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Compliance Insights

5 Questions to Ask When Choosing a GRC Platform
Apr 20, 2021
4
Minutes

Governance, Risk and Compliance (GRC) management is an integral part of an organization's management strategy. Once the management identifies the benefit of adopting a GRC platform, the next question that comes up is that how to choose the best GRC platform suitable to your organization? Not all platforms are the same. The key is to set the right expectations and perform the due diligence before you choose your vendor. 

 

We have highlighted 5 questions you should ask your vendor:

Where Do You Host My Data?

Companies opting for SaaS applications are on the rise. It is vital to know where your vendor is hosting your data in times of data sovereignty and GDPR. If you are opting for a SaaS GRC platform, which is a great choice of organizations, including small and mid-tier companies, you need to ask your vendor where they are hosting your data. Your vendor is your data processing application, make sure that you choose the best vendor who host the data in a secure virtual server. VComply is hosted in cloud, and makes sure that your data is secure and compliant at all the times.


What Are the Features and Benefits the Vendor Offers?

Evaluate the features that the vendor offers. Compare the features with other vendors in the same price range. Analyze your organization's GRC goals, whether the proposed application provides a structured approach to achieve your organizational goal, minimize your risks, and manage your compliance requirements.

The basic features that you can look out for in a GRC platform are:

  • Centralized Internal Controls
  • Support for Future Frameworks and Standards
  • Workflow Automation
  • Scalability
  • Customizable Reports and Dashboard
  • Flexibility
  • Obligation Assignment


VComply is tailor-made to meet the demands of compliance professionals by helping them perform risk assessments and implement controls. It comes with built-in compliance frameworks that enables you to automate the implementation of compliance controls. VComply's workflow automation makes creating, assigning, and monitoring compliance responsibilities easier. It sends reminders to stakeholders who are entrusted to complete a responsibility. Automation can drastically improve compliance oversight, coordination, and collaboration.


How Easy is It to Use the Platform?

A GRC platform should be intuitive and easy to use. Many of the legacy applications available in the market are complex and pose difficulties in using. When there is a gap in the customers' expectations from a great GRC platform, it turns into bad UX costs. For example, if the user experience does not allow the user to create and assign a control quickly after a risk assessment, it fails the purpose of an effective GRC platform. Suppose the compliance team cannot collaborate on a document or a compliance obligation, or the leadership team do not get enough insights from the reports or dashboards. In that case, it can lead to wasted efforts, time, and frustration. In some cases, it can even add up to your tasks. Analyze the application based on these factors, and it should be easy for the platform to fit for your needs.

Compliance is considered an on-going process, and your tools should also embody that attribute. VComply evolves and proactively adapt to provide you enjoyable user experience. When it comes down to the nitty gritities of risk and compliance management, the dashboards and report should provide at-a glance information. The VComply suite is equipped to address this need and does so seamlessly to successful compliance efforts. 


Does the Platform Provide Integrated GRC ?

A modern and integrated GRC software can help predict and mitigate risks,  streamline compliance with regulations and the organization's policies. The flexibility to extend applications' capability to allow employees to access a policy library, upload compliance evidence, and proofs, and file and archive documents help to a great extent to avoid compliance mistakes and omissions.

VComply offers a federated approach to GRC wherein audit, risk, policy, and compliance management activities are integrated. A centralized view of risks, internal controls, and compliance responsibilities are available to the leadership teams. A holistic view of GRC is transformational.

What Does The Overall Onboarding Process Look Like?


More broadly than simply selecting a tool, consider how exactly the vendor plans to onboard you onto the platform. How long does it take to operationalize and reap benefits out of the GRC platform? First, identify your success criteria for implementing the system and convey it to your vendor and tie it with your onboarding process. It takes only 5 days to fully onboard with VComply. It is easy to set up VComply and set up organizational settings for managing your compliance and risk programs. The implementation team is with you at every step of the implementation process from kick-off, configuration, and workshops. VComply equips your team to shorten audit cycles and eliminate the cost of non-compliance meaningfully. By automating workflows, processes, and mapping of frameworks, VComply can generate faster ROI for you.


If you're looking for a better way to manage governance, risk, and compliance in your organization, take a look at GRC software by VComply.  VComply offers a complete GRC management solution to help you streamline everyday compliance processes with a centrally managed, cloud-hosted system.

Devi Narayanan
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Why Are Internal Controls Critical for Your Organization?
Apr 13, 2021
4
Minutes

Growth is something that organizations have their eyes fixed on. They are cautious of wasting precious time and money in costly lawsuits, compliance risks resulting in penalties, or reputational damage. Internal controls help establish procedures and policies to keep the organization compliant, prevent employees from committing fraud, and improve the organization's operational and financial efficiency.

What is Internal Control?

COSO defines internal control framework as the following:

A process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

  • Effectiveness and efficiency of operations;
  • Reliability of financial reporting;
  • Compliance with applicable laws and regulations.

Internal Controls are made up of steps, procedures, policies, and rules designed to ensure that an organization meets its objectives in the most efficient manner and prevent, detect, and mitigate risks facing organizations. Internal Controls aim at operational efficiency and effectiveness through the control of risks. Many experts even comment that internal controls are part of day-to-day operations. 

The following are the basic features required for a robust internal control system: 

Establishing responsibilities

The most important principle of internal control is establishing and entrusting the responsibility to specific individuals. Many times, teams fail because of the lack of clarity on one's responsibilities. Controls work the best when individuals are made responsible for executing tasks. Establishing responsibility includes authorizing the power to execute certain actions to these individuals.


‍Segregation of Duties 

Separating duties involve bifurcating a task into a series of small tasks and sharing them among various employees. Separation of tasks (SOD) is the basic building block of internal controls and risk management and helps prevent fraud and errors. When parts of a  task are divided and distributed to two or more employees, it reduces wrong doings, errors, and swindling. The SOD promotes shared responsibilities and prevents just one person from accessing company's critical assets. The concept of SOD is derived from the notion that giving complete control of critical systems and vulnerable processes to one single individual can increase risks. 

Records Maintenance 

Documentation is a critical component of any internal control. Maintaining appropriate records enables storing and safeguarding of documentation, and includes destroying any tangible obsolete records. A GRC platform like VComply helps organizations maintain a central repository of records, and associate proofs or evidence for a control.  It also facilitates role based access to records and restricts unauthorized access. A backup of the data ensures that there is no data loss.

‍Independent Reviews and Audits

Independent internal verification or audits ensure that that controls are working as intended. They also assure the organization that it  complies with rules and regulations, performance of operations are effective, and financial reporting is accurate.

Safeguarding and Insuring of Assets

Physical as well as digital safeguards help protect company's assets. They can be physical e.g. locks or intangible e.g. – passwords and pins . Irrespective of the methods, they are an important feature of the company's internal control plan. Documents such as blank checks, company letterhead and signature stamps are items that require safeguarding. One may commonly overlook this. 

Thus, to ensure good governance and compliance, a company should have effective internal controls in place. 


VComply is a leading GRC platform that helps meet the demands of compliance professionals by helping them perform risk assessment and implement controls. It comes with built-in compliance frameworks that helps you automate the implementation of compliance controls.

Devi Narayanan
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How to Prepare Your Organization for GDPR and Data Privacy?
Apr 8, 2021
4
Minutes

When the internet and technology are the lifeblood of modern business operations, it is no wonder that data privacy has taken the  center stage. According to a Pew Research Center report, 79% of consumers have raised concerns about personal data that organizations collect. These concerns have as much to do with discrimination and law as they do with ethics and policy. Across the EU, UK, USA, China, Singapore, and virtually every other location on the planet, the regulatory landscape for data privacy has changed and continues to evolve. In the EU, the General Data Protection Regulation (GDPR enforceable in 2018) and its policies have effected change worldwide.

EU regulators and legislators indicated that businesses' almost laissez-faire approach toward data protection compliance had gone on for far too long and that the GDPR would rectify this. And it did. Today, the cost of data privacy infractions can amount to a hefty penalty of up to €20 million or 4% of the company's annual global turnover. Moreover, on account of the GDPR's broad territorial scope, it is regarded as a standard globally, and businesses invest heavily to keep up with the compliance regulations.

However, despite efforts, a report published by DLA Piper states that data breach fines and notifications between January 2020 and 2021 increased by 40% and 19%, respectively. Naturally, this double-digit growth isn't conducive to healthy business operation and implores the question, 'What can or should companies do to mitigate losses due to data privacy non-compliance?' For insight on the matter, read on to know how companies can prepare for the inevitable progression of GDPR or any other such data privacy laws and regulatory guidelines.

Define the role and responsibilities of a data protection officer

The first approach companies could take is to hire a data protection officer or DPO. This is a relatively new role for most institutions and should exist, especially considering how quickly regulatory reforms can occur. A data protection officer is a professional tasked with doing all the heavy lifting in ensuring that the organization remains compliant with the GDPR. As a matter of fact, it is a mandatory requirement by the GDPR that a company must hire a DPO if it handles personal data of EU residents. 

Ideally, companies should look inwards at personnel working within the IT or legal departments for the role of DPO. A DPO's responsibilities often overlap with those of a Chief Data Officer and these professionals serve as viable candidates for the job. However, to be effective, it is important that the DPO receives formal training on GDPR. Organizations such as the Association of Data Protection Officers and the International Association of Privacy Professionals (IAPP) offer courses on data privacy and security. There is a talk that the GDPR will likely create entities that offer certification for such courses in the near future.

Ditch all age-old, legacy systems that make data management tedious

In a bid to save on costs, it is quite common for companies to take legacy systems forward with every passing year. While this may have worked a decade ago, it definitely won't in today's environment. Legacy systems used to track, enter, and monitor data make staying compliant difficult, especially when dealing with a breach. The solution here is to evaluate the efficacy of existing data management tools with today's standards. 

A good starting point would be to get rid of systems that don't easily integrate with workflow automation. Manual inputs and processes increase the risk of noncompliance, and new-age tools can help address this problem. One smart and effective solution is the VComply GRC software suite. VComply allows you to establish a centralized data model, where a single repository of all critical documents may be maintained. This enables easy management, tracking and can aid quick breach redressal when dealing with risk data.  

Ensure that the privacy impact assessment isn't lacking

An effective way to stay ahead of GDPR changes is ensure that the current documentation is maintained with maximum accuracy and as per requirements. Under the GDPR, all data-intensive projects must have privacy impact assessment (PIA) documentation, which must be accessible to everyone involved in a project. This is non-optional as it is a process that accounts for all the privacy risk present with any data a company collects from consumers. 

 Ideally, a comprehensive PIA should be able to document all key data-related information. Here is a table that highlights the main verticals and the type of data that should be documented.

Prioritize security above all

It comes as no surprise that data security is a key part of the GDPR compliance journey. To stay ahead of the ever-changing environment, companies should design all security measures with privacy as a priority. Common measures include creating workflows that govern data access, both on-site and remotely. As per the GDPR, an external data breach can even be a situation where an unvetted temporary employee is granted full access to data through a generic log in. 

 

Such cases of unsecured data access can be solved by implementing clearly defined user access controls. Besides these, security measures extend to monitoring and logging. This is another branch of data collection, albeit internal, and should be handled in keeping with the GDPR.

Review existing risk assessment controls and revamp as needed

Before the GDPR took hold, data privacy may have not been a key part of the risk assessment and management strategy. This needs to change in order to adapt to the modern-day requirements and data privacy should be given its fair share of importance within these protocols. This includes designing specific risk assessment models, having controls to mitigate risks, and understand the impact of these risks and the extent of their exposure. 

 

Considering that the GDPR guidelines will continue to evolve with every passing year, it is safe to assume that companies will soon have to learn to adapt on the fly. These 5 measures should help prepare for many reforms, especially if the company has the right tools at its disposal. The VComply GRC software suite offers such a solution to organizations to map their data and efficiently implement controls to track and manage compliance with GDPR regulation. To address any queries or know more about the provision, contact us online.

VComply Editorial Team
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Why User Experience Matters While Choosing a GRC Software
Mar 23, 2021
4
Minutes

Today's organizations face a plethora of challenges managing compliance, keeping up with internal policies, and improving social security practices. Needless to say, that managing compliance and risk management programs manually is a painful task. Fortunately, there is an influx of software applications in the compliance and risk management space claiming to reduce compliance and risk managers' pain. However, an unintuitive GRC platform laden with poor user experience will only add to problems.

A compliance and risk management platform is a significant investment. How do you select a GRC tool? What is the importance of user experience when evaluating a GRC tool? These are some of the questions you need to seek answers to before selecting the tool. Just in the case of any other software, usability and user experience is the key. If the software is not usable and ignores user satisfaction, customer retention might not be easy.


Breaking down user experience

There is a tendency to use the term user experience interchangeably with the user interface. The fact is that they are different. User interface refers only to the aesthetics of the software. User experience covers all aspects of the end-users interaction with a product, and the user interface is a part of it. The goal of a good user experience is to accomplish the exact needs of the customer without fuss. The best UX focuses on simplifying the functionality and improving the user's interaction with the product.

It should:

  • Let customers accomplish their goals easily
  • Saves time and money
  • Allow them to perform difficult tasks effortlessly.


Why UX matters?

When there is a gap in the customers' expectations from a great GRC platform and your product offering, it turns into bad UX costs. If your customers encounter a bad experience, if they don't find what they need or can't reach someone, they will abandon the product and not come back. For example, if the user experience does not allow the user to create and assign a control quickly after a risk assessment, it fails the purpose of an effective GRC platform. If the compliance team cannot collaborate on a document or a compliance obligation, or the leadership team do not get enough insights from the reports or dashboards, it can lead to wasted efforts, time, and frustration. In some cases, it can even add up to their tasks. 

The common characteristics of bad UX are:

  • A decrease in employee productivity
  • Decreased user adoption
  • Increased employee frustration

Bad UX has a price. You should prevent users from experiencing negative emotions in their interaction with the platform and implement an optimal user experience.  A good UX's goal concerning a GRC platform is to let various stakeholders do what they need to do and help your organization remain compliant and keep risks at bay. To achieve this, adopt a user-centered design approach, perform usability tests and envisage how users will use the application, identify mistakes, correct them. The next best way is to understand how your customers feel about your application. Ask for their feedback. Customer feedback forms and NPS are effective tools to measure and understand customers' overall satisfaction.


VComply's approach to user experience

VComply pays special attention to usability and overall experience of the user. We place focus on the following aspects of the user experience:

Navigation :There is a popular quote within the designer circle "It doesn't matter how good your application is if users can't find their way around it." Giving potential customers access to the information they want in the easiest way possible is the key. We keep our navigation and user experience simple, thereby reducing the friction points and making the experience enjoyable. For example, VComply makes it very easy to create or oversee a control associated with a SOC2 or GDPR framework. 

