The Importance of Sound Compliance Programs
At the heart of all regulatory compliance efforts for a company is its formal Compliance Program. This is the embodiment of the company’s overall approach, strategy, and steps for achieving compliance. A company’s program is generally codified into a Compliance Manual, which is then disseminated throughout the company as needed. A well-crafted manual should be:
- Accessible to relevant employees
- Subject to oversight by the board of directors and high-ranking officials (especially compliance officers)
- Periodically reviewed and modified, especially in light of changes to global compliance laws
Besides the formal Compliance Program and Manual, other aspects of company operations and governance need to coordinate in order to ensure compliance. These aspects can include:
- Employee training
- Background checks
- Reporting mechanisms (whistleblowing)
- Mechanisms for auditing and monitoring
- Risk assessment
- Assessment of the compliance program
- Corrective responses to compliance program violations
Thus, in addition to having a sound compliance program, a culture of compliance must permeate all levels of the organization. Effective regulatory compliance strategies must also be forward-looking, meaning they should focus on identifying and managing compliance risks before they materialize.
New Compliance Tools
Regulatory compliance can be challenging for companies, as regulations can often change very quickly, and organizations themselves can change. Large financial institutions are estimated to spend over a $1 billion a year on compliance and controls; they dedicate 10-15 percent of staff resources to compliance.
With regards to global compliance challenges, several new technologies and utilities are emerging that can help companies meet the rigorous demands of regulatory compliance. Known collectively as “RegTech,” these technologies and applications utilize cloud-based approaches and are based on existing FinTech approaches to meet regulatory requirements. In particular, RegTech leverages the elasticity and higher security that cloud-based models provide, and has the potential to reduce costs and provide greater competitive advantages for companies.
Some forms of cost-effective compliance solutions also involve the use of artificial intelligence (AI) and robotic process automation (RPA). These types of technology can offer significant benefits to companies, such as improved workflows, standardized approaches to data handling, and improved reporting.
Various Other Global Compliance Factors to Consider
Issues Affecting Compliance Officers and Other Executives
Compliance officers are responsible for a wide range of responsibilities. For instance, they must monitor regulatory trends and shifts in all jurisdictions in which their company conducts business. They must also collaborate closely with other executives and with regulators in order to assess and manage risks.
In particular, compliance officers are increasingly faced with technology-related issues, especially those dealing with big data as well as privacy and cybersecurity.
Evolving Jurisdictional Rules
One of the main challenges in the field of regulatory compliance is the fast pace at which new laws and regulations appear. In a global setting, this means that companies and their executives need to be constantly updated regarding new legal developments and rulings, especially as they expand into new territories.
For instance, the U.K. High Court recently ruled that the litigation privilege does not apply to documents produced in an internal investigation. Compliance officers, general counsel, CEOs, and other important executives need to be kept aware of these types of changes in jurisdictions where the firm conducts business.
Compliance may be well understood in the U.S., but it may be more vague when operating in emerging markets. In particular, there must be a direct connection and coordination between risk management and compliance functions for companies operating in emerging markets.
For instance, emerging markets are often associated with vastly different legal frameworks and compliance requirements. In many cases, there may even be distinct cultural and social factors that affect market operations. These types of realities and influences must be accounted for and integrated into the company’s overall risk assessment as they enter those markets. What works in one economic context may not be advantageous in a different setting; thus, companies and executives must be able to adapt as the scope of operations changes.
Compliance is a complex subject, especially when considered in light of global, intra-jurisdictional operations. Moreover, regulations are constantly shifting and undergoing updates, and the ability to adjust to new developments is crucial. If you have any questions or concerns regarding global compliance trends, contact us at Kessler Topaz. Our team of attorneys is dedicated to helping organizations achieve their goals while complying with applicable laws and regulations.