How do I manage such a wide variety of regulations?
Since the Corporate Compliance model was established in Spain in 2015 with the reform of the Criminal Code, companies have found it necessary to establish performance standards that allow them to identify and classify potential risks at an operational and legal level within the framework of business activity, and adopt necessary measures for prevention, management, and control in the face of possible non-compliance with regulations that could be committed.
The challenge that this model raises is the integrated management of a wide variety of national and international regulations — regulations that companies must attend to depending on the nature of their activities and their relationships with third parties. Likewise, achieving integrated regulatory compliance management that supports risk mitigation requires organizational strategies and policies that foster communication and the development of a compliance culture. In this respect, the greatest challenge companies face is achieving synergy between the different areas involved, the corresponding risk analysis, and the execution of controls that ensure regulatory compliance in the course of business activity. Strictly speaking, having a reasonably integrated compliance management system.
How do I achieve a reasonably integrated compliance management system?
Currently, ERM (Enterprise Risk Management) management models are taken as a reference, insofar as there are synergies and joint areas of action between risk management and compliance. Implementing this type of model involves an organized and continuous process for managing the company’s risks, as well as the development and establishment of integrated systems.
To implement this type of model, it is necessary to:
- Define the scope and make it clear enough to understand the company’s commercial activity.
- Identify the risks affecting the company, which requires detailed knowledge of the company, the market in which it operates, and the legal, political, and social environment surrounding it.
- Develop a common vision that is consistent with the strategy and the objectives to be achieved, including critical factors for its success.
- Assess the risks in terms of probability and impact.
- Establish the monitoring of the measures defined to mitigate the identified risks.
Likewise, among the features that characterize an ERM, we can find:
- It is an additional resource for setting and prioritizing the company’s objectives.
- It offers interaction and feedback from the different stakeholders and process interdependencies.
- It is a means to support the establishment of strategies and decision-making based on the analysis of the identified risks.
- It enables the centralization of controls, providing improvements in information quality, perception, and the effectiveness of data governance.
- It addresses compliance requirements such as SOX, COSO, ITIL, among others.
The importance of comprehensive risk and compliance management
Every choice the company makes to achieve its objectives carries its risks — from the simplest decisions in carrying out commercial operations to those of great importance in boards of directors. Even business success is not exempt from entailing a risk, for example, the risk of not being able to meet an unexpected surge in demand or maintain the set commercial target. This is why companies must adapt as much as possible to the growing complexity and volatility of business opportunities.
Risk assessment generates expectations that the company must be aware of and consider whether or not it can meet. Along these lines, it must protect its efforts and resources by creating effective policies and procedures. The monitoring and control of these policies and procedures is of the utmost importance in order to keep advancing in comprehensive management and to keep improving the system at its most vulnerable points.
To have a clearly defined scenario, it is necessary to think about risk management integrated at all organizational levels of the company, such as:
- Governance and corporate culture.
- Strategy and objective setting.
- Review and monitoring of systems.
- Communication and reporting of information, among others.
In this way, it contributes to strategic planning and the performance of all departments and functions.
Proper comprehensive risk and compliance management is an essential element in the approach companies take to manage complex and volatile circumstances. Being able to make agile decisions and offer coherent responses influences how to correctly address the proliferation of data, efficiently manage the cost of risk management, leverage artificial intelligence and process automation, and most importantly, build stronger and more prosperous companies over time.
Benefits of effective risk and compliance management
Companies that carry out integrated risk and compliance management, as well as adopt measures for regulatory compliance, can achieve many benefits, including:
- Expanding the scale of available opportunities by considering all possibilities.
- Identifying and managing risks throughout the entity, and consequently, sustaining and improving development.
- Increasing advantages while reducing negative situations, as a result of identifying risks and establishing appropriate responses.
- Maintaining high standards of quality and company image.
- Professionalizing the compliance function, providing it with resources and processes that guarantee its operability.
- Reduction of legal and administrative problems.
- Improving resource deployment by having solid information on risks, which allows for an assessment of overall resource needs and establishes priorities in their deployment and allocation.
In this way, it can be concluded that it is highly important for companies to implement a comprehensive risk and compliance management system. Not only because it will ensure the smooth running of their business activities, but also because it will provide many benefits in economic, social, and labor terms. Without forgetting that achieving synergy between all areas of the company as far as risk and compliance are concerned will be a mitigating factor should a possible regulatory breach occur.