Familiarity : We use a familiar approach in design and use simple and familiar elements within our interface. We have made it intuitive so that even first-time users should be able to use it easily. 

Consistency: We kept our interface consistent across the VComply platform as it makes it easy for users to identify and familiarize themselves with the usage patterns. 

Flexibility and efficiency: VComply knows the exact needs of its customers and their intents. Flexibility refers to allowing each type of customer to do what they need. For example, VComply allows an executive to know his compliance task on a particular day and  a compliance officer to oversee a task or gain insights on overall compliance performance. When it comes to efficiency, the platform allows users to fulfill their tasks effortlessly and derive great value out of its features.


Legacy GRC tools aren't equipped or efficient enough to keep pace with the new-age user experience, which should be seen as a risk. Remember, compliance is considered an on-going process, and your tools should also embody that attribute. The ability to evolve and proactively adapt to an enjoyable user experience should be a functionality that the GRC tool offers. The VComply suite is equipped to address this need and does so seamlessly to successful compliance efforts. 

Devi Narayanan
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Workflow Automation for Compliance Programs
Mar 16, 2021
4
Minutes

In a world where efficiency is king, it comes as no surprise that the practice of workflow automation is as popular as it is. Every process has some form of workflow to go through, and these often include several manual tasks, which increase risk exposure due to their inherently error-prone nature. Workflow automation addresses this lack, working on a company-wide scale. For instance, as per data published by the Annuitas Group, marketing and process automation drew in a 417 % increase in revenue. 

 

Considering the burdensome nature of the compliance process, it is clear that operating without automation is a risk, to begin with. But does automation scale as effectively when optimizing the compliance workflow? As a matter of fact, it does, and very elegantly too. Workflow automation for compliance works primary because it streamlines the flow of crucial information and key compliance responsibilities. With traditional compliance workflows, there is a lot of manual effort and input required from the compliance officer. Compliance oversight and coordination can also be challenging in such a system, but such complexities can be reduced with automation.

 

Another good example is the ability to adapt to new compliance norms. In a fast-paced, ever-changing market space, regulatory reforms can be an administrative nightmare for compliance officers. However, with the right tools, adapting to these new rules doesn't require a complete and expensive controls' overhaul. This is just one among the many benefits, and for more insight on this subject, read on.  

 

Compliance problem areas solved by workflow automation 

Compliance officers have their work cut out for them no matter the industry the organization operates within. This is especially true for companies without any form of automation in place as this means that workflow processes are still reliant on manual input. Human error is among the primary risk factors to account for when dealing with any form of manual work. 

 

This exposure only widens with complexity as employees start to seek workarounds and shortcuts in an attempt to provide quick solutions. As a result, this exposes the organization to some form of a regulatory violation. Workflow automation helps mitigate this risk as employees can only operate within set parameters, and these are designed to comply with internal policies. However, complex manual processes are just one among the many compliance breakpoints. Here are other common compliance problems areas that workflow automation can help optimize against. 

 Entrust Responsibilities

Even though employees understand the importance of compliance responsibilities, they can forget or lose track of when and what needs to be done. So, it important that responsibilities need to entrusted to various stakeholders and provide a due date for completion. For example, an IT manager needs to submit a cybersecurity report. Compliance workflow automation makes creating, assigning, and monitoring compliance responsibilities easier. An automated tool can send reminders to stakeholders who are supposed to complete a responsibility. Automation can drastically improve compliance oversight, coordination, and collaboration.

Entrust responsibilities to employess

Insecure document distribution

 A systemic problem plaguing many organizations is that information, often vital, is transmitted through less than secure channels such as email. Companies could face severe consequences if a document is seen by people who aren't authorized to view it. An efficient way to minimize exposure to this vulnerability would be to take control of document distribution with the help of automation. The company creates workflows with customized roles and employs automated document routing for maximum safety. Another solution is to have a workflow form that requests sensitive data and once uploaded, this data is automatically transferred to a unified document management program, such as SharePoint, and grants access only to those authorized. 

 

Unique industry-specific regulatory norms

Compliance norms vary based on the industry and there may be some especially strict rules to follow. This is a problem because not all tools are equipped for these unique requirements. Some software may not support necessary compliance frameworks, which can spell trouble since it might manual controls. Automation helps this by enabling the design of flexible workflows to ensure that any complex processes required by regulation aren't sidelined. 

Inadequate tracking of documents and data transfers

 Businesses have to manage and transmit large volumes of data via documents on a daily basis. Generally, organizations use some form of database or a cloud service to store and interact with this data. Unfortunately, this can cause inconvenience as many such technologies don't allow you to track these documents' movement. 

 

Another issue is tracking down the data shared within these systems for the purposes of removal. This is a near impossible task as information is shared across various platforms. A solution helps automate the otherwise tedious process of creating the audit log or trail. 

Approval hunting

 In any company, there is always some form of the hierarchy followed regarding how information flows. For instance, employees may be required to get certification or approval from specific executive staff and chasing these approvals can be quite tedious. This is especially relevant to larger organizations where a request may get lost in the email inbox or may get delayed for some other reason. 

 

In such cases, it is quite common for employees to either skip this crucial step of approval or for administrators to issue quick approvals just to maintain pace. Any such occurrences are major compliance vulnerabilities that shouldn't exist and workflow automation can safeguard against them. These tools can be designed to ensure that information gets automatically routed to the designated recipient and follow-up alerts get issued in a timely manner. 

  

Ways to leverage automation to drive compliance

Considering the consequences that come with being noncompliant, there are several reliable and ingenious ways to leverage workflow automation for compliance. Take a look at the options that all companies have at their disposal. 

A robust compliance management or a GRC management tool can help companies automate compliance processes' overall management. Since no two companies are the same, internal policies and controls will vary and these tools can be used to design the automated workflows as needed. Some of the best ways to use this tool are to: 

  • Assign clear compliance responsibilities to employees based on the department they operate within.
  • Delegate tasks to responsible team members and use a workflow automation tool to monitor progress. 
  • Store documents and ensure that document retention stays flawless for when auditors come knocking. Workflow automation minimizes the chances of human error and can also help simplify search during audits. 

 

Succeeding at workflow automation for compliance does rely on software being used. Not only should it have the certification, but it should also be equipped to operate within the applicable compliance framework. The VComply GRC software suite meets all these requirements and goes further to offer integrated risk assessment and management programs. Armed with this tool, you can empower your compliance teams to work optimally and prioritize compliance as they should. For more information, contact us online. 

VComply Editorial Team
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What Is the Importance of Ethics in Business?
Mar 6, 2021
4
Minutes

In a highly competitive environment that thrives on doing anything and everything it takes to succeed, ethics are a key system used to govern business operations. Business ethics, by definition, is a system of beliefs that serves to guide a business organization and the individuals within that organization. These largely revolve around the behaviors, decisions, and values of all involved, and are sometimes incorporated into regulatory norms. 

 

For most businesses, some laws dictate ethical protocol as well, some of which commonly include:

 

  • Minimum wage norms
  • Environmental regulation
  • Restrictions against collusion and insider trading

 

It is interesting to note that the attributes and factors that qualify as business ethics are now vastly different from those of the past. Naturally, businesses now operate on a much larger scale and leverage more advanced technologies and media. As such, there are standards both unspoken and known that should be followed for optimal business operation. More to the point, companies and organizations with a defined ethical protocol are often known to be more successful. 

 

This is proven by the fact that companies on the World’s Most Ethical Companies list were found to outperform the U.S. Large Cap Index by a significant 13.5% for a 5-year period. In short, good ethics translates into good business and it is a no-brainer that it benefits businesses to invest in a well-defined ethics program. For more insight on what this entails and the consequences of ignoring business ethics, take a look at these pointers.  

 

What are the different areas of ethics? 

There are 3 main areas of ethics, and all have a role to play in any organization. A lack of any, and in any form, exposes the entire company to risk or non-compliance. The first, and arguably most important, are the ethics in leadership. For any business ethics program to successfully become a part of its culture, the senior management has to be proactively involved and must be seen doing so. 

 

With senior management instilling ethics, other leaders at various levels are able to transmit the message forward effectively. Moreover, when the higher-ups lead by example, a long-lasting ethics culture is created, promoting beneficial operations. 

 

Some of the benefits of establishing ethics in leadership include:

  • Attracting better talent
  • Retaining a high-quality workforce 
  • Building a positive reputation in the community 
  • Establishing stability within the company 

 

The second area of ethics deals with employee ethics. Employees are known to benefit from a well-designed business ethics program greatly. For instance, business ethics can guide employees and help them make better business decisions, quicker. In addition to this, employee ethics also: 

  • Increases productivity
  • Promotes employee loyalty
  • Enhances employee morale

 

Additionally, when employees are part of businesses that operate by maintaining a high standard for ethics, they are more likely to improve their ability to do their job more effectively. This all goes back to how good ethics makes for good business. 

 

The third area to note are industry-specific ethics. These are trickier to navigate as they vary with industry and country. For instance, an energy company will have to employ a very strict and clearly defined environment ethics program to ensure that it can continue to operate as needed. Any ethical oversights or mistakes are likely to draw in the public's wrath and the numerous regulatory bodies. On the other hand, there are companies, like Google, Amazon or other e-commerce platforms, that don’t have a direct impact on the environment. These are bound by ethics related to customer security and data privacy. In fact, ethics in marketing is a hot topic within this sector as it involves selling user data for marketing gain. 

 

Ethics in Business

What should an ethics program achieve?

Considering that ethics promote employees to conduct their work with integrity, it is clear that every company needs one. However, it is important to consider the deeper role and significance of such a program. As per the U.S. Department of Commerce, any ethics program that is deployed must first relate to all business functions. This aids seamless integration of the program across the various departments, after which businesses can focus on maximizing its impact. 

 

In order to do so, it is crucial that an ethics program be designed to meet set goals. As per Gartner, a global research and advisory firm, an ethics program should:

  1. Manage behavior ethics
  2. Offer training and communication regarding ethics
  3. Monitor and mitigate risks
  4. Reinforce behavioral expectations
  5. Create a clear program mandate
  6. Have policies and procedures defined
  7. Provide necessary support to allegations of misconduct

 

Why are business ethics important?

Business ethics are important because they facilitate operating with integrity. They also promote all the benefits mentioned previously, catering directly to business longevity and sustainable employment. However, besides these reasons, business ethics also offer the benefit of increased profitability. Because operating within ethical norms boosts a business’ reputation, there is data that suggests stakeholders and investors are now investing differently. Investors are actively seeking out companies that operate ethically as it is arguably the smart choice. Companies that are known to disregard ethics are being sidelined, and investors are more reluctant to buy in or invest. 

 

What are the risks of operating unethically? 

When any business chooses to operate outside ethical norms, it is actively choosing to squander the benefits of being ethical. In essence, the company has increased exposure, which brews a negative culture that will almost certainly spiral into the illegal. Some of the more common risks of operating unethically include:

 

  • Destroying the company’s reputation in the industry and community
  • Forcing employees to commit wrongful or unfair business practices 
  • Loss of work culture, leading to lower employee morale
  • Loss of trust among stakeholders, customers and any professionals in the industry
  • Increased possibilities for illegal acts leading to the incarceration of employees
  • Loss of livelihood due to a break in the supply chain

 

Considering the risks associated with operating unethically, it comes as no surprise that companies are actively investing in business ethics programs. However, in today’s ever-changing regulatory environment, establishing ethical practice can’t be achieved in just one sitting. 

 

Companies will now require specialized tools to manage such programs, adapt them for newer technology and update them, as needed, without incurring massive overheads. The VComply GRC suite offers such a solution and helps companies handle risks efficiently and effectively. With just a single program, your company can adopt and enforce risk programs seamlessly, to ensure that your business ethics are always a priority. To know more, contact us online. 

VComply Editorial Team
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What is a Risk Management Plan?
Mar 4, 2021
4
Minutes

Every organization faces certain types of risks in business. Any factor that threatens an organization's ability to achieve its goal is considered a business risk. The major categories of risks to consider are: strategic risks, compliance risks, financial risks, and operational risks. Another important way to categorize risk is based on the source of the risk and see whether they are internal or external risks. 


If your risks are not managed proactively, they can severely affect the success of your business. You can respond to risks based on the priority of the risks.


The strategies to respond to risks can be one of the following:

 

Accept

Accepting risks involves identifying and analyzing risks and bringing these risks to stakeholders' attention so that everyone involved is aware of the risks and their consequences. The most common reason for accepting a risk is that the cost of mitigation options might outweigh the benefit.

Avoid

One of the options to do with risk to avoid it.  If the risk poses unwanted consequences, the organization chooses to avoid the risk. Not letting workers work in a construction site in bad weather is one example of avoiding the risk. 

Transfer

Another strategy to deal with risks is to transfer the risk or a part of the risk to a third-party. A conventional means to transfer risk is to outsource some services to a third-party. Outsourcing the non-core functions such as payroll, recruitment services to an expert agency is a typical example. 

Mitigate

Organizations can mitigate unavoidable risks. Businesses use this tactic most often in risk management. Risk mitigation involves implementing controls to reduce the risk exposure or the chances of the risk occurring. It will help reduce its adverse impact on the organization.


How do you overcome these risks and lead your company to success? Consider implementing a risk management plan!


What is a risk management plan?

A risk management plan is a well-crafted document that details how to deal with risks facing organizations and actions that should be taken to tackle these risks.


Coming up with a risk management plan consists of the following steps:


Identify risks


The first step is identifying the potential risks and adding them to a risk register. All the risks-small or big must be noted distinctively. You need to involve all of your stakeholders in the risk identification process so that if any of them have faced any risks in similar projects, they can help identify them.


Analyze the risks


At this stage, you need to analyze the risks in terms of their likelihood and severity. What is the frequency of these risks occurring, and what could be the impact of these risks on business. You can use a risk assessment matrix to score it visually. 

Risk assessment matrix


Prioritize the risks


This becomes easy if you have a well-defined risk appetite statement. You can begin to answer questions such as:

  • Which risks can the organization do without?
  • Which assets demand the greatest amount of security?
  • For how long can the organization delay taking on this risk?
  • Do the risks align with the organization's business strategy?
  • What is the organization's net level of operational risk?


Treat your risks

Once you identified and assessed your risks, you can treat the risks by utilizing your resources optimally. Start implementing controls  to treat high priority risks so that they are no longer be a threat to your organization.


A good risk management plan offers several benefits. It helps companies identify potential risks and make plans to avoid them or treat them as they pop up. It helps in improving operational efficiency and boosts the confidence of the organization.


