Many areas of modern business have been transformed by digital technology. Certain sectors are further down the road of digitisation than others, but overall, the ways in which we communicate, collaborate and share information have been fully digitised in many cases, and a whole host of other business processes are highly digitally advanced.
Yet some areas of business remain curiously untouched by digitisation – these include risk management and compliance. While most major organisations have a compliance officer or director, and some will even have a compliance team, many of these still have to rely on analogue tools such as Excel to monitor compliance requirements and manage risk.
Given the sheer volume of compliance and regulation requirements in modern business, the challenges inherent in remaining compliant, and the penalties for failing to adhere to such regulations, this is highly surprising. In the US alone in 2016, 30 companies were fined a total of $2.4 billion for non-compliance under the country’s Foreign Corrupt Practices Act – it just doesn’t make business sense that beleaguered compliance and risk management officers aren’t given more technological assistance.
What’s the reasoning behind this, and how can organisations use digital compliance to turn what is usually perceived as a defensive business discipline, into one that delivers to them critical competitive advantage?
The challenges of compliance
Few would doubt the challenges of ensuring compliance in modern business. Some sectors are more involved than others, with Financial Services (FS) an industry that has a seemingly never-ending series of compliance requirements.
New regulations such as MiFID II and MAR increase the regulatory requirements for FS firms and initiatives yet to take effect such GDPR will also impact on what is required to remain compliant.
Organisations also need to be aware of different compliance regulations in different parts of the world. For a large, multi-national organisation this is no small undertaking. It is a highly involved process, requiring lots of information and knowledge to be input into a certain format and furthermore, it is a task that requires demands absolute attention to detail.
But it has always been managed in this way, and because for many organisations compliance is not seen as a priority, there is a reluctance to invest in the right tools to manage it effectively.
Analogue tools are wholly inadequate
But for most firms, irrespective of size or industry, compliance is now both increasingly important and increasingly challenging, and staying on top of the varied compliance requirements is becoming a significant business issue.
For effective compliance, you need precision, to be systematic and you need to be up to date. This can be done using a spreadsheet, database or SharePoint, but they all require human input, and humans are fallible.
But if you have an automated tool that takes away the hassle of managing compliance, it mitigates the risk of failure much more effectively, saves you having to remember everything and can facilitate a more pro-active approach.
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So using Excel to manage risk in such an environment is simply not fit for purpose and leaves organisations highly vulnerable to compliance requirement failure. The consequences of this are vast and potentially wide-ranging, so a modern and more digital approach to compliance is required.
This entails a combination of automation of tool, with input from industry experts and thought leaders, that can help map the compliance requirements faced by an organisation, across territories, sectors and a range of other areas.
Proactive digital compliance
This approach also allows an organisation to manage compliance on an ongoing basis, rather than as a project to be begun and completed within a certain time. Modern compliance is ongoing so it stands to reason the management of it must be so too. Furthermore, compliance has traditionally been perceived as a defensive discipline in business, a box to be ticked to enable business to carry on as usual.
This, however, is not suited to compliance requirements in modern business. Adopting a more proactive approach to compliance is not only more effective when it comes to warding off risk of failure, but it also allows an organisation to turn that into competitive advantage.
Given that most companies face similar challenges and risks to their competitors, knowing more about compliance requirements, when they might occur and the consequences of failing to manage them effectively, will enable that firm to steal a march on those competitors. They can consider each requirement on the horizon and assess each one, based on their priority and the volume of work involved in addressing it.
This enables the creation of an advantage over organisations that do not manage compliance in this way and the value to any business cannot be under-estimated. Digitisation is assisting organisations all over the world in a myriad of different ways, and compliance is an area of business that is ripe for digitisation.
It means that instead of using compliance as a defensive measure, a continuous and digitised approach instead allows an organisation to view compliance as a valuable competitive advantage.
Sourced by Eric Berdeaux is CEO of OXIAL, the new generation GRC solutions provider
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