliance. These products leverage advanced technologies to equip compliance professionals with a 360-degree view of their compliance posture, automated workflow, collaboration, and real-time reporting capabilities, enabling them to save time, cost, and resources in managing compliance processes end-to-end.
With MetricStream Regulatory Compliance, organizations can:
An award-winning entertainment powerhouse was largely relying on manual processes for its internal audit, compliance, and risk assessment processes. But as its network of stores grew to include thousands of outlets, a more resource-efficient and digital approach to GRC became essential.
Operating in one of the most highly regulated industries, building healthy relationships with regulators is one of the top priorities for the company. Towards this goal, it implemented MetricStream Compliance Management to equip users to effectively monitor more than 4300 stores to be monitored against 25 areas of compliance. The product will help accelerate control assessments and minimize the costs of compliance. Users will be able to gain a clearer picture of compliance issues and close them proactively. Furthermore, running on the AWS Cloud delivered scalability and security.
State, federal, and global regulators are actively increasing their supervision and enforcement of policies across industries. As the regulatory landscape continues to diversify and expand, organizations today face heightened compliance risks and have increasing responsibilities to meet these regulatory requirements.
New regulations and frequent regulatory updates in areas such as cybersecurity, fraud and financial crimes, data privacy, operational resilience, third-party management, climate disclosure, and more have made ensuring regulatory compliance an ever more pressing challenge. Speaking of the financial sector alone, financial institutions across 190 countries faced an average of 246 regulatory alerts per day in 2021, according to Thomson Reuters.
Failing to meet these compliance obligations may result in enforcement activities, colossal fines, and penalties, often running into billions of dollars. Depending on the failure and enforcement action, it could also result in serious reputational damage, business operations and output disruptions, diminished stakeholder trust and confidence, and even closure of the business, if the offense is serious enough. In 2021, a staggering $44.94 billion in fines was levied on businesses operating in the US and Canada, while $407 million was imposed on the UK and Europe-based organizations for various instances of non-compliance (excluding the General Data Protection Regulation, or GDPR). Last year, an e-commerce giant was fined $847 million - the highest to date - for allegedly violating Europe’s GDPR rules.
In recent years, regulators are also increasingly shifting their focus on individual accountability – imposing fines not just on the organization but also on chief compliance officers (CCOs) and executives for compliance violations. Recently, the Financial Industry Regulatory Authority (FINRA) imposed a $25,000 fine on the CCO of an international broker-dealer for failing to properly oversee the organization’s anti-money laundering (AML) program.
The volume of regulations and regulatory changes will only increase going forward, making it difficult for the already inundated compliance teams to keep up. A compliance strategy tightly integrated with a governance, risk, and compliance (GRC) framework and aligned with business objectives can significantly streamline compliance processes, create compliant and ethical workplaces, and help reduce compliance costs and penalties.
This eBook aims to provide compliance professionals with five actionable compliance management strategies that they can implement to avoid compliance failures and fines. It will also provide insights into how technology is a key underlying factor for future-ready compliance programs.
Implementing a holistic and integrated approach to compliance will help standardize compliance management processes, taxonomy, and operations. This can reduce many of the redundancies across multiple control tests, policies, risk assessments, audits, and reports configured for meeting different regulatory requirements. Each regulation can be mapped to organizational objectives, business processes, and policies. With this approach, identifying risks and controls for each compliance requirement is streamlined, which helps identify similar compliance patterns across multiple business units and areas of compliance.
Here are five compliance strategies that can help you avoid compliance fines while strengthening your compliance posture:
- Build a Common Data Structure
A single compliance mandate may be applicable to more than one business function. And a common data architecture enables different teams within the organization to collaborate and work towards similar objectives. Instead of struggling with disparate silos of compliance data, they can leverage a single data model and common taxonomy to consolidate and map all the elements of their compliance universe.
By linking various elements of their compliance universe in a many-to-many manner, multiple business functions can share an integrated library of risks, regulations, controls, and objectives. This integrated model, in turn, simplifies the process of tracking the impact of regulations and regulatory changes on the business, creating a 360-degree view of the organizational compliance posture. It also becomes easier to answer questions such as:
- How will a new regulation affect organizational policies, risks, and controls?
- Which policy needs to be updated based on a change in regulation?
- What are the risks to meet regulatory requirements?
- Are there controls defined for these risks?
- What are the issues in meeting compliance?
- What are the top 10 compliance risks?
Technology can help by providing the foundation to build this data model and taxonomy. It enables compliance professionals to plot and understand the relationships between various compliance data elements at the click of a button, without having to juggle multiple cumbersome spreadsheets and documents.