While risks are an inherent part of every business, having a well written risk management plan helps minimize the impact of certain risks, while acknowledging and accepting others. VComply provides an effective way for businesses to track and mitigate risks. VComply helps manage and automate the risk management processes such as risk assessment and risk treatment. The best risk mitigation strategies involve maintaining a risk register, regular reporting, teamwork, and planning.


Devi Narayanan
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Five Reasons for Compliance Failure
Mar 4, 2021
4
Minutes

In the present age, it is increasingly common to find many organizations, including industry titans, take near-fatal blows at the hands of non-compliance. Regulatory bodies around the world keep slapping fines and issuing notices to non-compliant companies. In 2020 alone, the largest non-compliance fine was paid by Wells Fargo, which was to the tune of $3 billion. Considering the financial consequences and likelihood of lasting reputational damage, staying compliant is of utmost priority for corporate boards.

 

Organizations are now making the shift to having clearly defined compliance departments that have dedicated software and tools to manage risks and regulatory compliance. Ideally, such departments are intended to safeguard against risks such as:

 

  • Safety deficiencies
  • Money laundering
  • Cyber breaches
  • Compliance lapses
  • Bribery
  • Corruption

This type of targeted funneling of resources goes a long way in assuring stakeholders that all operations are within regulatory norms. However, if the past is any indicator, many such programs fail to protect against the very transgressions they were meant to protect. Top reasons for this could include the gap between occurrences of such incidents, implying a false sense of compliance, or a random assessment by a regulator that proves the existing program ineffective. 

 

Here are the most common reasons for compliance failures to watch out for. 

 

Leaders that don't lead by example

Whether an organization is looking to stay compliant, be it by its own internal policies, industry-specific regulations, or the standards of something like the General Data Protection Regulation (GDPR), it is an unmistaken rule that the administration takes point. This includes the CEO and the board members too, because complete compliance is everyone's responsibility. 

 

However, in many cases, a company's administration employs an uncommitted and vague approach to compliance. This disinterest then trickles down the ladder and compliance is no longer a priority. When these key members only talk and take no ownership of the compliance program in place, they essentially create a culture that normalizes regulation's undervaluing. Senior management's responsibility to build and nurture a culture of compliance and failing to do is one of the most common reasons for compliance failure. 

 

Neglecting risk assessment protocols

Compliance failures that stem from neglecting risk assessment are quite common among companies that are either venturing into a new market or are employing a newer business model. This is usually the case because these entities are focused more on succeeding and keeping pace with the new market, and compliance is put on the back burner. There may be a lack of internal risk assessment and management controls or may not perform a thorough assessment of their exposure.  

 

Such a hurdle is especially common when companies fail to do their due diligence on international markets' agents. The compliance regulations are vastly extensive in these scenarios, which is why third-party risk management controls have to be clearly defined preemptively. Solutions like VComply can help offer a fully integrated GRC software suite to help with risk assessment and management. 

 

It is a perfect fit for both companies venturing into new markets and seasoned veterans as it empowers compliance teams with the tools needed to operate optimally. With it, your company can enforce compliance controls, successfully mitigate risk at all levels and manage compliance data efficiently. 

 

Misaligned compliance and organizational goals

In any organization, there is a certain operational or business culture that goes unsaid. It may be how the company speaks to the world, what it identifies with and how it is branded. Whatever the case, these attributes inevitably tie into the grand scheme of things when defining organization goals. The compliance program should also be considered at such a stage, especially since it factors into operational success. 

 

This means any compliance program defined and enforced must be conducive and supportive to the organizational goals. A failure to achieve harmony between these two crucial elements makes effective compliance a herculean task. This is especially true when defining controls as misaligned goals can stifle progress or seamless operation. 

 

Misguided incentives

It is quite common for organizations to use incentives as a tool to promote desirable, optimal behavior. However, what many don't realize is that incentivizing aspects like professional growth or monetary gain is a dangerous way to operate because it tends to encourage misconduct. Whether intentional or not, misconduct in any form violates compliance regulation and brings about a failure, which can have severe consequences. 

 

In fact, studies relating to the inefficacy of using incentives in any manner go back a couple of decades, and the literature still holds true. As stated by Professor Herbert H. Meyer of the psychology department at the College of Social and Behavioral Sciences in the University of South Florida, "In nearly forty years, the thinking hasn't changed." It is believed that all such incentives do is secure temporary compliance, which means that incentivizing a culture of compliance may not be the best approach either. Temporary compliance is a red flag that can't exist in a modern corporate setting. 

 

Lack of a compliance culture

Compliance failure is also a product of an incorrect understanding of the compliance program's function. If a company views its compliance program as just another mechanic or obligation among the many legal requirements in place, a gap is created. This disconnect affects education and compliance training all through the institution, increasing exposure. For this reason, it is important to instill a compliance culture. Without it, employees aren't regularly trained or taught how to navigate real-life situations while operating within regulation. Moreover, the lack of a compliance culture also inhibits employees working in different departments from collaboratively tackling compliance challenges. 

 

Besides these reasons, there may be instances where compliance failure arises simply due to a reliance on age-old technologies. Analog GRC tools aren't equipped or efficient enough to keep pace with today's regulatory reforms, which should be seen as a risk. Remember, compliance is considered an on-going process and your tools should also embody that attribute. The ability to evolve and proactively adapt to the regulatory reform should be a functionality that the GRC tool offers. The VComply suite is equipped to address this need and does so seamlessly to successful compliance efforts. 

VComply Editorial Team
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What is SOX Compliance?
Mar 3, 2021
4
Minutes

On July 30, 2002, the American Congress passed the Sarbanes-Oxley (SOX) act to improve corporate disclosure accountability, transparency, and corporate governance across a public company. The SOX act is intended to protect the shareholders and the general public from business accounting errors and fraudulent activities. The act was passed in a reaction to a series of financial scandals that occurred during 2000-2002 period such as Enron, Tyco, and WorldCom.

With the SOX Act, all U.S. public company boards, management, and public accounting firms should confirm with SOX standards with the goal to increase transparency in financial reporting and to implement formalized systems for internal controls. The nature of data storage by IT has also changed with the SOX Act defining which records need to be stored and the timeline that has to be followed for the storage. Complying with SOX requires businesses to save all data records, which are no longer limited to electronic records and messages, for not less than five years. Non-compliance with SOX may lead to fines or imprisonment or both.


The Act contains eleven titles that cover additional corporate board responsibilities to criminal penalties. The enforcement and implementation of these requirements were given to the Securities and Exchange Commission (SEC). The most important SOX compliance requirements are considered to be 302, 404, 409. As per section 302, every public company must file periodic financial statements and the internal control structure with the SEC. Section 404 requires that all annual financial reports include an Internal Control Report stating that management is account for internal controls and any shortcomings should reported. As per section 409, companies need to disclose any changes in financial conditions or operations so that the interests of the investors and public are protected.

Electric Record Management Rules

The third rule under Sec 802 of SOX Act defines business records, communications, and electronic communications that need to be stored. The IT department is responsible for the creation and maintenance of corporate records. The department should comply with the Act in a cost-effective way. According to Sec 802, Criminal Penalties for Altering Documents in SOX Act, the penalties for anyone involved in the destruction, alteration, or falsification of records would be hefty fines or imprisonment for not more than 20 years or both. The second rule under Sec 802 SOX Act defines the data storage retention timeline. Some of the generally accepted retention periods under SOX are listed below.


SOX Compliance Controls

The management should implement security controls so as to ensure the safety and accuracy of data. There is a major overlapping of Data governance and SOX Compliance as both of them work towards the safety and accuracy of data within the organization. Data mapping and classification tools help in tracking the data’s whereabouts and its usage.

SOX Compliance Audits

An independent auditor conducts SOX audits on an annual basis. SOX audits have to be separate from other external and internal audits to avoid any conflict of interest. However, one can time the audits with other audits so as to be able to include it in their financial annual reports, thus having transparent communication with their stakeholders.

SOX Software Solution

To comply with SOX, your business must demonstrate that it has strong, approved internal controls. It also mandates that an internal auditor should verify that these controls work. Implementing a software solution for managing compliance requirements would enable monitoring of data, tracking policies and its timelines and recording every user action. With evidence trails captured in the system, it would ensure the proper investigation in case of any fraudulent activity. Implementing a software solution that ensures SOX compliance would protect data and business and ease the SOX audit processes carried out annually. VComply helps the organization in tracking SOX Controls on a single platform with real-time tracking and in-detailed analysis.


Devi Narayanan
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Impact of Non-compliance on Organizations
Mar 2, 2021
4
Minutes

In general, compliance refers to all the laws, regulations, and policies that an organization should confirm.  When in compliance, the organization, employees, and third-party vendors will behave according to the laws and standards of the regulatory and industry bodies. The essence is that compliance helps organizations to act responsibly and obey regulations related to labor, work safety, finance, operations, and accounting standards.

As regulatory requirements vary based on the industry sector you operate in, you should know the regulations that apply to your industry. These could include Federal Information Processing Standards, General Data Protection Regulation (GDPR),  Payment Card Industry Data Security Standard (PCI-DSS), Health Insurance Portability and Accountability Act (HIPAA),  Occupational Safety and Health Administration (OSHA) Sarbanes-Oxley Act (SOX), etc. that requires companies to make controls to comply with procedures and standards.

Unfortunately, it is not that easy to remain complaint. Regulatory landscape keeps changing, regulatory bodies are implementing and enforcing more and more regulations. Organizations need to be agile and stay up to date on the changing regulations. Otherwise, the consequence of non-compliance can be huge.  

Penalties 

The cost of non-compliance can be manifested in the form of hefty fines. Regulatory fines might erode big companies' profits significantly whereas it can cause stiffer hits to smaller ones even making them wiped out of business. For external requirements, state authorities impose penalties that ranges from minuscule amounts to very serious consequences. The US financial institutions alone paid a huge sum as fine till now. For example, in 2020 alone, several banks paid major fines amounting to $11.39 billion. U.S. banks Goldman Sachs, Wells Fargo, and JP Morgan Chase paid upwards of $7.50 billion of this total, according to Finbold's 'Bank Fines 2020' report. Besides, lawsuits and settlements can easily cost you millions of dollars. 

 

Reputational damage 

The reputational damage of non-compliance is immense. A non-compliance issue can put a company in a bad light. The brand value and reputation can take a serious hit based on the severity of non-compliance. This can also lead to further loss of opportunities. According to a survey conducted by Deloitte, 87% of the executives they surveyed reported reputation risk as much more important than other strategic risks their company is facing. 

Audits 

Noncompliance might demand for additional audits to uncover the reason for non-compliance. Conducting these audits can be time-consuming and require a lot of efforts.

Legal actions and imprisonment 

In exceptional cases of non-compliance, compliance officers have personally faced regulatory and government enforcement action. Ever since the financial crash of 2007-2008, a broader increase in scrutiny by regulators and government agencies about the role and responsibilities of compliance officers have been surfaced. In addition to penalizing the organization, these bodies are holding individuals accountable for their wrongdoing. This is a warning alarm for compliance officers who have been previous insulated from their wrong doings.

Legal actions


 

Company shut down

Failure to comply is considered as illegal and the governing bodies may take any relevant action on the organization. Governing authorities may sometimes order companies to shut down or completely dissolve them in case of serious non-compliance issues. 

 

The moral is that the regulatory compliance is not something you want to gamble with as it can wipe out your customer base and shareholder value. One thing about these compliance challenges is that juggling between multiple compliance regimes, such as PCI DSS and GDPR or HIPAA and CIJS, is hard. It becomes even more difficult if you do not have a way to oversee compliance on an organization-level. Poor communication, training, monitoring, and data management can hinder compliance. Being stuck in silos with spreadsheets and binders fails to provide the big picture and that is the gap VComply, an integrated GRC solution fills. 

‍ 

With it you can analyze your organization’s performance with graphs, delegate responsibilities to increase accountability, get real time alerts, obtain automated reports and much more. So, as you tackle the compliance challenges 2021 has in store, commit to a smarter way of running your organization! 

 

Devi Narayanan
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What You Need to Know about Banking Compliance
Mar 30, 2021
4
Minutes

Compliance is one of the most important challenges for any banking institution operating in today’s market. Non-compliance has consequences, and in 2020 alone, several banks received major fines amounting to $11.39 billion. U.S. banks Goldman Sachs, Wells Fargo, and JP Morgan Chase paid upwards of $7.50 billion toward this total tally, indicating that even the sector leader isn’t immune. Naturally, any form of negligence within this realm of operation can lead to big losses, especially considering how strict legislation has become in the sector.

Evolution of banking compliance

The banking sector has always had compliance models in place, but it is becoming increasingly common to find banking entities funnel  money into their compliance department. Some assume it is to keep up with the ever-changing compliance environment or to institute more-efficient controls. Whatever the reasoning, one thing is exact, and it is that optimizing protocols to stay compliant is now more of a priority than it used to be. 

 

Going back a few years, the textbook compliance model was simply a stand-in to enforce legal function. In fact, it was maintained mostly in an advisory capacity without much of a focus on risk management or its identification. Such a model may be best suited as another lesson for managers to learn from in today’s environment. With the advent of process automation, wide-spread digitization and globalization, compliance literacy is undoubtedly the need of the hour. 

 

However, even though many banking enterprises, including regional and small-scale entities, have some form of compliance framework in place, there are still a number of important questions that go unanswered. These are pertinent to the big picture, i.e., complete compliance, and the answers help establish effective models. For greater insight and to broaden your understanding on banking compliance, read on.  

 

What are the responsibilities of a compliance department?  

In any bank, the compliance department is the body responsible for ensuring the institution as a whole remains compliant. Its goal is defined, and it is to ensure the bank functions within regulation, thus preserving its integrity and reputation in the industry. In a vacuum, the compliance department is usually tasked to: 
 

  • Safeguard the bank from data theft 
  • Protect against fines imposed by the government
  • Prevent tax evasion
  • Prevent money laundering
  • Identify and analyze risk areas
  • Steer clear of activities that aren’t within the bank’s ethics policy

Besides these, the department may also be tasked with creating a compliance program or policy. This is usually achieved through a joint effort with senior management. The department establishes the general policy while the management establishes the culture of compliance across the enterprise. Some of the best ways this is achieved is by: 

 

  1. Proactively communicating the compliance policy to all personnel in the institution 
  2. Disclosing ethical conduct as bank culture
  3. Standardizing processes

 

The third point is a significant responsibility as it ties into efficient risk management. With a standard process for routine operations like doing inventory, addressing risks, managing problems and offering resolution, the organization becomes a lot more efficient as it acts only on the basis of bank policy. In addition to all this, the compliance department has a responsibility to ensure that customers interact with the bank as per regulation. Any acts committed outside the purview of regulation or may cause the bank to become non-compliant must follow a clearly defined set of rules. 

