Regulatory Compliance Risk Management. A Challenge

Regulatory compliance risk management is an area many businesses struggle to deal with as regulatory, legislative requirements and oversight are ever increasing. This becomes more challenging during periods of economic downturn with a slump in revenue. It is further compounded by higher customer expectations in terms of quality and contractual integrity, which if not met, could throw your business into the murky waters of litigation. Regulatory compliance risk management is a necessary cost of “doing business”.

The regulatory and compliance climate for many businesses is generally a land mine of risks which need to be effectively managed and navigated for successful and continued operation.

BCINC will help your business, even within the current global economic downturn, track and remain compliant with all necessary regulations so that you can remain efficient, productive, organized for audits, avoid litigation, avoid payment of unnecessary penalties, or face reputational risk.

First, let us look at the differences between regulatory compliance and risk management – two distinct activity streams that will guide your understanding of how BCINC can assist your business.

“If you think compliance is expensive – Try non-compliance”

– Former U.S. Deputy Attorney General Paul McNulty

Regulatory Compliance vs Risk Management

Regulatory compliance and risk management are inter-related.

Compliance with established rules and regulations help protect businesses from a variety of unique risks. Compliance processes are generally created for specific regulatory requirements or a specific event. The latter could be in response to a new regulation / standard, criminal investigation, or a ruling from a litigation. Sometimes these are quickly created to meet the need without adequate thought on execution.

Compliance requires adhering with regulations for the business or the industry in which the business operates. In a broader sense, it also includes compliance with other external stakeholder commitments, socially accepted norms, and best management practices.

Regulatory Compliance Risk Management
Risk

Risk management activities would be a fore-runner of compliance. It helps businesses properly understand, identify, and take preventive measures to protect them from risks impacting the business that could lead to non-compliance.

BCINC can partner with you to

  • Track customer complaints,
  • Identify non-conformance and manage root cause analysies
  • Conduct and manage audits and findings,
  • Implement and close appropriate corrective and preventive actions,

Using an integrated risk assessment framework to address the activities above will improve product / service quality while ensuring regulatory compliance – all measured by SMART goals.

Implications of Non-Compliance

Regulatory Compliance Risk Management
Financial fines for non-compliance

Non-compliance with a critical clause in regulatory and industry standards or internal policies can be costly for any business. Non – compliance can cause hazardous situations which compromise the health and safety of employees, the environment, and can even culminate in loss of life.

Non-compliance as previously mentioned can result in the risk of economic loss – financial (fines) and material resources. Other risks include the loss of future business opportunities, contracts, and possibly company reputation.

“It takes less time to do things right than to explain why you did it wrong”

– Henry Wadsworth Longfellow

The Challenges To Expect – No One Size Cookie Cutter Solution

Regulatory Compliance Risk Management
Cookie Cutter

1. It is not uncommon to find that different departments in the same business will use different tools to track compliance requirements because of the “siloed” effect. Perhaps you are faced with a similar situation in your business. This can affect the efficiency of decision-making senior executives as conflicting data will need to be investigated resulting in the unwanted use of man-hours and eating away at costs.

2. Regulatory requirements require several compliance management activities which without a holistic overview would be challenging to track. Process mapping can provide this overview.

3. Compliance requires re-structuring of workloads with the introduction of additional procedures to employees which can later be enforced. A major challenge here is that there may be employee resistance to change. Manual processing of compliance activities can result in decreased workforce productivity because of the increased activities employees now need to conduct to ensure compliance.

This becomes more evident if there is a reduced workforce due to lay-offs and terminations. Because employees are no longer solely focused on the “nuts and bolts” of the business market competitiveness of the business may be diminished.

4. Tracking of business processes and ensuring that they occur within the correct time frame can be a significant challenge for the business. Senior executives must decide on the choice of a manual versus automated tracking solution will meet the needs of the business.

5. The business must conduct a cost-benefit analysis for potential process automation replacement for the majority of physical processing activities required for compliance versus whether training and education would be more applicable for the business.

Regulatory Compliance Risk Management – The Solution

Regulatory Compliance Risk Management
Internal Audit

As always, process mapping is the necessary first step to identify compliance pressure points – government regulations, industry standards, internal procedures, and any others. Once a holistic overview is developed the necessary compliance activities can be incorporated into the process map.

Some businesses prefer to use a technology solution to monitor, enforce and report on compliance activities. This may come with its own challenges such as lack of overall company “buy in” especially between departments and the presence of inadequate company technology capabilities.

Internal audits should be periodically conducted by the business to continuously improve the compliance program through monitoring, root cause analysis and ensure that corrective actions for noncompliance are executed.

In Conclusion – Regulatory Compliance Risk Management

Compliance with regulatory or industry dictated requirements, or internal company procedures is an area that no business can afford to ignore because of the high risks to the business.

An integrated compliance risk management program allows for greater coordination and collaboration between compliance and the rest of the organization, ultimately leading to a more consistent approach to risk management.

To discuss a bit more about compliance activities and risk management specific to your business, schedule a FREE 45-minute Strategy Call (a $350 value) – CLICK below

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