- Track Regulatory Intelligence and Changes
To stay abreast of the numerous new regulations and regulatory updates, organizations need to refer to a variety of regulatory intelligence sources, such as regulatory agencies, trade associations, trade industry publications, national media, and specialized media. Instead of tracking all these sources individually, which is time-consuming and inefficient, a single and centralized content repository can pull and route authoritative regulatory content automatically to specific business units and compliance professionals for their analysis and review.
Integrating regulatory content sources that provide periodic feeds and updates on regulatory changes will help ensure that any updates to regulations are not missed. With a robust technology framework, regulatory changes can be fed into the organization as automated alerts, and then directly routed to a subject matter expert who can proactively act on them.
Analyzing the impact of these changes on various functions, updating policies, and communicating the same to the impacted organization are equally important aspects of managing any regulatory change. Advanced technologies, such as artificial intelligence and machine learning, can help automate this process to help compliance professionals more quickly identify the change and its impact on various business functions.
- Pursue a Risk-Based Approach to Compliance
A risk-based approach to compliance involves identifying risks related to compliance requirements within the organization, and then managing and monitoring them based on their priority. By measuring and rating compliance risks across business units, processes, and geographies, organizations can effectively plan and implement controls. Through risk scoring aligned to the organization’s risk profile and the potential urgency and impact of a risk, those requiring immediate action can be surfaced and acted upon quickly and accurately.
Compliance risk assessments help the organization understand the full range of its risk exposure and flag potential risk events, while also determining why those events may occur and how severe their impact could be. Through an effective assessment, the organization can map its compliance risks to controls, issues, specific business functions, processes, and other key elements, and ensure optimum allocation of resources to keep the risks in check. For instance, if there is a high likelihood of an information security violation occurring, the organization should proactively implement the necessary physical, administrative, and technical controls to avoid or respond better to a security breach.
- Effectively Report and Manage Issues, Observations, Cases, and Incidents
While compliance risk assessments, policies, and controls go a long way towards minimizing compliance issues, violations can still arise. When they do, there must be streamlined and consistent processes to record, investigate, track, and report these cases to closure. Establishing a simple framework with standard workflows to record the cases can help with the process, enabling compliance executives to easily track when a particular compliance violation occurred, the evidence that exists, or the priority level of the case.
Compliance managers are also required to report to the senior stakeholders on the status of compliance risks and controls, often on a real-time basis. Advanced reporting tools can be useful in these situations. Graphical dashboards, for instance, offer comprehensive visibility into the compliance risk management process with aggregate reports as well as individual status trackers. Automated alerts for events such as exceptions and failures help eliminate any surprises and make the compliance process predictable.
Equally important is to encourage frontline engagement to capture any issue or observation that they observe as inconsistent with the organization’s culture and compliance obligations and may need attention from senior executives. It is important to provide them with user-friendly tools and reporting channels to easily convey any issue with the option to do so anonymously. This helps organizations create and maintain a culture of compliance, enhance the ability to identify potential compliance blind spots, and address them before they snowball into bigger issues.
- Manage Regulatory Engagements in a Systematic Manner
Heavily regulated industries like banking and financial services, health care, pharmaceuticals, and energy & utilities are often required to follow a structured approach for managing their engagements with regulators. Technology can streamline the process in multiple ways. It can help track and prioritize requests from regulators, assign tasks to internal teams, and track them to closure from a single point of reference.
Technology allows all regulatory engagement data to be captured in a central repository, thereby making it easy to share, track, and access the data. Workflows can be easily defined and managed, minimizing inconsistencies or duplication of effort. In addition, graphical dashboards, reports, and metric cards can provide comprehensive and real-time intelligence on various regulatory engagements, tasks, findings, action plans, and trends. These insights can help stakeholders take informed steps toward strengthening the organization’s relationships with regulators.
MetricStream offers a comprehensive suite of GRC products and solutions to help organizations streamline and strengthen both regulatory and corporate compliance. These products leverage advanced technologies to equip compliance professionals with a 360-degree view of their compliance posture, automated workflow, collaboration, and real-time reporting capabilities, enabling them to save time, cost, and resources in managing compliance processes end-to-end.
With MetricStream Regulatory Compliance, organizations can:
An award-winning entertainment powerhouse was largely relying on manual processes for its internal audit, compliance, and risk assessment processes. But as its network of stores grew to include thousands of outlets, a more resource-efficient and digital approach to GRC became essential.
Operating in one of the most highly regulated industries, building healthy relationships with regulators is one of the top priorities for the company. Towards this goal, it implemented MetricStream Compliance Management to equip users to effectively monitor more than 4300 stores to be monitored against 25 areas of compliance. The product will help accelerate control assessments and minimize the costs of compliance. Users will be able to gain a clearer picture of compliance issues and close them proactively. Furthermore, running on the AWS Cloud delivered scalability and security.