 

For instance, as per the Office of Foreign Assets Control, banks in the U.S aren’t allowed to process any transactions from individuals and countries that the U.S. has previously sanctioned. Any attempts made must be blocked and reported, failing which, the bank will face serious consequences. All of these responsibilities are handled by a compliance department, and it is clear that having the right tools in place can make all the difference when assessing the true efficacy of any compliance program. 

 

How can banking enterprises stay compliant effectively? 

In an industry where regulations shift regularly, it can be hard to adapt on the fly. But it must happen as being non-compliant, in any sense, is detrimental. Thankfully, to operate within regulation, there are reliable practices you can enforce. 

 

Streamline the risk-and-control framework

It is common practice for banking enterprises to have dedicated teams to put out fires caused elsewhere in the organization. While this works, there is potential for wastage of precious resources, which is suboptimal. A smarter approach would be to implement a control where the risk is managed by the same department causing it. This streamlines responsibility and control performance, even if the control has multiple owners. 


 Manage residual risks

Inherent risk is defined as the risk that exists without considering the external controls. However, residual risks is the risk that remains even after the treatment or in presence of controls and to deal with these effectively, consider these four options:

  1. Risk mitigation: A common practice, usually the go-to in the industry, and it relies on decisions taken by management. 
  2. Risk acceptance: This is when the risk is accepted, and the plan of action is to monitor the risk levels and review the risk periodically to ascertain if acceptance is the best way to manage it. 
  3. Risk avoidance: With such an approach, the banking enterprise avoids engaging with the risk or disengages from it entirely. 
  4. Risk transfer: This involves transferring the risk to another entity such as an insurance company. With such a tactic, the risk of loss is borne by the insurance provider. 

Integrate with risk management governance

This practice is closely linked to establishing more streamlined risk controls and nurturing a company-wide risk-aware culture. In this case, standardized processes are pivotal and everyone is accountable, not just the compliance department. The communication begins at the highest level of management right down to maintenance staff.  

 

What are the best ways to manage compliance costs? 

Because compliance regulations are always changing, it is unwise to respond by creating new protocols or databases to stay compliant. Instead, consider adding your existing processes by making workflow improvements. These should integrate seamlessly and eliminate the need to divert capital to keep up with regulatory reform. Another way to go about it is to leverage the power of technology and automation. This includes tools that can: 

Tools to manage compliance costs
  • Automate data gathering
  • Monitors risks
  • Control data validation 

 

These tools greatly improve operational efficiency while remaining completely compliant with the added bonus of enhanced customer service. One tool that offers these benefits and more is the VComply platform. It offers a fully-stacked GRC suite to simplify compliance and risk management. Armed with the software, you can revolutionize your enterprise’s approach to staying compliant and implementing risk controls. To know more, contact us online.   

Compliance is one of the most critical challenges for any banking institution operating in today’s market. Non-compliance has consequences, and in 2020 alone, several banks received significant fines amounting to $11.39 billion. U.S. banks Goldman Sachs, Wells Fargo, and JP Morgan Chase paid upwards of $7.50 billion toward this total tally, indicating that even the sector leader isn’t immune. Naturally, any form of negligence within this realm of operation can lead to big losses, especially considering how strict legislation has become in the sector.

VComply Editorial Team
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Top 5 Compliance Issues That Non-Profits Face And How To Fix Them
Feb 18, 2021
5
Minutes

Operating as a non-profit organization in an overly competitive and capitalism-first economy means that there is no shortage of obstacles. Non-profits are bound by unending public scrutiny coupled with strict government regulations because of the special financial privileges they enjoy. The tax-exempt status combined with access to public funding is two very good reasons why compliance, on all fronts, can't be ignored. 

 

Yet, an increasing number of non-profits underestimate their exposure to risks and fail to employ the required risk-assessment and prevention safeguards. 

 

The data suggests that 3 key factors drive this negligence among non-profits: 

  • An unfounded belief that non-profits are protected against compliance risks
  • A critical lack of understanding about risk management among the administration
  • A belief that regular risk assessment isn't feasible for non-profits

 

Naturally, none of these validate or even pardon noncompliance, which is why it is extremely important for non-profits to comply with regulations. For greater insight into the matter, here are 5 compliance risks that non-profit organizations face and guidance on remedying them. 

 

Failing to submit tax documentation 

While it is known that non-profit organizations are exempt from all federal corporate taxes, they still have a responsibility to the IRS. To remain compliant and retain their tax-exempt status, non-profit organizations in the US must file Form 990 with the required tax information on a yearly basis. Additionally, non-profit organizations with staff are required to maintain a W-4 for each employee, and file Form 941 on a quarterly basis unless the IRS requests otherwise. 

Failing to submit tax documentation 

 

Failure in meeting this requirement has serious consequences, for which a steep fine is just the precursor of what's to come. These fines accrue daily, meaning the longer this information goes undisclosed, the more money it costs. To make matters worse, it doesn't stop revoking the 501(c)(3) tax exempt status. Continual negligence in this regard can also lead to the administrative dissolution of the corporation. Naturally, managing this risk requires these organizations to have an internal control or risk management system to help mitigate these issues on time. 

 

Hosting auctions outside IRS regulations

Non-profit and for-profit organizations share some similarities when comparing the compliance protocols for making money. In both cases, compliance is stringent, even if the purpose of raising money, via an instrument like an auction, is for a good cause. For such undertaking, the non-profit organizations must follow IRS regulations to the tee or face a penalty, in the form of a fine. Some states even require non-profits to apply for a special fundraising license before hosting auctions. 

 

 With auctions, potential compliance issues could arise in 2 ways: 

  1. Against quid pro quo contributions
  2. Against non-cash gifts

 

In the case of quid pro quo contributions, where the donor exchanges money for goods or services, the non-profit organization must provide donors with a letter containing a disclosure. This letter's contents are the good-faith estimate of the market value of the goods or services the donor has received with their contribution. Failing to provide this acknowledgment letter can result in a fine of up to $5,000 per auction. 

 

On the other hand, when someone donates goods to an auction, the non-profit organization must submit tax-related information about the exchange. This includes: 

  • Name of the organization
  • A statement that details the services or goods exchanged by the organization
  • Description of the item that was donated

Managing this data is important as the regulatory bodies require it and doing it manually is asking for trouble. A neat solution would be a cloud-based software that gives non-profits seamless access to data caches, so that this type of crucial information is always up to date.  

 

Lobbying 

Given the good that non-profits set out to achieve, it is no surprise that any political candidate would want the endorsement or backing of one. However, under the Internal Revenue Code, it is clearly stated that all section 501(c)(3) organizations are prohibited from participating in any form of political campaigning or lobbying. This includes any direct or indirect intervention of any sort.

 

Violating this tax code results in revoking the tax-exempt status applicable to the non-profit organization and may even lead to the imposition of additional excise taxes. Having a clear understanding of this compliance risk and ensuring that all organization members are aware of it is a good way forward. 

 

Earning substantial profits

Non-profit organizations are known to suffer from a lack of finances, but there is an excess of profits in some instances, and this is a problem. As per regulation, non-profits aren't allowed to earn sizable amounts of profit and doing so goes against compliance norms. Even though the money is meant to serve a good purpose, it is illegal as per the compliance regulations for the collection of tax on sale. 

 

However, there may be instances where a non-profit underestimates the profits earned and in such cases, experts suggest that any excess must remain within the organization. This surplus may be used to pay off debt or finance the non-profit's mission in the future. 

 

The Board, employees and volunteers of non-profits need to be aware of this fact to comply with regulations. 

 

Botched record-keeping 

Complete transparency is a mainstay of any non-profit organization, which is why maintaining records is crucial. Unfortunately, this is an area that many have been lacking, which brings about a plethora of compliance issues. Without proper records, the annual Form 990 will be incomplete and have discrepancies, leading to problems. Moreover, the IRS and other governing bodies quite frequently request information from non-profits, and botched record-keeping will stand in the way of this. 

 

Experts believe that a failure to maintain records efficiently is a good way to break laws and is among the easiest ways to risk non-compliance. Thankfully, digitized solutions help solve this problem with cloud-computing and customizable control systems, thus ensuring records are maintained and secure.  

 

Considering the role that non-profits play in the economy, it is incredibly vital that they do not abuse their economic privilege. For this reason, non-profits need to implement internal controls and there's no better way to safeguard the organization than to do it pre-emptively. This is where VComply can be of great assistance to non-profits by providing fully integrated GRC Management Software. It gives organizations the option to establish controls and reminders to ensure that compliance obligations are the first priority. VComply helps non-profits with real-time data tracking, risk management, and compliance management without complications.

 

VComply Editorial Team
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The Two Big Compliance Fines of 2020
Apr 15, 2021
5
Minutes

Regulatory watchdogs around the world served stiff penalties in 2020, with major financial institutions being asked to own up for their deficiencies and malpractices. Citigroup faced a $400 million fine for risk management shortfalls, JP Morgan was charged $920 million for illicit market activity, Westpac agreed to a record fine of AUD 1.3 billion for anti-money laundering breaches, Goldman Sachs was fined $2.9 billion in connection with the 1MDB scandal, and Wells Fargo saw a huge $3 billion penalty for he fraudulent account fiasco.

The list could go on, but as the fines grow weightier, all eyes are on what compliance can do to protect organizations from not just economic damage, but the long-lasting reputational damage that accompanies financial abuses. Here are some compliance learnings one can glean from the Goldman Sachs and Wells Fargo cases.

Goldman Sachs

In the 1MDB scandal, Goldman Sachs came under intense scrutiny for its role in money being siphoned from Malaysia’s sovereign wealth fund, 1Malaysia Development Berhad. The ongoing investigation probes the bank’s role in underwriting 1MDB bond issues. About $6.5bn was raised in 2012 and 2013 and the bank is said to have earned over $600m in fees for the work. The complex global fraud saw Malaysian common folk deprived, private pockets filled, and Goldman Sachs staring at fines to the tune of $5 billion.

Recently, the bank’s chairman and CEO, David Solomon, called the scandal an “institutional failure”, noting that “certain former employees broke the law, lied to our colleagues and circumvented firm controls...we did not adequately address red flags...”

In the aftermath of the 1MDB scandal, experts from around the world have opinionated on what might have led to the massive corruption scheme.

Here are some insights compliance officers can gather from the 1MDB event.

1) Make compliance part of business strategy

Goldman Sachs intended to expand aggressively and dominate the South-East Asian market. The problem lay in the fact that the SEA market was also known to carry a high risk of money laundering. Turns out that Goldman’s compliance and risk management systems weren’t primed in keeping with the high-risk business model that the bank was adopting for the region. The US Department of Justice later noted that, “[ Goldman’s] business culture…particularly in south-east Asia, was highly focused on consummating deals, at times prioritizing this goal ahead of the proper operation of its compliance functions.” A key learning from this is that compliance is a crucial element of business strategy.

2) Ensure the ‘tone from the top’ safeguards  compliance

Central to the1MDB scandal was former chairman of Goldman Sachs in South-East Asia Timothy Leissner and he later pleaded guilty to conspiring to launder money.  Bloomberg reports Leissner as revealing that the “culture of secrecy” at Goldman led him to conceal wrongdoing from compliance staff.

“It must be presumed,” lecturer from the University of Alexander Dill says, “that he would not have attained partnership status, without executive management’s approval of his conduct and character. Who makes partner at Goldman is a true reflection of the company’s tone at the top.”

When the tone at the top upholds ethics and integrity, compliance has a firm footing. If ethical norms are brushed aside by an organization’s leadership, it can only be a matter of time before cracks emerge.

3) Avoid a siloed approach as it cripples compliance efforts

International fugitive Jho Low, is accused of having masterminded the 1MDB plot and Leissner tried to have him as a Goldman Sachs customer. The move was prevented by the bank’s Compliance Group and Intelligence Group on concerns they had over the source  of Low’s wealth. Yet Leissner continued to work with Low and financial regulation news analyst Regulation Asia points out that, “a siloed approach to KYC allowed its sales team to circumvent controls and onboard Low as an indirect customer via the 1MDB bonds.”

If your organization’s sales teams, compliance departments, senior management, and board work in silos, information can slip through the cracks and controls in place to detect financial crime can give way. In case of money laundering, the first step of “placement” that is the act through which the fraudster seeks to insert tainted money into the legal system, is crucial. For KYC controls to work efficiently, it is best that all departments work together.

Banks compliance

Wells Fargo

The account fraud scandal at Wells Fargo came to light towards the end of 2016.Over million fraudulent bank and credit card accounts were reportedly created on behalf of clients of the bank without their knowledge or consent. Wells Fargo betted hard on a cross-selling strategy and by 2012 had an average of .9 products per customer. However, by 2013, rumors had surfaced that employees were gaming the system to meet their cross-selling targets.

 

Cutting to the chase, a Shearman & Sterling report later pointed out that, “Many employees felt that failing to meet sales goals could (and sometimes did) result in termination” and that “certain managers explicitly encouraged their subordinates to sell unnecessary products to their customers in an effort to meet sales goals.”

 

It’s clear from this that the Wells Fargo fiasco boils down to aspects like a problematic business strategy, bad company culture, and poor tone at the top. Back in September 2016 the bank was fined $18 million and as recently as February 2020 Wells Fargo faced charges amounting to $3 billion.

 

What can compliance officers learn from Wells Fargo fiasco?

 

1) Have many parts working together to achieve compliance

Reports reveal that in mid-2014 Well Fargo attempted to curb the malpractice of creating fraudulent accounts with an ethics workshop. Yet, reports also indicate that bank managers allowed illegal conduct to persist until 2016. The point here is that compliance cannot really thrive or survive if there is discord between your Code of Conduct and company culture. You need to weed out rouge employees and correct a bad company culture if you are to be successful.

 

Stanford researcher Brian Tayan keenly points out that branch-level employees received incentives to cross-sell, but the senior-executive bonus system did not have the increase in products per household as a metric. Are there business-critical matters that are passing the oversight of senior members at your organization? Compliance is everyone’s responsibility and requires the entire team, right from the employees to the senior management and board, to protect the organization from known risks.

 

2) Use software to  manage compliance and risks

Assuming that you set realistic targets for your employees and have appropriate controls in place to mitigate risk, how do you maintain a controlled and cohesive environment, prevent stuff from slipping through the cracks, and avoid risks from growing unnoticed? A notable way of doing this is to use cloud-based GRC software that works on an organization-level.

