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Compliance Insights

Compliance operations are critical to running a business today, especially with increasing regulations and scrutiny. Organizations must operate within legal and ethical boundaries, mitigate risks, and safeguard their reputations.

The world has seen the collapse of Silicon Valley Bank, a medium-sized bank focused on tech startups after panicked depositors rushed to withdraw their money. Several factors led to the collapse of the bank, one of which was the absence of diversification, and a typical bank run scenario occurred where a large number of customers withdrew their deposits simultaneously due to concerns about the bank’s ability to meet its financial obligations.

The collapse of Silicon Valley Bank, the go-to-bank for US tech start-ups deemed the largest institutional failure since the 2008 financial crisis. The bank’s failure is majorly attributed to its risk management failure, lack of accountability among the board, inadequate control measures, and poor communication.

Internal controls in any organization are of paramount importance as they are defined as rules and procedures established by management or those charged with governance to ensure the timely achievement of the organization’s goals, mission, and vision.

Organizational exposure to compliance risk is increasing consistently while compliance costs are skyrocketing. A reactive approach to compliance creates complexity and forces organizations to be less agile. Previously, organizations viewed compliance as discrete obligations and created multiple siloed initiatives to meet the objectives. These initiatives typically rely on manual compliance management processes burdened with costly assessments managed using error-prone spreadsheets, documents, and email. This reactive methodology makes adapting to new regulatory requirements and changing business environments difficult.

The primary objective of organizations has always been to improve and safeguard the efficiency and effectiveness of their operations, along with ensuring compliance with applicable laws and regulations. However, implementing these priorities, in reality, can be extremely challenging. Recent incidents of corporate failures and data breaches have exposed businesses’ vulnerabilities, leading to a surge in demand for increased regulatory oversight and a more compliance-focused mindset.

Regulatory compliance is when businesses follow state, federal, and international laws and regulations to operate their business. Regulatory compliance helps businesses to set the highest state of conduct, integrity, safety, and ethical behavior in business.

Today organizations need to be on their toes to stay up-to-date with the complex and rapidly evolving regulatory changes. And if organizations are not ready, it may take them up to a year to implement all the regulatory changes. This can have several implications, including impacting revenue and lawsuits.

In today’s complex and strictly regulated world, internal controls are a prerequisite as they protect your organization from unethical behavior, violations of regulatory requirements, and monetary losses. However, are just building internal controls enough for your organization to manage and reduce risks?

The answer is no. Internal controls are essential, but they are continually evaluated for the information they produce in terms of quality, speed, and accuracy. Knowing where to begin when creating a system of internal controls can occasionally be challenging. As a result of these challenges, organizations are changing the landscape of their internal control framework through automation.

The risk and compliance landscape is constantly changing. In times of uncertainty, with economic limitations, geopolitical instability, regulatory changes, trade volatility, and a growing rate of cybercrime looming large on organizations of all sizes and industries, the range of risks facing compliance officers has become more complicated than ever before.

When it comes to hiring for a compliance leadership role, it’s important to look for certain qualities and skills to ensure the success of your organization. A strong compliance leader should have a deep understanding of relevant regulations, strong ethical standards, and the ability to communicate effectively and lead a team.

In today’s fast-paced and digitalized world, organizations are exposed to numerous risks that can jeopardize financial reporting or result in the loss of business assets. To prevent unintentional but expensive errors and premeditated fraud, and to improve financial reporting, organizations must set up a strong internal control system. 

Internal control refers to the policies and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote operational efficiency, and prevent fraud.

A compliance officer in any organization across any industry ensures that the processes across your organization are transparent and compliant with all the industry regulations and guidelines. An insurance compliance officer is expected to stay up-to-date with all the changing rules and regulations and keep the organization updated to avoid lawsuits or legal complications. 

A robust compliance program is one of the most critical aspects for an organization to succeed in a modern business environment. Experts believe that compliance and governance programs built on the foundations of values, beliefs, and ethics are critical.

Businesses are under increasing pressure to deliver products on time with high standards, but they’re struggling even more when it comes down health and safety concerns. These issues can lead into serious injuries or loss of life in the workplace as well financial damages that affect both businesses’ bottom lines – like plant closures due to an accident at your facility which resulted from poor ergonomic practices. Or what about the damage done by natural disasters such s hurricanes this summer causing extensive flooding right near one of our factories leaving them without power overnight during peak production periods ? And then there’s always PR reputations being tarnished because people don’t believe anymore

GRC tools are software tools or applications that proactively manage compliance, risk, and governance programs across the company, help you control different processes by ensuring that all compliance guidelines are adhered to, and help you mitigate the risks of hefty penalties.

Running a successful company itself is a tedious task. Following all the parameters, abiding by all the norms, and getting prepped for the new security guidelines takes an enormous amount of effort and time. But even after following every step by the book, an enterprise organization gets asked by clients from time to time ‘are they secured enough?’. 

Imagine this. You’re a U.S.-based non-profit that has to adhere to a minimum of 50 Federal, state-specific, and local regulations to keep receiving the grants. Right from the FDA and IRS to DOJ Federal laws, there are several other state-specific rules that you need to comply with. Monitoring and tracking the regulator compliance requirements are time-consuming. Doing it manually makes it even more cumbersome. 

