What Is The Better Way To Ensure Compliance And Risk Management?

The global enterprise governance, risk and management market was valued at USD35.1bn in 2020. Compliance and risk management are vital aspects of business across industries such as financial services, manufacturing, energy and healthcare. Non-compliance can lead to legal, business and financial risk for financial institutions and damage their credibility.

The Current Scenario

When it comes to financial services, financial institutions usually have a separate department for handling investment compliance and managing risk. There may be times, though, when the compliance department ends up working in isolation. This may have organisation-wide repercussions, as other departments may not be following best compliance practices. When the compliance department receives approval requests from these departments, several changes may be recommended. This could result in a back-and-forth between the compliance and other departments, resulting in bottlenecks in business processes. At an organisational level, this would slow growth.

The following are ways in which compliance and risk management can be optimised:

Design A Framework To Manage Compliance Risk

The department handling compliance and risk management could compile a set of guidelines and policies to be developed into a robust framework. A framework could be built from scratch, or the compliance team could refer to benchmarks, such as the COBIT5 framework.

Assess Risk

Once the compliance obligations are compiled into a framework, it is crucial to measure the impact of risks on your organisation if the guidelines specified in the framework are not followed. This would enable the compliance department to get management buy-in and prioritise deploying resources to optimise compliance and risk management.

Adopt Technology

Asset managers must keep in mind that there are a number of platforms and tools available to ensure an organisation adheres to investment compliance-related requirements. For instance, such tools would be able to detect deviation from pre-defined compliance practices. Financial institutions could use centralised platforms for financial and regulatory filings across geographies. Such platforms would also offer timely alerts about pending compliance-related filings. Investment compliance-related information could be shared with multiple teams through these tools.

Build a Collaborative Environment

Focus on enhancing collaboration between the compliance team and other departments that need to interact often with the compliance team. They could create an automated workflow to ensure deeper collaboration. The compliance team could design this workflow and ensure it is adopted across the organisation so the other departments could have deeper and productive engagement with the compliance department.

Involve An External Partner

Companies that have substantial compliance-related requirements, such as financial institutions, could consider involving a credible external partner to assist with compliance and risk management. Such a partner would be able to enable it to deploy best practices across compliance and risk management, while the company continues to focus on its core competency.

Enterprise-Wide Risk Management

Ultimately, risk management and compliance should occur on an enterprise-wide level. Personnel across departments must be taken on board, trained, sensitised and empowered to work closely with the compliance department on projects that may have risk- or compliance-related implications. Thus, risk management would have business processes integrated and transform the organisation into one that is highly compliant.

Regular And Accurate Reporting

As with any other activity, compliance and risk management measures taken must be reported widely within the organisation. This would also ensure enterprise-wide awareness and acceptance. Every step must be evaluated for weaknesses or challenges that could be overcome in due course.

As legislation and businesses evolve, risk management and compliance would become more complex and stringent. Hence, it would be prudent for organisations to make compliance and risk management a core part of their overall business strategy.