 

VComply, for instance, gives you the tools you need to assign responsibilities, escalate matters, conduct gap analysis, monitor your risks, evaluate existing controls, distribute, and test policies, and a lot more. You may or may not have thousands of employees like Wells Fargo; nonetheless, overseeing the lifecycle of your compliance, risk, and policy efforts can be painstaking and even impossible if you do not have the tools to do so.

 

3) Remember compliance pays dividends in customer trust

Wells Fargo has been, and still is, among the biggest banks in the US. Imagine the shock and betrayal customers would have experienced on hearing that Wells Fargo created fraudulent credit cards or bank accounts in their name. The reputational damage of non-compliance is immense.  "Simply put, Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way," US attorney Nick Hanna is quoted as saying.

 

The moral is that no one is above the rules of regulations. Regulatory compliance is not something you want to gamble with as it can wipe out your customer base and share holder value.

 

Whether t's anti-money laundering or nurturing an ethical business culture, Goldman Sachs and Wells Fargo teach us that compliance is more than a checklist. It evolves with your organization and having the tools to stay compliant best serves your growth.

 

VComply Editorial Team
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What is SOC 2 Compliance?
Feb 25, 2021
5
Minutes

With digitization of services progressing at a relentless pace, businesses are storing large volume of customer data . But with sensitive information being routinely handled by service providers and third-party associates, there is a pressing need for increased information security. Data breaches and cybercrime too are a threat to security. In such a scenario, it is not uncommon for clients to want an independent review of your internal controls for data security prior to partnering with you, especially if you are a SaaS organization.

This is the kind of guarantee that an SOC 2 audit provides, and many organizations seek to be SOC 2 compliant to possess more robust internal controls and improve their trustworthiness. To have an in-depth look at what is SOC 2 and the relevance of SOC 2 audits, read on.

What is SOC 2?

Framed by the American Institute of CPAs (AICPA),Service Organization Control 2 or SOC 2 lays down a framework for strong information security for cloud service companies. SOC 2 applies to SaaS companies and businesses that upload customer data to the cloud and aims to safeguard this data through 5 Trust Services Criteria.

The 5 Trust Services criteria are:

●       Security

●       Availability

●       Processing integrity

●       Confidentiality

●       Privacy

Following this, SOC 2 compliance is about an organization being able to assure the security of customer data, based on these 5 principles, using adequate controls and systems. Beyond criteria, SOC 2 also provides an auditing procedure and a SOC 2 audit report aims to assure users, clients, stakeholders, and third parties that the organization is complying with the criteria in place for handling sensitive information.

That said, SOC 2 reports are unique to your organization and you have the power to design controls and systems to comply with the trust service criteria that are relevant to you. SOC 2 audits are performed by accountancy organizations or an independent CPA (Certified Public Accountant).

Do you need to be SOC 2 compliant?

Companies and clients you liaison with may not  require you to furnish SOC 2 reports. SOC 2compliance is not a strict necessity in that sense. However, being SOC 2 compliant has its share of benefits. Here’s a look at what they are.

●       When auditors attest to your organization’s system sand controls for data security, you possess a competitive advantage in the market. All things equal, clients are sure to prefer an organization that assures them of information security and integrity.

 

●       SOC 2 compliance can help boost your other compliance efforts, such as preparing to be compliant with ISO 27001.

 

●       Data breaches can cause grave financial losses and have legal ramifications too. Being SOC 2 compliant is an ideal way to safeguard yourself against such aspects.

So, while SOC 2 compliance is not mandatory, objectively speaking, it may be required for your organization on a practical level.

What are the SOC 2 Trust Categories?

The 5 Trust Services Categories outlined by AICPA are:

Security: Refers to information and systems being protected against unauthorized access, unauthorized disclosure, and damage that could affect the entity’s ability to meet its objectives.

        a. Information protection in this case covers the points of collection, creation, transmission, storage, processing, and use

        b. Systems under protection are those that employ electronic information to act on the information gained

The criteria of security seeks to safeguard customer data against aspects like theft and unauthorized disclosure. Consequently, tools like 2-factorauthentication can be used to secure data.

Availability: Refers to systems and information being available for operation and use to meet the entity’s objectives.

So, your systems need to be available and accessible as per the terms of your service agreement. Availability is vital, for instance, if you run a datacenter or a web hosting service, which requires data to be accessible 24/7.Likewise, if you sell a SaaS product, you need to ensure that it is available for use, as per the agreement.

Processing Integrity: Pertains to services provided or goods manufactured, distributed, or produced. It ensures that the audited system’s processing is valid, complete, timely, accurate, and authorized in such a way that the entity’s objectives can be met.

If you provide e-commerce services or transact on behalf of clients, processing integrity should make its way into your SOC 2 report. This ensures clients that data modification is authorized, processing errors are able to be detected, system output is accurate, and so on.

Confidentiality: Stipulates that information that is held as confidential is aptly protected to meet the entity’s objectives. This applies from the point of collection right till removal. While privacy pertains to personal information, confidentiality refers to other information as well, such as proprietary information, trade secrets, and intellectual property.

An example of data that needs to be protected is personal health information. If your organization collects and stores such information, an audit of confidentiality ought to be carried out as per the SOC 2 guidelines.

Privacy: Refers to the collection, usage, retainment, disclosure, and disposal of personal information to meet the entity’s objectives. Privacy has parameters such as:

       a. Notice and communication of objectives

        b. Choice and consent

        c. Collection

        d. Use, retention, and disposal

        e. Access

        f. Disclosure and notification

        g. Quality

        h. Monitoring and enforcement

The criteria of privacy verifies that your organization is handling customer data in accordance with the privacy terms agreed upon.

What is Type 1 and Type 2 of SOC 2?

SOC 2 has two types of reports. Type 1 reports attest to the design of controls and security systems at your organization at a specific point in time. Type 2 audit reports are broader in scope. They contain everything that is included in Type 1 reports and attest to the effectiveness of the controls in place evaluated for a period of 6 months or more. Thus, a SOC 2 type 2 report is more valuable.

What is the difference between SOC 1, SOC 2, and SOC 3?

An SOC1 report attests to financial controls only. It is mainly for other auditors. An SOC2 report attests to controls that come under the 5 Trust Service Criteria. An SOC 2 report is mainly for the company itself and while SOC 1 focuses on internal controls over financial reporting (IFCR), SOC 2 focusses on data handling as per the Trust Criteria. SOC 3 report is a general use report that is designed for public sharing. It is a high-level summary of the SOC 2 report but does not go into details of the information in it.

Can GRC software help you become SOC 2 compliant?

A GRC platform like VComply can help you design internal controls that keep your organization compliant with the criteria requirements of SOC 2. VComply provides an uncomplicated way for you to manage compliance and risk, allowing you to assign controls and track them through an intuitive interface. For instance, you can assign responsibilities for data security so as to comply with SOC 2’s primary criteria.

Being SOC 2 compliant is sure to throw open doors to business opportunities and improve customer confidence in your services. Go about it the smart way with a GRC solution by your side!

VComply Editorial Team
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What is Operational Resilience?
Jan 7, 2021
5
Minutes

Etymologically, the word resilience has roots in the Latin term resiliere, which means ‘to rebound’. In similar vein, operational resilience describes an organization’ stability to cope with change or misfortune. The ongoing global pandemic, COVID 19 is an extreme form of misfortune, but its impact has been so universal that it has laid bare each organization’s level of operational resilience and sparked renewed interest in the topic.  

Stress, threats, potential failures, disruptions, uncertainty, and change are part of the life of an organization, but one that is operationally resilient has the wherewithal to maneuver through it all. From climate change, power grid black outs, and cyber-attacks to a tainted image on social media and demand-supply disruptions, there are numerous factors that can cause an organization to buckle and crack. A resilient organization has the frameworks and mechanisms to bounce back when dealt the unexpected.

Operational resilience, however, goes further than an organization simply maintaining business continuity or managing risk.

What is operational resilience?

Here are two helpful definitions:

Gartner: Operational resilience is a set of techniques that allow people, processes, and informational systems to adapt to changing patterns. It is the ability to alter operations in the face of changing business conditions. Operationally resilient enterprises have the organizational competencies to ramp up or slow down operations in a way that provides a competitive edge and enables quick and local process modification.

PwC: We define operational resilience as “an organization’s ability to protect and sustain the core business services that are key for its clients, both during business as usual and when experiencing operational stress or disruption.”

The operational resilience definition offered by Gartner places a lot of emphasis on ‘techniques’, ‘abilities’, and ‘competencies’. PwC too focusses on ‘ability’ but brings the end goal in picture, that is, service of the ‘client’.

This article will elaborate more on these themes, while also providing some operational resilience examples.

Interconnected and futuristic

To work within a sound operational resilience framework means to consider risks in a holistic manner. It involves moving away from a vertical and siloed approach to a horizontal and organization-wide approach. This way you aren’t left facing collapsing dominos when one segment of your operations stalls. Similarly, key to the word resilience is the aspect of bouncing back and if your operational resilience strategy focuses on avoiding disruptions only, it is inadequate. Operational resilience is a trait by which your organization can get back to everyday business once a disruption occurs too!

Digital, data and cyber

Today, amid the pandemic, digital adoption is what has kept many businesses running and building a layer of digital resilience can help you put your best foot forward. With more and more touchpoints in the customer journey being digitized, it becomes important to live up to the customer expectation of having always-on services. Issues like server outages can dampen customer confidence.

Digital processes run on data as a fuel and your operations will be only as good as the quality of data you possess. Data resiliency includes aspects like restoring compromised data, preventing data loss, and establishing a sync point in case of a snag.

Alongside digitalization and increased data comes the need for cyber operational resilience. For instance, on 5 March 2020 the US Power Utilities were the subject of a cyberattack that used firewall vulnerabilities to cause ‘blindspots’. The system was resilient enough that actual flow of electricity was not affected. However, this incident shines light on present-day practices that hamper organizational resilience. These include using sensitive apps over home Wi-Fi, storing passwords on home devices, and limited awareness about data privacy.

Client is king

When an organization is in its nascent stages, everything revolves around satisfying the client. At such times, it is quite clear what the firm’s key business processes are, which add direct value to the client. However, as an organization scales, processes become more abstract and even at the C-level, one is not dealing with the client’s needs and aspirations directly, but with other contingencies. While it is required that, for instance, the CIO, COO, and CEO take up different responsibilities, resilience is built when these are ordered to the client’s needs.

This approach makes it easier to identify key products and services, meaning that business continuity planning becomes more strategic and secure when the client is at the center. The goal of a client-centric operational resilience strategy must be to uninterruptedly deliver critical operations, even amidst disruptions.

Human resource

At a certain level, your organization is only as good as your employees. Business staff man several key processes, without which products and services would never reach the client. Factors like employee attrition and wages are perennial issues that threaten business continuity, and hence operational resilience. But in the wake of the pandemic, newer issues such as employee wellness have surfaced. In an increasingly remote-first work environment, HR teams have the tricky task of accepting work from home’s olive branch of business continuity, while knowing that prolonged isolation is a deadly threat to creativity, collaboration, and long-term goals.

Third-party dependency

Whether you have an operational resilience manager or not, possessing a framework for managing third-party relationships that are interwoven with critical operations is a must. This is another way of saying that the client shouldn’t be at the receiving end of issues related to sourcing and other external dependencies. Achieving this includes performing due diligence and risk assessment according to your standards for operational resilience before entering into an agreement.

Governance, risk, and compliance

GRC is integral to operational resilience – and not just because organizations are increasingly coming under the scrutiny of regulatory authorities! A good operational resilience framework includes having a governance structure that can respond to disruptions. Ongoing risk assessment too is crucial to weeding out vulnerabilities and avoiding threats. As mentioned earlier, being resilient means moving away from silos and being more holistic and here, GRC software serves aptly as operational resilience technology.

Solutions like VComply ensure you have a better way to run your business. VComply is a comprehensive platform you can use to govern risks, stay compliant, and implement an operational resilience strategy in a way that you cannot with spreadsheets and binders. With automated reports, integrated workflows, data centralization and more, you can more reliably work towards making your business‘ disruption-proof’.

With a better understanding of what operational resilience is, proceed to define what it means in the context of your organization and grow your business strategically!

VComply Editorial Team
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What is CCPA? How Do You Ensure Compliance with CCPA?
Jan 5, 2021
5
Minutes

In this day and age, data is the most important asset that businesses need to protect.

All businesses, big or small, have access to more data than ever. This includes customer data, suppliers’ data, accounting data, and more. The CCPA (California Consumer Privacy Act) has been brought into existence in the state of California for the protection of consumer data and safeguarding their interests.

In this article, we will discuss CCPA in detail and cover topics such as:

● What is CCPA?

● Difference between CCPA and GDPR

● Which business does the CCPA apply to?

● What is personal information under CCPA?

● What are the consequences of non-compliance with the CCPA?

● Steps to become CCPA compliant

What is CCPA?

The CCPA act was introduced on the 1st of January, 2020, in the state of California to protect consumers’ personal information. This act allows consumers to investigate what information is collected by a business about them, and how the information is used or shared. A consumer can ask a company to delete or alter their information under Section 1 (AB 1146), if they feel it will have an adverse effect or their privacy will be hindered. For example, a customer may not want his photo to be shared after a hair transplant.

In order to comply with the CCPA, businesses should take the following steps:

● First, find out if the CCPA is applicable to your business.

● Update the privacy policy data as per the CCPA.

● Provide an opt-in option for prior consent of the users to sell their information, and from parents for users who are in the under-age category.

● Provide the option ‘Do not sell my data’ for users to opt-out from selling their information.

CCPA and GDPR: A comparison

The CCPA and GDPR both have the same objective, to protect consumers’ data and information from violation. However, there are a few differences between them as we'll see below:

● Commencement Date

The CCPA was effective from 1st January 2020, while GDPR came into existence on 25th May, 2018.

● Protection

CCPA protects information that will identify, describe, or is associated with the consumer, such as photos or videos. On the other hand, GDPR protects a specific piece of information about a consumer, for example, a credit card number.

● Region

The CCPA applies only for the state of California, while the GDPR is applicable to any data subjects who are citizens of the European Union.

● Regulation

Businesses that earn more than $25 million, collect data from more than 50,000 consumers, and generate more than 50% of the revenue by selling data accounts of consumers, come under the regulation of CCPA.

Any business around the globe that deals with private data of EU citizens comes under GDPR.

● Penalties

A fine of $2,500 to $7,500 is charged depending on the decision of the Attorney General of California if any law is violated under CCPA.

The penalty under GDPR can be 4% of the annual turnover of the company, or €20 million depending on which is higher.

Which businesses does the CCPA apply to?

The CCPA applies to all big and small businesses. All companies that are in the business of collecting data or information from the consumers need to comply with CCPA.

