Every company that works on a global scale, whether a large or small organization, spends an enormous amount of time on compliance efforts, that do little to improve the bottom line, but can cost millions if ignored.
While every global company has some kind of compliance strategy in place, very few think about how to integrate these strategies to support operational efficiency and profitability.
Failing to make compliance strategy a part of your business plan can often have disastrous outcomes, yet for some reason companies still frequently make the same errors when it comes to implementing compliance strategy.
Legacy Technologies that don't work
One of the most common mistakes that companies make is leaving their compliance programs on legacy technologies that were designed in-house, or contracted out but never updated due to cost and technical constraints.
Thomas Sehested, CEO and co-founder of GAN integrity, a compliance technology platform, explains why these technologies are ineffective when it comes to global compliance efforts "Global compliance teams suffer because the technology offered to support compliance programs has been fragmented with activity-specific vendors, which hinders easy reporting and increases administrative headache and cost."
Companies wanting to avoid issues arising from outdated technology should consider compliance platforms and cloud-based solutions that can help reduce redundancies, minimize costs, and streamline data. Sehested explains "The ability to access and analyze data quickly is paramount. An integrated platform is the best way to achieve peace of mind that if a regulator knocks at the door, the data relating to a company's compliance program can be retrieved easily." Companies that make their data more accessible on secure cloud-based solutions will make that data easier to use and more effective in preventing costly compliance errors.
Poor Due Diligence on Vendors
Another critical aspect of any compliance strategy is due diligence on business partners, third-party vendors, and service providers. Most companies spend a lot of time making sure they are operating above board and according to different international and local regulations. What they fail to do more frequently is properly vet third-party vendors. While these vendors may be entirely separate from the organization, if they commit violations on behalf of the company in question that company can also become liable.
Sehested recommends that companies leverage new technology to help them execute better due diligence, "Smart technology can facilitate efficient due diligence processes by automating baseline risk ranking, information and document collection, and providing global screening reports." With regulatory environments becoming more strict, companies can no longer afford to hire vendors and partners without properly vetting them first.
Siloed Teams and Technologies
The third, yet most common mistake that companies make is keeping their compliance efforts siloed across different work groups. The Chartered Institute of Managed Accountants stated in a report on risk management and compliance, "Risk was being monitored in individual divisions, and this siloed approach allowed overalls risk to develop unchecked."
Each workgroup has unique compliance requirements, but these departments frequently have overlap when it comes to compliance responsibilities. For example, when it comes to environmental regulations, employees need to undergo training and certification that is often administered by human resources. However environmental compliance teams often lack access to that data which may prevent them from confirming that programs are administered according to local regulations.
As a business grows in size and complexity the number of regulations, guidelines, and legal scrutiny that will be applied to that business will increase as well. It is important for every company to have a sound strategy surrounding its compliance efforts that integrates with various work groups and existing technologies.
By avoiding some of these common mistakes, a company can simultaneously avoid the lawsuits, fines and operational delays that often ensue. Companies would be wise to ditch legacy technologies for updated cloud-based systems, to help streamline and integrate different forms of data. Additionally, they should work to use new research tools to exercise better due diligence on vendors and business partners. As U.S. Representative Sean Duffy put it, "the hundreds of new rules will require an estimated 2,260,631 labor hours just for compliance." That's precisely why firms are turning to technology to help improve their compliance strategy.
Finally, companies should leverage these technologies to help bring together all of their compliance efforts into one unified strategy that can be accessed by all relevant members of the team. These adjustments will better support everyone from frontline employees to chief compliance officer's as they will simplify, automate, and reduce workload across the board.