How should you communicate with the C-Suite that efficient compliance management can correlate with the betterment of your company? Your compliance risks mean potential exposure to legal penalties, fines and other loss if your organization fails to follow applicable laws and regulations. But how can your compliance programs actually improve efficiency, productivity and profitability? And how can this become part of maximizing the value of your people and minimizing what you spend on managing them? In other words, smart human capital management (HCM).
Start by realizing your existing compliance tools may be causing unnecessary problems. According to PricewaterhouseCoopers, many organizations have addressed compliance issues with new processes and tools for managing compliance and internal controls. "However, most of these efforts are neither efficient nor effective, due to lack of focus on key processes, regulations, and risks, fragmented processes, lack of integration and automation, point-in-time evaluation [and] evolving needs and environments," PwC said.
Many organizations react to these new rules by adopting tools and systems piece-by-piece. But siloed systems can make technical oversight next to impossible and the management of your human capital excessively expensive. As businesses and regulations expand, compliance and control processes can become difficult to manage across your disparate teams, sites and systems, costing your organization money and efficiency. Additionally, if your systems are not automated and connected, the assessment of controls can turn into a cumbersome operation.
Compliance requirements stemming from various human capital management-related laws, such as employment laws, taxation and data privacy, are often changing. "Many organizations are unprepared to document and report data with sufficient accuracy to avoid or minimize the penalties that can readily be incurred," according to Dave Imbrogno, President of National Account Services at ADP.
Take a look at information security, for example. Intensifying regulations on the federal and state level focus more and more on security controls, and consumers are also increasingly concerned over the security of their personal information. So businesses that offer robust security to satisfy these regulations and consumer demand often enjoy a competitive advantage.
In financial services and accounting, to cite another example, the Sarbanes-Oxley Act of 2002 introduced major changes to the regulation of financial practice and corporate governance, especially concerning protecting investors from fraudulent accounting by corporations, according to U.S. Securities and Exchange Commission.
Compliance provisions can also help improve your internal communications, as compliance programs often require multiple business units to interact (think how compliance provisions of some industries, such as incident reporting, require input from diverse departments). You can keep these communication channels open in the future, not only for compliance concerns but to help business initiatives.
Quality and Confidence
A good compliance program can help prevent errors and facilitate best practices to dovetail compliance and HCM. For example, in the pharmaceutical industry, which has numerous compliance obligations, "compliance programs have forced a big clean-up of nomenclature and definitions," according to PM360. "They also force the complete, accurate and timely documentation of activities and expenses."
Compliance with security of electronically transmitted medical data and patient information has also helped to usher in electronic prescribing and other technologically advanced tools to improve the speed of care, streamline business processes and cut administrative overhead. Confidence in your business processes grows when your controls are tested rigorously to meet compliance standards.
Compliance is here to stay. "You only have to look at the history that's led to compliance to appreciate that it is much more than just 'red tape,'" notes cybersecurity firm Wallix. "Such regulations typically result from industries' inability to effectively deal with significant shortcomings in business practices. It's about people's safety, ultimately, and businesses that don't play ball aren't going to come out of it looking very good in the eyes of their peers and customers."
Embrace compliance not as a burdensome and necessary evil, but as a tool to help improve communications, enhance the practices of your business and create a better environment to make the most of your capital.
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