Specifically, businesses that come under CCPA compliance are:

● Businesses based in California or deals with consumers of California.

● Businesses that are engaged in collecting personal data of the consumers.

● Commercial organizations that make more than $25 million gross profit annually.

● Companies that are collecting and selling data for more than 50,000 users.

● Businesses that generate more than 50% of the revenue by selling data accounts of consumers.

● Additional obligations will be implied including the CCPA if the company is dealing with data exceeding 4 million users.

Businesses exempt from the CCPA are:

● Businesses not from California or those that don’t deal with California.

● Businesses not engaged in collecting data of consumers.

● Nonprofit organizations are also exempt from the CCPA.

● Agencies of credit reporting that come under the Fair Credit Reporting Act.

● Financial Companies that come under the Gramm Leach Bliley Act.

● Health care centers that are under HIPAA (Health Insurance Portability and Accountability Act).

What is personal information under CCPA?

Personal information under the CCPA is anything that describes or is associated with a consumer, household, or device directly or indirectly.

Personal information covered under the CCPA includes the following:

● Customer Identification

Information that identifies a customer such as a name, age, gender, photograph, and other related identifiers.

● Customer Information

Information such as signature, social security number, driving license number, bank account, etc comes under customer information of the CCPA.

● Biometric Data

Information detected and recorded electronically such as fingerprints, eye color, retina scan, and similar other biometric data.

● Commercial Details

Information such as bank details, transactions such as purchase and sale of goods and services, payment of utility bills, etc are all commercial records of a customer.

● Educational Background

This refers to information on how qualified a person is, such as a graduate or a postgraduate.

● Professional Information

Professional information refers to what a person is professionally engaged in.

● Location

Where people live, which places they visit and check-in, where they travel are information records of their location. The new trend of Facebook, Instagram check-ins are examples of showing the location of where a person has visited.

Consequences of non-compliance with CCPA

A company that doesn’t comply with the CCPA can be penalized with charges of thousands of dollars. If a business violates any CCPA law and fails to pay the charges, it risks complete shutdown of the business, website, or channel. Consumers are also in a position to sue companies for breach of their private information after a notice period of 30 days. Another body that can sue the business is the Attorney General of California for the violation of any law of the CCPA.

Here are some specific penalties businesses might incur if they fail to comply with the CCPA:

● Charges from $100 to $750 fined per violation if a company doesn’t prove itself just and fair in front of the consumer.

● A fine of $2500 can be charged by the Attorney General of California if the law was violated unintentionally.

● A fine of $7500 will be charged if the Attorney General feels that you have violated the law intentionally.

Steps to become compliant with the CCPA

Here are some steps businesses can take to ensure compliance with the CCPA at all times:

● Know Your Business

First, you need to know if your business falls under the category to be compliant with the CCPA. To fall under the jurisdiction of the CCPA, your business should be a commercial organization collecting data of consumers of California and generating income of more than $25 million, making 50% profits by selling data, and selling data of more than 50,000 users.

● Keep a tab on data collection

Be sure to keep an eye on all personal information your business is collecting about your consumers. This includes data collected on your website, data your employees are collecting, and so on.

● Create a data map

A data map is a very important part of data privacy management. It shows what data you collect, where it is stored, how secure it is, who has access to the data, and the purposes it is used for.  

● Update your privacy policy

Consistently review your policies and procedures regarding the handling of personal information in your company. Your employees should not be allowed to download data of customers on their devices. For example, accounting data for audit purposes.

● Include an opt-out link

Create a process for customers to opt-out and delete their data from your records. This is an important part of the regulation. Customers can opt-out or delete the sharing or selling of their data. This link should be prominently accessible on your website.

● Improve customer communication

A company should promptly respond to customers if they have any requests to change their data usage. Companies should be able to provide information if the consumer asks about their private information and how it is being sold.

● Vet all third-party contracts

Review contracts with the third party vendors on your policies about managing and using customer data. Determine things that need to be changed related to the privacy policy. Outline the responsibilities that will be handled by the third party and include them in the contract.

● Have security controls in place

The CCPA has strict fines for data breaches. Thus, it's essential that data collected is fully secured and encrypted. Review your security control measures and make sure they're sufficient to protect your business against breaches.

● Invest in employee training

Employees must be adequately trained and educated regarding the  CCPA. They must be aware of the consequences of mishandling data, and how best to communicate with customers regarding their personal information.

Wrapping up

The goal of the CCPA is to protect consumer information from being misused and mishandled. Businesses complying with the CCPA are thus likely to enjoy more loyalty and goodwill from customers.

If you're struggling to keep up with the various laws and regulations your business must comply with, we've got a solution for you. VComply's GRC software makes it easy for businesses in all industries to manage compliance and governance in a hassle free way.

VComply Editorial Team
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5 Ways Internal Audits Can Go Beyond Tick Marks And Spreadsheets
Dec 11, 2020
5
Minutes

The tick mark has grown to become a symbol of the internal auditor’s raison d'être, but the primary role of internal audit is not, in fact, defined by stationery and workpapers. The Institute of Internal Auditors (IIA) notes that:

“The role of internal audit is to provide independent assurance that an organization's risk management, governance and internal control processes are operating effectively.”

Today, in the wake of the pandemic, organizations across the world are not just realizing the importance of internal audit, but also appreciating the merits of internal audit that go beyond the confines of ticking and tying. With automation, AI, and ML brining data-driven insights to the table, C-suites and boards are better able to realize why internal audit departments should exist. What is the primary objective of auditing? It’s about offering an independent opinion. But how many times do auditors unearth matters that are of immense importance? The crux of the issue lies in going beyond sheets and into strategy. For that, it is helpful to list out some best practices that can change how internal audit works.

Carefully define the scope of internal audit

This applies to what and how much. After all, internal audit teams help boards and the C-suite steer the ship. It is of prime importance that auditors are trained to look at the big picture and not just at minute details, which very often have no significant consequences on decision making. As the pandemic unfolded, many organizations were confronted with realities they had, hitherto, turned a blind eye to and if internal audit can unmask threats with well-timed counsel, it will well and truly have done its job.

The objectives of each audit too must be defined so that teams do not get overwhelmed with scope creep. This is when you aren’t able to audit in a modular way and land up investigating and rummaging through everything. To define the scope of the undertaking it can be helpful to learn from past audits and factor an element of structure into the internal audit process by drawing out a schedule, assigning responsibilities, setting a budget, and so on.

Prioritize insights and advice

One thing the pandemic made clear is that a spotless past is no absolute guarantee of a seamless future. Many ways of working were condemned to at least temporary obsolescence and today, many organizations question their preparedness for things to come in the future. Hence, internal audit has the chance to evolve into the role of a dependable advisor. The emphasis here lies on what lies ahead. Yes, GRC is important, but consulting must come to the fore too.

Shining a spotlight on issues that have occurred, and even diagnosing them is one thing, investigating processes for issues that may occur in the future is quite another! This is the kind of value that leadership and stakeholders seek, especially after the pandemic. Forward-looking internal audit can take many forms: providing data on how much of a cybersecurity risk work from home poses, probing into current employee morale and what a company needs to do to avoid attrition, alerting management to current ways of working that are likely to come under environmental sanctions in the future, and so on. The advantages of internal audit multiply when you add strategy to assurance.

Invest in the right skills sets

You’ll note shifting the focus from hindsight to foresight is not so much about an internal audit process, it is more about the competence of the team. As such it makes sense to recruit and retain top talent. Besides technical audit skills there are several competencies that you should look to your auditors having.

Data analysis: There is a reason that data science is in vogue and people from all professions are taking to it. With operations and processes becoming increasingly digital, there is a dire need for professionals who can work on that data, make sense of it, and churn out insights from a heap of 1s and 0s. This means that if an audit lead, for instance, were to be able to process data, he or she could instantly steer the internal audit team towards bringing data-driven insights to the executive table.

Soft skills: Irrespective of the internal audit procedure and the technical skills it mandates, what does not change is the requirement for soft skills like exemplary communication. Often, these are hard to teach and given that internal auditors communicate with persons at different levels of the organization, the audit committee, board, C-suite, employees, and stakeholders alike, soft skills can be the factor that determines the efficacy of an audit.

Cybersecurity: With online work going mainstream and unsafe cyber practices being commonplace a fragile digitally-connected world is now a reality. Along with this is the increased probability of a cyber pandemic that can cripple to industries on a global scale. Far from being conspiracy theory, this is what entities like the World Economic Forum are talking about. Having an internal audit department that understands cybersecurity is almost a necessity today (why wait for the next pandemic to strike!).

Cultivate a culture of transparency

Ancient philosophers believed that what is received is received according to the mode of the receiver. Meaning that an internal audit report may be only as good as the way it is accepted. Since it is to comprise of an independent opinion, it becomes necessary to foster transparency across the organization, and definitely between the auditors and the people they are reporting to. If internal audit reports to an audit committee, things become easier, but, for instance, in a small organization, if auditors must report to the department they are auditing it becomes tricky.

An interesting way to improve transparency across the organization is to reduce the gap between employees through collaboration. If auditors work with other employees and vice versa mutual trust will be formed and further, cross-team projects give internal audit an opportunity to glean strategic insights.

Deploy an organization-wide GRC solution

The traditional internal audit checklist is replete with items like repetitive tasks, manual data extraction, spreadsheet-intensive work, and report preparation. Not only are many of these time-consuming but in other fields tasks such as these have already been automated. It is this gap that GRC solutions like VComply seek to fill, offering internal audit capabilities such real-time metrics, easy reporting and dashboarding, advanced data analytics, compliance management, and remote auditing tools.

Deploying such a software organization-wide increases the scope of internal audit instantly and is in fact a clear sign that you want to move beyond tick marks and spreadsheets, and into the realm of data-driven insights and advice. Good luck!

VComply Editorial Team
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9 Challenges to Data Compliance Strategies
Dec 7, 2020
15
Minutes

Today, data is everywhere. With ecosystems and infrastructures going digital, access to personal and sensitive data has proliferated across the board, giving rise to the need for adherence to data compliance standards.

What is data compliance? In simple terms, it means managing your data in a manner that keeps you in line with regulations that safeguard the security and integrity of the data you handle. With the introduction of GDPR, data compliance did get a lot tougher, but being compliant is a priority that your business cannot afford to go slow on, especially in an era defined by data-based interactions.

Nevertheless, be it GDPR compliance or CCPA compliance, every data compliance officer will agree that rummaging through awfully long and dense legal prose is one thing, implementing a framework to ensure compliance standards across an organization is quite another! The challenges are varied, manifold, and unrelenting.

 

Here are 9 challenges to data compliance strategies commonly faced by organizations.

More data...

In the last decade itself, the sheer volume of data churned out and consumed by the industry has been incredible. Data is growing exponentially. Moreover, with tranches of the population in developing countries still taking to digital interactions there is reason to believe that this upswing hasn’t peaked. Further, with the increase in online modes due to the pandemic, companies who weren’t handling data are now doing so.

 

Data, today, is like the air you breathe, permeating everything, giving life to smartphones, appliances, watches, and other gadgets. IDC projects that by 2025 the global data sphere will grow to 175ZB (1021), from 45 ZB in 2019. What’s plain in all of this is that the data compliance protocols of today may be outdated as soon as tomorrow and that’s a big challenge, especially to companies with limited resources.

...and more devices

As the Internet of Things (IoT) weeds its way into the fabric of every business, you no longer have just an Achilles’ heel to watch out for—you have many points of vulnerability to heed to. While the IoT market is slated to be worth $ 1.1 trillion by 2026, as per a statistic, IoT devices experience over 5,000 attacks per month. Another statistic indicates that 6 in 10 companies have experienced an IoT security incident.

The challenges for data compliance are manifold and include:

  • Privacy violations
  • Legal complications
  • Vulnerability management

Can’t say ‘No’

Less is often more when it comes to data. Big data has its place in the industry, yes, but clinging to every bit of data that comes your way is also a problem. That’s because you have compliance, privacy, and security concerns to attend to when gathering and processing the data you receive. In other words, customer data compliance becomes more of a balancing act if you haven’t drawn the line between what data is desirable and what is not.

 

Here, you’re not looking at just GDPR compliance, but every other law that you are liable to. A simple internal decision on data management can reduce the compliance requirements for your business by a lot. Yet is data your key to growth or is it a risk? That’s the major challenge!

Dark data

Dark data refers to data you have, but are not aware of. And if dark matter is a metaphor to go with – 85% of the universe is supposedly dark matter –  your organization could be sitting on an iceberg of data, part of which is useful, much of which is worthless, but all of which is a risk.

 

Dark data raises serious compliance issues, but also ethical issues in data collection. How do you keep data free from harm, private, and confidential, when you are unaware of the data you possess? The challenge is also one of cost, because to bring data into the light, you’d probably need better systems in place.

Lack of board foresight

If you’ve keenly observed the last few challenges, you’ll note that they don't necessarily ask that you draw out a GDPR requirements list. However, they do point to the need for clear organizational policy. The internal signal not the external mandate is often where data governance, and compliance, should start.

 

This means that the board needs to own responsibility for the data you store, process, analyze, and even sell. In times past, data privacy and compliance may not have been a priority at board meetings, but in today’s digital era, boards must set the tone for risks in data management throughout the organization.

Mandates galore

For many boards, however, the big challenge is that there are just too many compliance standards to juggle with at the same time. You’ve got a ton of yardsticks to play with such as:

  • GDPR
  • HIPAA
  • PIPEDA
  • CCPA
  • PCI DSS
  • FACTA

What’s more, compliance standards like GDPR can tend to erase geographical boundaries and with the mass adoption of digital technologies amid the pandemic, you can expect several countries to draw out their own GDPR-like standards. The result is compliance fatigue, which can be broken down into:

  • More time spent
  • More money spent

With ample legislation comes the difficulty of enforcing policies and applying them to real-world contingencies. A prime example is the issue of confidentiality associated with the Bring-Your-Own-Device (BYOD) trend.

Data lifecycle

To abide by data compliance rules, you want to have keen oversight over customer data, right from when you first acquire it, to the time you process it, and how you do so as well. This poses a challenge because over the course of time your data is going to migrate from physical servers to the cloud and across boundaries and secondly, because data lives on. Connected with this is the fact that you may recognize organizational silos within your fabric, and with data lost within silos the issue of compliance gets murkier.

Damage is costly

With data compliance damage is costly, extremely costly. That’s because you’re dealing with:

  • Fees
  • Penalties
  • Containment
  • Reputation

Think about it. Even the slightest slip up can cause you to lose customer trust, which can have more of a long-term impact on your business than the hefty fines associated with data breaches.