Is your organization’s policy management framework optimized for hybrid operations? In response to the needs and requirements of employees in the wake of the COVID-19 pandemic, many organizations are offering their employees a hybrid working option or simply working completely remotely from home. In other words, many workers are going into the workplace part time and many others never even leave their homes. These offerings are done in the hopes that business will carry on as usual.

One of the most prominent challenges organizations face today is operationalizing and managing compliance programs and holding stakeholders accountable. Given the complexity of the compliance landscape, professionals in this field have different views on the concept of “operationalizing compliance management”.

Compliance today is a monumental challenge in the context of continuous evolution, vast volumes of data, and change within the organization, regulations, and external risk environments. From nonstop regulatory change to updated processes, the compliance landscape is always changing for each organization making it necessary to develop agile compliance processes to meet the ever-growing list of demanding requirements.

These words will ring true until the end of time, as many believe that the true path to happiness is giving rather than taking. Strangely enough, giving can often be more challenging than taking as being self-serving and self-interested is the easy route to go through life, while attempting to make the world a better place can be more of a struggle than many are willing to face. In our current and modern world of business, an increased emphasis on the culture of an organization is continually highlighted. Both regulatory bodies and the public are increasingly trending towards the demand of corporate ethical practices and principles. This puts a unique and intense pressure on compliance professionals in nonprofit organizations world-wide as they must take responsibility to build controls and procedures that establish an authentically ethical organization that acts with integrity.

The first step to solving any problem is admitting that there is one. No matter how well an organization structures its governance, risk management, and compliance framework there will be issues that always slip through the cracks. Organizations must be aware of this and develop a holistic issue reporting and case management system with 360-degree awareness or issues and how they impact the organization risk and compliance profile.

If you travel to Denmark, you’ll find that when you enter the subway system there are no turnstiles prohibiting your access to the platform prior to providing payment or taping your metro card. Why is this you might ask if you’re an urban native anywhere else in the world? No, public transportation isn’t free. Denmark has achieved something that is absolutely unthinkable to many parts of the world, a prime culture of trust – a phenomenon that residents of major urban centers such as New York, London, and San Francisco would find baffling. A culture of trust means that compliance and adherence to rules is so high that creating checkpoints and protocols to ensure trust are virtually unnecessary because all actors are complying.

Regulatory change is accelerating. As industries grapple with new technologies and digital transformation, compliance teams face the monumental task of keeping up with the regulatory requirements. Modern business has become an integrated web of supply chains and third-party partnerships. While such evolutions are expected as markets change, the pervasiveness of these relatively young developments and the speed at which they influence the modern economy leaves regulators and compliance teams alike racing to address new forms of risk.

Whether compliance is demanded through regulatory requirements or voluntary ethics and values, effective and efficient compliance is necessary for any organization. As the modern business world becomes increasingly complex and dynamic, the level of regulatory compliance grows with it. Increasing demand for robust cyber security and data privacy and rising environmental standards are only a few examples of the greater compliance standards imposed on organizations. Failure to abide by these standards can be detrimental to the organization’s financial standing or reputation.

Gone are the years of simplicity in business operations. Rapid growth and change in risks, regulations, globalization, distributed operations, competitive velocity, technology, and business data encumbers organizations of all sizes. Keeping business strategy, compliance, uncertainty, complexity, and change in sync is a significant challenge for boards and executives and management professionals throughout all levels of the business.

Organizations often fail to monitor and manage compliance controls effectively in an environment that demands agility. This results in the inevitable failure of compliance that provides case studies for future generations on how poor internal control management leads to the demise of organizations: even those with strong brands.

Organizations need to be organizations of integrity. What we communicate to the world about our policies, compliance and ethics practices, values, code of conduct, regulatory commitments, and now ESG statements is a reality in the organization and not fiction. The Chief Ethics and Compliance Officer (CECO) has become the Chief Integrity Officer of the organization. Integrity is a mirror. What we tell the world what the organization is about, is that what is truly reflected back to us in our behavior and operations?

Having a board-level compliance committee is now a standard in most organizations. Based on the regulation framework, processes, and internal structure, the role of these entities differs.

With ever-evolving regulatory landscapes and frameworks, staying compliant is more of an ongoing effort today. Compliance programs keep an organization abreast with the changing regulations so as to avoid any legal implications. Therein lies the need, but compliance is a lot more than just following regulation and minimizing corporate misconduct. The very fabric of a compliance program is woven into daily business operations. It lays down principles and ethical standards, which influence the organization’s policies and continues in a loop, affecting risk management, oversight, monitoring, and corrective action.

Over the years, technology has become a critical part of the compliance ecosystem. AI and machine learning have redefined the approach and made it more efficient.
Through this blog post, you will see the benefits of compliance technology and how to choose the best technology for compliance management.

Through this blog post, you’ll learn how to assess compliance, what assessing compliance means, and key considerations when starting to assess your current compliance posture.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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 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:

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.

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.

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.

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 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).

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.

“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.