5 elements that make an effective compliance program

5 elements that make an effective compliance program

With regulations continuously changing, there are always new challenges to overcome. To help firms stay on top, Diligent has outlined the five elements that make an effective compliance program.

It stated that by implementing key elements of an effective program, a company can be equipped for any changes to regulation.

Diligent stated that firms first need to strengthen their approach to compliance. Firstly, a company should stress good governance from the top down. For example, the leadership team should be on board with the efforts to make compliance watertight. It added, “A ‘do as I do’ culture underpins your efforts, while a ‘do as I say’ approach serves only to undermine them.”

Secondly, it said firms should communicate that while there is a compliance team, governance is not exclusively their responsibility. Compliance is everyone’s responsibility, with internal audit, general counsel and company secretaries, risk officers, marketing and sales teams and other areas of the business all having a role.

Next, it stated that implementing clear processes will also help. Mandating stages, such as compliance team review and approval of financial promotions, helps reduce the chance of non-compliant materials slipping by.

The trick is to establish sn effective compliance program.

Measure Your Compliance Program 

Diligent stated that firms should not underestimate the importance of compliance monitoring. It said that measuring against best practice and reviewing internal approaches is an essential first step in an effective compliance program.

It said, “Assess your risk, measure how well you’re performing against current obligations and identify any gaps. This way you will create an action plan with clear priority areas for focus.”

However, Diligent stated that a challenge with measuring, is that obligations are not stationary and will always change. As a result, companies need to continuously monitor performance.

It said, “This can be resource-intensive, at a time when organisations might already be dealing with increased workloads and a reduced workforce. Other priorities’ often tactical business as usual (BAU) activity’ can push strategic compliance improvements down the to-do list. You also need to make sure your approach to measurement is comprehensive. Geographically diverse teams can make it hard to get a handle on global approaches, with actions needed for global and local entities differing.”

Turn Insights Into Action 

The report continues to state that there is no point measuring if nothing is down with the information. Once firms have an understanding of their performance, they need to take action. It stated that firms should identify their desired ‘future state’ in terms of regulatory compliance and then put steps to get there.

Clearly Communicate Roles and Responsibilities 

Next, Diligent said everyone in the company needs to ensure the whole organisation knows their role in compliance. Everyone then needs access to systems and tools that let them fulfil their responsibilities.

It added that firms should make deadlines clear so everyone knows what is required of them. “Automated processes can be invaluable here; there are many benefits of compliance solutions, including the ability to create unambiguous workflows, clear processes and calendar reminders, so anyone allocated a task has no excuse for being unaware of or forgetting their obligations.”

Streamline Your Compliance Processes 

Diligent said that compliance processes need to be streamlined and automation should be leveraged to reduce the manual workloads. Not only can automation reduce manual processes, by quickly spotting issues.

Review Regularly 

Finally, the report states that as regulations are always changing, the right approach might need subtle changes or wholesale re-evaluation at any point. “Make sure your approach stays on point through regular reviews’ and ensure you have the data available to respond to any compliance audit notices or regulatory visit. However robust your approach, your organisational compliance may benefit from recalibration.”

Read the full report here.

Copyright © 2022 FinTech Global

Enjoying the stories?

Subscribe to our daily FinTech newsletter and get the latest industry news & research


The following investor(s) were tagged in this article.