According to IBM , in 2020, the global average total cost of a data breach is $3.86 million, and in the US, this cost rises to $8.64 million. In 2019, big players already shelled out in hundreds of millions for data breaches and security incidents. IBM also points out that with remote work going mainstream, the cost of a data breach could potentially increase.

Ongoing compliance

Whether it is setting controls in place for vulnerability management or preparing data for regulators seeking to know your compliance position, data compliance managers have their plate full. Without real-time monitoring and automated data analytics, mitigating risks can be a challenge. Further, companies across the board find themselves struggling to report data breaches in time.

To cope with ongoing data compliance requirements, it makes sense to arm your organization with a tool like VComply, an integrated governance, risk, and compliance management platform. It is multifaceted, powering compliance management, policy management, risk management, audit and assurance, and more, all through an agile, online platform.

Being prepared for a digital-first future with the tools to handle data compliance is a way you can make the hurdles that come across your way smaller and go from being compliant to secure effortlessly!

VComply Editorial Team
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What is Business Continuity Risk ?
Dec 4, 2020
20
Minutes

Business continuity risk refers to threats that disrupt the functioning of a business. These threats maybe any untoward incidents or disasters that negatively impact an organization.

 

There are a number of business continuity risks that make organizations suffer, such as cyber attacks, data breaches, security incidents, fire, flood, transport disruption, and terrorism.

 

Perhaps the best example of business continuity risk is the effect of the Covid 19 pandemic on businesses all over the world. As shops closed down indefinitely and consumers were forced to shelter in place during lockdowns, businesses faced huge losses. A record number of people were laid off, as companies struggled to make payroll or pay rent.

 

For essential services that were allowed to continue such as health workers and food supply managers, it became a matter of huge concern to protect their health and wellbeing. To ensure complete safety of workers, organizations were required to provide them with PPE lists, hand sanitizers, masks, and strictly observe social distancing measures.

 

A business continuity plan helps to mitigate such unforeseen risks, and ensure smooth and efficient functioning of the organization.

Types of Business Continuity Risks

Let's take a look at five business continuity risks that a firm must monitor and control:

1.  Cyberattacks

Cybersecurity attacks area major source of concern for businesses. Network and system damage by hackers not only damages a firm's reputation but can also cause monetary damage.

 

For example, Software AG, a German tech firm, was attacked by Clop ransomware in October 2020. The cyber-criminal gang demanded more than $20 million ransom. The attack disrupted parts of their internal network.

2.  Data breaches

Data breaching refers to releasing or revealing important, private and sensitive information to an untrusted person or environment. In the first half of 2020, there were 540 reported data breaches in the U.S.

 

Some examples of data breaching include loss of USB drives, mobile or computer devices, laptops, and computer networks. Such breaches can put sensitive information regarding the firm and it's customers in the hands of unscrupulous people and cause severe damages to the business.

3.  Terrorism

When terrorism strikes a country or city, it instill a sense of fear and uncertainty in it's residents and the public at large. Employees and organization security forces might be ill-equipped to handle attacks of terrorism. Property damage and business interruption are the most obvious impacts of terrorism.

 

Further, even after a terror attack, tourism and day-to-day life in a country remains affected. It takes a few months for businesses to resume their operations as usual.

4. Fire

Fires generally take place suddenly, without any warning  signs. They often occur due to faulty firm equipment or misuse of organizational tools and instruments.

 

Keeping a fire control plan involving fire brigades, fire alarms and fire extinguishers as a precautionary measure to control fires, is quintessential for businesses of all kinds.

5. Supply chain disruption

Disruption in supply chains is also a big concern for organizations. Natural disasters such as floods, hurricanes, earthquakes, tsunamis, storms, often lead to such disruption. As a result, the supply network between companies and suppliers weakens and the supply chain suffers.

4 Major Risks of Not Having A Business Continuity Plan

Not having a business continuity plan might be more dangerous for a business than you think.

 

Here are four major risks of not having a well-defined plan to handle business continuity disruptions:

1. Death and Injury

When organizations suffer from natural disasters and other threatening events, it leads to loss of life and brutal injuries to workers, clients, and other individuals associated with the business.

 

This can be prevented by keeping premises under regular inspection, maintaining tools and equipment, and posting warning signs, if combustible or dangerous equipment is being used.

2. Business Failure

Disasters and unexpected incidents also affect and damage business property and goods. After suffering such damage, organizations are generally unable to recover.

 

For example, due to Covid 19, more than 100,000 restaurants have permanently closed this year, according to the National Restaurant Association. Business continuity plans provide better alternatives for businesses to survive even after a disaster.

3.  Reputational Risk

Disasters also affect a company's reputation in a negative way. People’s lose trust in a company and start to view it with a healthy dose of scepticism.

 

For example, a fire may damage a firm’s internal property as well as injure people, which might make the public think the firm is not secure and doesn't take necessary precautions to safeguard it's personnel and premises. This might discourage future clients and employees from associating with them.

 

Likewise, a firm's reputation can also be damaged by data breaches. People's trust towards a firm decreases due to the spread of sensitive data.

4. Loss of data

Loss of essential data not only disrupts business activities but also puts the company's future in jeopardy.

Mitigate Business Continuity Risk: 4 Steps to Create a Business Continuity Plan

To develop resilience as a business and future-proof it's functioning against unexpected disasters and events, businesses must prepare a business continuity plan.

 

Here's a four-step guide to mitigate business continuity risk:

1. Scope and Teamwork

The first step involves putting together a team for implementing a business continuity plan. Management buy-in and commitment to the BCP process should also be established in this step.

 

The firm must clearly explain the key reasons for having a BCP, namely, to protect employees, suppliers, and customers as well as the business operations themselves.

2. Business Impact Analysis

Business impact analysis helps determine the potential impacts of a disruption to critical business operations. The BIA can be facilitated by asking the following questions:

  • Which activities are critical to the core operations of the business?
  • What resources need to be obtained to resume these prioritized activities? This includes both internal and external resources such as vehicles, inventory, human resources, and electricity supply.
  • What is the maximum period of time for which a business might be able to withstand temporary disruption? This identifies the time frame for the prioritized activities to be resumed.

Post this, a firm should assess external risks which may affect a business. This helps establish the types of disasters which an enterprise may face.

 

It's essential to account for all possible disasters a business might face, be it natural, data-based, corporations-based. To get a more accurate assessment, firms should also look at past events and disasters that similar businesses may have faced.

3. Develop Strategies

Information gathered from the business impact analysis should be utilized to develop strategies which help an enterprise tackle an emergency and resume operations efficiently.

 

Strategies must include different types of plans to figure out how the enterprise will function during the time of emergency. Some basic questions your strategy might answer include:

  1. How will customers contact the organization during that time?
  2. How will the organization gain access to electricity and food?
  3. Will the organization be relocated elsewhere?

The business continuity management team is responsible to ensure these strategies are implemented should a disaster strike.

4. Plan Testing

The final step of this plan consists of testing your plan to improve your ability to successfully recover from various unexpected scenarios.

 

BCP testing should be exercised to experiment the effectiveness of your plan.

 

A few pointers to effectively test your business continuity plan:

  • Review plan strategies and ensure each disaster or scenario has been accounted for.
  • Ensure each employee is aware of the significant sections of the plan and their roles in a disaster or scenario. Carry out BCP simulation tests.  These tests include actual recovery actions such as restoring backups and live testing of superfluous systems.
  • Involve vendor partners in your testing process. This will help you attain accuracy in your tests and receive feedback from the vendors on the effectiveness of your plan.
  • Document the results of your testing and implement processes by following up on the results, to improve your BCP.

Wrapping up

Business continuity plans help organizations safeguard their existence as well as retain the trust of their customers and employees. The lack of a well-documented business continuity plan can disrupt the functioning of a business, affect it's employees' physical and monetary health, and in some cases, cause complete business failure.

 

While it's difficult to anticipate when the next pandemic might strike, or when businesses will fully recover from the current one, one thing is clear: failing to plan is planning to fail.

VComply Editorial Team
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Compliance 101 for Banks
Dec 2, 2020
14
Minutes

The purpose of compliance in banking is to detect and prevent any abnormality, criminality, and noncompliance in the bank’s functioning. Banks must operate with integrity and follow regulations, internal policies, and applicable laws.

 

Every bank should have a compliance division. The division will make sure that the bank cooperates with all the laws and helps in upholding the reputation of the bank. The division should begiven the duty to oversee the bank’s actions, recognize and examine the areas of risk, evaluate the bank’s plans and strategies' suitability, and provide the remedy to risks.

The compliance functions should ensure that the bank’s transactions are transparent and in conformance with the policies. They should have checks in place to prevent any non-compliant acts, especially legal issues, and identify compliance risks and ways to mitigate them.

Banking Laws and Regulations

The United States has a dual banking structure. Dual banking structure means that the United States banks can be regulated by one of the 50 states or by the federal government. Every bank must have a federal manager. The United States has a complex administrative system that has several federal administrative offices.

Here are two bank administrative offices:

The Board of Governors of the Federal Reserve System: This is the main banking structure of the United States and manages the U.S. pecuniary plan.

 

The Federal Deposit Insurance Corporation: This is the main administrator for those state-chartered banks who are not apart of the Federal Reserve System.

 

Here are some of the banking acts that were passed to manage regulatory aspects:

  • The National Bank Act 1863
  • The Federal Reserve Act 1914
  • The Banking Act 1933
  • The Bank Holding Company Act 1956
  • The Bank Secrecy Act 1970
  • The International Banking Act 1978

Compliance Function in Banks 

The board of directors of the bank is in charge of supervising the administration of compliance risk for the bank. When the board decides on a compliance plan, they must include a compliance function in the form of an official long-lasting and operative contract.

 

Every year the board of directors must check if the bank is supervising compliance risk diligently. The bank's compliance plan will not be operative if the board of directors does not encourage the principles of nobility and uprightness all over the company.

The senior management of the bank is in charge of administering the compliance risk of the bank. The management needs to set up and pass on a compliance plan, ensure it is obeyed, and report to the board of directors on the administration of the bank's compliance risk. The senior management is also in charge of setting up a lasting and operative compliance function in the bank as a section of the bank's compliance plan.

Challenges of Regulatory Compliance Management in Banks 

The compliance attempts of the bank are concentrated on an established governance, risk, and compliance (G.R.C.)function. Because of that, banks haven’t been able to construct modern capacities necessary for fighting back arising compliance risks. 

 

The administration of compliance is not totally connected to the bank's policy-making procedure. Banks use a compliance sign-off method rather than using a preventive defense approach. G.R.C. programs are controlled in a clumsy way, which leads to irregular executions. 

 

Compliance I.T. execution attempts focus only on the primary compliance instructions and don’t provide any focus towards the longevity features. This gives rise to unusual ‘quick fixes’ that enlarge the later complexity and decrease flexibility.

Best Practices Of Banking Compliance

Compliance functions make sure that the banks work with honesty and follow the rules and regulations. A powerful compliance function reduces risks that are connected to wrongdoings, money manipulation, and other risks. 

Here are some of the best practices for banking compliance:

1. Up-to-date technology

Upgrading banking technology can help not only the company but also the consumers. Procedure advancements can supply consumers with superior financial protections at the user level. The technology will have to develop if the consumer base becomes bigger.

2. Managing compliance

Banks must try and automate compliance processes, to ensure they don’t fall behind on their regulatory responsibilities. The compliance function in the bank is responsible for ensuring all employees are aware of their roles in maintaining compliance. There are also several tools such as VComply that provide banks with risk-based alerts, so they can deal with concerns before they become an issue.

3. Get all departments on the same page

When physical actions have been replaced with automation, then the banks should take a long term view and tackle exterior risks. It's essential for each member in a bank to be aware of all the rules and how they must be dealt with.

Banking Compliance Strategic Plan

There are eight necessary components for an efficient compliance structure in banking:

1. Administrative Level Management

The Board must make sure that the bank has a Compliance Plan. The Senior Management should form and manage the Compliance Program and the Chief Compliance Officer (CCO) must be the Senior Officer of Compliance.

2. Compliance Framework

The compliance framework should be developed in three important zones: governance, committed capital, and imposition of schemes and strategies.

3. Schemes and Strategies

The bank must have up-to-date schemes and strategies which comply with the rules and regulations.

4. Observation and Evaluation

The compliance plan should be observed and evaluated all the time.

5. Management Information Systems and Accountability

Banks should account for everything to keep a tab on: crucial matters and administration problems, execution, and reliable deployment and exchange of data.

6. Coaching

A good compliance structure is only possible if the entire personnel is well-educated on how to sustain a strong compliance plan.

7. Compliance Analysis

An individualistic analysis must be done to ensure that the compliance-risk reduction instruments are working as expected.

8. Working Together with Supervisors

Banks should work together with the supervisors by providing them with regulatory documents and responses on draft plans. 

Banking Regulatory Compliance Checklist

Here's a quick checklist for banks to create their own compliance and regulatory framework: 

1. Assign Responsibility of the Compliance Structure

Every division should take responsibility for the compliance structure and should be held responsible if something goes wrong. The division that produces the risk should deal with that risk as well.

2. Recognize and Deal with Risks

Even after a bank recognizes and provides controls to risks, there might be additional risks to consider. Banks can deal with these risks by avoiding them, accepting them, transferring them or mitigating them.

3. Use Integrated Risk Management

Integrated risk management helps banks set up schemes and strategies. These are backed by risk-aware ways to better policy-making and work.

4. Oversee Development 

Schemes and strategies should not be deployed on a set-it-and-forget-it basis. Banks should regularly conduct audits and reviews to see if their compliance strategies are bringing the results expected.

Wrapping Up

As with any other business, banks have a set of rules and regulations to abide by too. The failure to keep up with the se can result in heavy penalties and increased risk for banks. 

We hope this article provides you with enough information to set up your banking compliance policy. 

If you're looking to manage banking compliance in a simple and efficient way, we'd recommend you checkout GRC software by VComply.

VComply Editorial Team
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What Do the New Advertising Regulations Mean for RIAs?
Dec 2, 2020
8
Minutes

If the recent proposal for amending the RIA advertising rules becomes a reality, RIAs (Registered Investment Advisers) can start using testimonials and third-party ratings in their advertisements very soon! Just like how lawyers woo their prospects using their clients' stories of million-dollar settlements in their favor, investment advisers can soon advertise testimonials of how their clients have benefitted through their services.

What are the significant changes on the horizon?

Let's look at the background of the rule and the reforms proposed by the Securities and Exchange Commission.

Background  

The advertising rule was first adopted in 1961, and it has mostly been the same since then. The rule prohibits investment advisers from using testimonials or third-party endorsements. The rule also prohibits references to specific recommendations that the investment adviser has made in the past.

The SEC has recognized that technology advancements have changed how consumers interact with investment advisers and evaluate the financial products. Today's customers rely on information and reviews on the internet before buying any products. After analyzing the market changes, the SEC has proposed reforms and adopted a principle-based approach instead of prohibiting testimonials completely. In November 2019, the Securities Exchange Commission formally released a proposal for replacing it sage-old advertising rules.

The New Proposal  

In the new proposal, the SEC has suggested broadening the definition advertisement as "any communication" disseminated by or on behalf of investment advisers to obtain or retain clients. However, the definition does not include 1) live oral communication that is not broadcast, 2) responses to some unsolicited request for specific information 3) advertisements or sales literature about mutual funds covered by other SEC rules. 4) information to be contained in statutory or regulatory notice or filing.

The proposed rule would permit testimonials, endorsements, and third-party ratings subject to some restrictions and conditions in reverse from the current rule's restriction on testimonials in advertisements.

The restrictions include:

  • Advertisements should not contain untrue statements.
  • Advertisements should not contain unsubstantiated claims.
  • Advertisements should not give rise to materially untrue implications.
  • Any implication of the benefits of the advertisement's services should be accompanied by discussions on associated risks and limitations.
  • References to past investment picks and or investment performances should be portrayed "fair" and "balanced" in advertisements.
  • Advertisements should not be materially misleading.

Regarding the advertisements showing retail and non-retail persons, SEC has distinguished between "retail" and "non-retail persons", and advertisements for "retail persons" will be subject to heightened requirements.

The new rule proposal was subject to the 60 days "comment" process where the public could register their comments about the proposed amendments. The public comment period ended on 03 January 2020; SEC is reviewing the comments. It is expected that SEC will announce the updated versions of the rule sometime before this year's end.

Closing Note

The proposed reforms are beneficial to investment advisers and customers alike. Using testimonials in advertisements can help future clients understand what type of clients the investment advisers have worked with and their experiences. The business becomes competitive, and both individual advisers and firms can leverage these reforms and advertise for growing their business. They might have to incur some additional costs and, chances are there that this can turn out to be more beneficial for big investment adviser firms.

Another perspective on there form is that the principle-based approach to advertising rule makes it open to more than one interpretation. If the rules are too broad, then the same standards may not be followed by all. The proposal's wordings and statements' ambiguity make it difficult for compliance officers and lawyers to make clear decisions and advise companies on any legal impact. And they hope that when rules become a reality, SEC comes up with more precise standards, definitions, and descriptions.

While the new rule might help clients pick up an investment adviser from a google search review result, it might create a new burden for compliance officers as they might need to review each advertisement for its due diligence. For more information on SEC's recent proposed changes, read the complete proposal here.

VComply is an intuitive and intelligent platform that empowers businesses to monitor and manage their compliance and risk initiatives. The team at VComply is dedicated to empowering customers to create and manage powerful, risk, compliance, and governance programs. Contact us to learn more about how VComply can help you meet your compliance and governance goals.

Devi Narayanan
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An Introduction to Compliance for Registered Investment Advisors (RIAs)
Oct 7, 2020
5
Minutes

What is RIA Compliance 

As financial planners and money managers for wealthy individuals and corporations, registered investment advisors or RIAs are required to comply with a set of rules and regulations laid down by the Securities and Exchange Commission (SEC). 


First, some basic housekeeping: Advisers handling small-scale accounts must register with the state securities authorities, while those who handle more than $100 million worth of assets must register with the Securities and Exchange Commission (SEC).


According to the Investment Advisers Act of 1940, the Registered Investment Advisers (RIAs) have to set up plans and strategies that will comply with the rules established by the Securities and Exchange Commission (SEC). Note the Investment Advisers Act has been modified twice, once in 1996, and later in 2010. As per the new amendments, only advisers with at least $100 million under management must register with the SEC. Essentially, abiding by the rules and regulations put forth by the SEC is known as RIA compliance.


RIA Compliance has many different aspects such as the Investment Advisers Act, the Securities and Exchange Commission (SEC) Examination Priorities, Form ADV, Compliance Officers (CCOs), Funds & Assets, and Code of Ethics. The Advisers Act exists along with the SEC’s rules to prevent any breach of the law. The SEC’s rules are constantly changing in order to be up-to-date with evolving technology. 


RIA compliance can present a few challenges to investment firms such as valuation, cybersecurity and theft, custody of assets, and foreign tax compliance which we’ll review in depth in this article. 


Before we move on to discuss RIA compliance in detail, we’d also like to shine a light on the basic differences between RIAs and broker dealers. It's common for professionals to confuse the two. However, they vary not just in their scope of work, but also in the laws they must follow and the way they earn a living. 


Difference between RIAs and Broker Dealers

A broker dealer helps in carrying out investing deals. Think advisors that tell you which shares to buy and which ones to sell. Broker dealers collect a small percent of the transaction as commission. Unlike RIAs, they are not bound by fiduciary rules. What does this mean? They generally focus on the deals that are most beneficial to them, as opposed to those which are best for the client


Registered brokers work for full-service broker dealers, where they have to follow a set of guidelines when it comes to recommending stocks, suggesting investments, and carrying out their business.  


On the other hand, independent broker dealers have more legroom when it comes to suggesting investments. For instance, they can also advise clients to invest in hedge funds, IPOs, and nonqualified plans. 

  

Here are some differences between broker dealers and RIAs: 


  • Compensation: Broker dealers charge commission based on each product they suggest and sell, while RIAs charge fees for advice or a percentage of assets under management. 
  • Standards: Broker dealers provide advice according to the suitability standard which means that they provide advice which is suitable for the customer’s personal needs, but not necessarily the best for them. 

On the contrary, RIA’s provide advice according to the fiduciary standard which means that they provide advice which is best for the customers needs. The fiduciary standard is stricter than the suitability standard.

 

The Different Aspects of RIA Compliance

RIA compliance has a lot of different aspects such as:


  • Investment Advisers Act: This is a U.S. Government law that shapes, explains, and conveys the duties of a Registered Investment Advisor. The Securities and Exchange Commission is given the authority by the Advisers Act to observe advisers, ease resource development, and maintain just, organized and structured markets. The Advisers Act defines precisely what counts as an investment advice and who needs to enroll with the SEC before providing that advice.
  • SEC Examination Priorities: Annually, a list of specific policies, goods or services, that are of high risk to the investors or the market, is issued by the SEC’s Office of Compliance Inspections and Examinations (OCIE). This list is an attempt to prepare the public and encourage transparency. SEC examiners look at this list while preparing the examinations of RIA’s. The advisers can also refer to this list while preparing for the examination.
  • Form ADV: This is a quintessential document for a Registered Investment Advisor. It is an annual form that must be filled out for the company to stay compliant. Form ADV has two parts. The first part requires details about a company, assets under management, and so on. The SEC uses these details to evaluate and impose rules. The second part is a brochure that can be distributed to clients and prospective customers. It is required that a firm discloses all it's activities in this form, in plain English simple English, a narrative format, and disclose their obligations as a fiduciary. 
  • Chief Compliance Officer (CCO): The SEC needs every company to appoint a CCO to look after RIA compliance plans and strategies. Many owners take up the role of a CCO in order to save costs in the short run. However, this can be detrimental in the long run. Savvy companies know must hire a CCO in order to let the owner concentrate on the profit-making activities. The CCO helps the company to keep up a tradition of compliance and ensures all duties, documentation, and procedures are duly fulfilled.


RIA Compliance: Things to Keep in Mind 

Here are some of the common challenges that registered investment advisors can face with compliance:


  • Time and cost intensive: Without support from a professional, RIAs can be at a loss when it comes to managing compliance. The rules of the SEC can be complex and wide-ranging, taking up several hours a week for RIAs to simply keep up with developments. Compliance administration can also lead to heavy expenditure for RIAs. Those who do not spend resources on compliance run the risk of getting under the scrutiny of the SEC. 


A better and faster way for RIAs to manage their compliance is using an automated system such as VComply, that helps them receive alerts, automate their calendar, and assign responsibilities. 


  • Cybersecurity - ID theft is a major concern for advisors. If a customer’s private details or assets are stolen, it can land an RIA firm in deep trouble. In recent years, various cybersecurity specialists have confirmed that the protective barriers used by the advisory companies are fragile and can be hacked by a group of hacking specialists.


In order to safeguard their organization from cybersecurity thefts, advisors must run their cybersecurity measures through framewowkrs such as CIS, PCI, NIST, and SOC 2, to deteremine if their security measures are appropriate. 


  • Custody of assets - Advisors require more than just cybersecurity to safeguard their customer’s details and assets. They also have to safeguard other customer assets such as security documents, money, cheques, and account files. To prevent physical assets from being stolen, advisors must implement better procedures and also educate customers on keeping their assets safe. 


  • Marketing - Owing to investment scandals and scams, new rules are constantly being introduced to avoid firms from promoting dubious schemes. RIAs must keep a constant tab on changing regulations around marketing. For example, mortgage providing advisors need to follow the advertising rules in the Truth-In-Lending Act. Advisors who advertise other goods and services must be sure that they are adding necessary disclaimers and their advertisements are truthful.

Conclusion

Compliance for RIAs is not straightforward, and with ever changing regulations, CCOs are forced to balance budgets as well as ensure compliance. As the organization grows larger, it becomes even more cumbersome to track and map regulations. 


The best option for RIAs to ensure compliance as well as data security is to opt for an automated system for compliance. To reduce the cost of noncompliance, streamline documentation, and keep risks at bay, RIAs can take a look at VComply, an automated governance and compliance software. 

VComply Editorial Team
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RegTech- The marriage of Regulation and Technology and its effects
Dec 13, 2019
4
Minutes

Regulatory Technology or RegTech, as its name suggests, helps organizations achieve compliance. It is being hailed as the “the new FinTech” and rose to prominence in 2015, from total obscurity.

The coming together of regulation and technology is by no means a new concept. However, it is becoming increasingly valuable. As regulation becomes more widespread, complex organizations and individuals need to find efficient ways to comply. RegTech helps businesses to be organized with their compliance, keep current records and meet regulations efficiently. This is done by organizing data quickly and effectively, making it easy for organizations to maintain transparent records.

Regualtion Technology can be said to be the coming together of three main elements-regulation, people and data. This congregation enables firms to establish a culture of compliance. Technology brings these three factors together in a way to empower and enlighten both the institutions as well as their respective regulators.

The main objectives of RegTech include enhancing transparency and consistency and to standardize regulatory processes as well as to deliver concrete interpretations of ambiguous regulations. It aims to primarily provide higher levels of quality at relatively lower cost. It increases the speed with which reports can be developed, therefore, reducing the time required for compliance processes to be implemented.

RegTech differs from other methods by being cloud-based, meaning that organizations pay exclusively for what they use. Data-driven technologies are put to use along with algorithms and rule-based engines that do all the heavy lifting which was so far done by compliance and risk officers very manually in spreadsheets and legacy system.

The collaboration of existing data sets has been made simpler with the advent of RegTech. We lived in a world of complex interconnected regulations where datasets have to be reused between different regulations. Sometimes, outputs of one set of regulations may feed another. There is, therefore, an unprecedented level of granularity and transparency required which cannot be expected from manual methods. Hence, using spreadsheets and other manual methods of doing all of this is neither suitable nor viable any longer.

Since its characteristics include scalability and flexibility, organizations have the freedom to build their own system and customize it according to their needs. Being cloud-based, it provides security by encrypting the data in use and offers unlimited storage of data. This technology works best when any data needs to be reviewed- it helps in identifying risks and at the same time fulfils the compliance requirements.

Regtech is indeed winning the race to combat regulatory compliance exposure and mitigate conduct risk-especially in digital business environments. Factors which stress its need include-

  • 50,00+ regulatory and compliance updates in 2015,
  • Rising personal liability and increased cost of compliance
  • Regulatory updates being doubled over the last 3 years

The digital age has made work easier for a lot of us. Even in compliance sectors, with RegTech, compliance officers can now do their jobs better and in a collaborative way. The advent of RegTech has successfully put all our compliance hurdles out-of-the-way and with further advancement, human effort will be reduced exponentially.

VComply Editorial Team
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How crucial is a Compliance Management System in your organization?
Feb 10, 2020
5
Minutes

“Compliance management is the process by which managers, plan, organize, control, and lead activities that ensure compliance with laws regulations & standards.” With the consequences of failing to comply with laws, regulations, and standards having such a high potential cost, compliance is clearly a very big issue for businesses.

Compliance Management might sound like a lot of extra work. But while it will certainly require commitment and some effort, there are tools you can use to make your job easier. When you get associated with a business, there are many categories of compliance that your company and its employees must uphold. “Compliance” refers to sticking to the rules i.e. you need to comply with relevant legislation, as well as any internal or external standards. Compliance Management System to an organization is all about:

1. Learning & understanding all the compliance responsibilities.
2. Making sure that the employees recognize their responsibilities.
3. Ensures that the essential requirements will be integrated into business processes.
4. Analyzing vital operations to assure that responsibilities are performed and requirements are fulfilled.
5. Makes a beneficial move and updates material as fundamental.

Compliance Management System plays a crucial role in the structure of every organization. A vivid and effective compliance management system will help check the risks relevant to an organization in administering several regulatory requirements. When correctly implemented and managed, issues within the organization that affects consumers will be efficiently resolved. Not sticking to compliance can lead to the damage done towards both the company and its customers. The compliance management system can include activities like Internal audits, Third-party audits, Security procedures and control, Preparing reports and providing supporting documentation, Developing and implementing policies and procedures to ensure compliances and many more.

Compliance Management is crucial for an organization for two purposes as it helps in:

  • Minimizing legal risks & avoiding future costs: Legal compliance is a must, Compliance Management will help your company avoid legal risks. Lawsuits and settlements can easily cost you millions of dollars. Fines and other compensatory payments can also add up. And if you have entered into formal contracts with customers, the clauses of those contracts also become legal requirements. Without adherence to the letter of the law, you face costly litigation and the potential of untold damage to your business and its reputation. Effective compliance management protects you from these risks. It’s better to practice good data security and avoid a breach altogether.
  • Compliance with other standards is also important: Rules and standards don’t just come from outside your company. They can also be internal. Your standard operating procedures would be a good example to start with. Some business organizations see managing compliance with your business rules as part of compliance management but most of them don’t.

VComply is an integrated platform that provides Compliance management as one of its solutions. VComply provides six simple steps to be followed in Compliance Management Process:

Compliance Management Process

By acting diligently and creating complete transparency within your organization, VComply makes sure your organization systematically discovers and resolves many hidden tasks, saving you and your organization from easily avoidable losses effectively & efficiently.

VComply Editorial Team
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