Why Business Processes are Critical to Ensure Compliance
In our globalized and intricate environment, the growing amount of legislation and regulation makes it difficult for organizations to stay up to date with compliance requirements and their impact on business processes. At the same time, an organization requires a robust internal control environment to make sure that their processes are efficient and secured to support the pursuit of business objectives.
In this context, it is difficult for organizations to make changes to existing processes and policies, and procedures related to those processes, and to keep pace with current and new compliance requirements.
Can anything be done to simplify the challenge of maintaining compliance in a dynamic business environment?
Understand business processes and operations to ensure compliance
Many organizations have siloed compliance requirements in scattered departments – Compliance officers, internal controllers, and internal auditors often use different systems, making it difficult for the organization to manage procedures and processes in such a disorganized system and architecture. Compliance in a dynamic business and regulatory environment requires a complete understanding of business processes, risks, and internal controls. It is processes that need to stay compliant and secured.
An organization can be fully intelligent about changing regulatory requirements but not in compliance with the laws if they fail to maintain their business processes to address changing requirements and adapt their policies, procedures, and control framework accordingly.
Reaching a 360° view of compliance
To fully and truly meet and maintain the entirety of compliance requirements, the organization needs complete situational awareness and holistic understanding throughout the enterprise into compliance requirements that can be scattered across systems, departments, processes, people, and data, To complete this vision, an organization needs also to have full visibility on the risks associated with compliance requirements, as well as the related controls that mitigate them to make sure that they are contained at acceptable levels in line with the company risk appetite.
The importance of internal controls, although not solely dedicated to managing regulatory compliance is essential as it provides unique insights to Compliance professionals regarding the organization's defense system. Compliance officers can easily leverage and integrate into their compliance program valuable information regarding the effectiveness of internal controls sourced by control owners.
Why are internal controls important in ensuring Compliance in an organization?
Internal control definition and objectives
Internal control as defined by COSO is broadly defined as a process, effected by an entity's governing body, management, and other employees, designed to provide reasonable assurance regarding the achievement of objectives regarding: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.
The role of internal control in Compliance
As stated above the role and contribution of internal control in an organization is paramount in ensuring compliance status in order to cover up potential vulnerabilities to risk such as fraud in payable system, conflicts of interest, poor segregation of duties, etc... To that end, Internal control and Compliance usually work in pairs to ensure accurate reporting, and compliance with laws, regulations, and policies. This joint effort benefits also Internal auditors by providing them with a shared vision on the compliance actions.
Effective internal controls are therefore essential in achieving compliance and must be embedded in the organizations’ processes and procedures. By implementing elements of internal controls in their compliance program and regularly testing the effectiveness of specific internal controls linked to compliance, organizations have an opportunity to support business objectives, in accordance with regulations and ensure operational resiliency.
Companies that want to foster even further this approach of symbiotic relationship between Internal Controls and Compliance can embed those two essential components right from the process design phase.
Benefits of integrating Internal Controls and Compliance in the process design
There are many benefits to embedding internal controls and Compliance into your organization's processes including but not limited to:
- Avoid regulatory fines and reputational damages
- Reduce the cost of managing compliance activities throughout the organization
- Lower costs in internal audit preparation and fees
- Operational costs reduction as a result of standardization
A proactive approach allows the organization to function at a higher level and quickly respond to compliance incidents throughout the organization without a major disruption to the enterprise as a whole. This also allows the organization to meet regulatory and compliance requirements without difficulty and to benefit from a holistic oversight over the entire enterprise.
Key functionalities required in a system leveraging internal controls and compliance
Managing regulatory compliance with a software solution can increase efficiency and ensure compliance within your business objectives, policies, and procedures. There are some key functionalities a software solution should cover to ensure compliance while improving employees' efficiency:
- Business process modeling. Define your business processes and model how they function to understand how your organization operates.
- Regulation mapping on processes. Map your regulatory obligations to your business processes. When a regulation changes it is now easier to know what business processes need to be reviewed.
- Central repository to store policies and regulations. Once you understand your processes and the regulatory obligations they have to meet, you can now write the policies and procedures to govern those processes and store them in a central repository accessible to all stakeholders
- Regulation mapping on risks and controls. Map your regulatory obligations and policies to your risk and internal control register. Visualize how the risks linked to failure to adhere to regulations and policies are effectively covered by compliance controls.
- Compliance assessment engine. Next is ongoing monitoring and assessment of the compliance controls to ensure that business processes conform to regulatory requirements and procedures.
- Monitoring and notifications. Regulations are constantly changing, and you need to monitor regulatory change in the context of business operations and processes to notify the right stakeholders if new internal controls need to be implemented or processes modified to meet new requirements.
- Audit trails. Provide regulators and management with full traceability on compliance initiatives and actions.
In our globalized and intricate environment, the growing amount of legislation and regulation makes it difficult for organizations to stay up to date with compliance requirements and their impact on business processes. At the same time, an organization requires a robust internal control environment to make sure that their processes are efficient and secured to support the pursuit of business objectives.
In this context, it is difficult for organizations to make changes to existing processes and policies, and procedures related to those processes, and to keep pace with current and new compliance requirements.
Can anything be done to simplify the challenge of maintaining compliance in a dynamic business environment?
Understand business processes and operations to ensure compliance
Many organizations have siloed compliance requirements in scattered departments – Compliance officers, internal controllers, and internal auditors often use different systems, making it difficult for the organization to manage procedures and processes in such a disorganized system and architecture. Compliance in a dynamic business and regulatory environment requires a complete understanding of business processes, risks, and internal controls. It is processes that need to stay compliant and secured.
An organization can be fully intelligent about changing regulatory requirements but not in compliance with the laws if they fail to maintain their business processes to address changing requirements and adapt their policies, procedures, and control framework accordingly.
Reaching a 360° view of compliance
To fully and truly meet and maintain the entirety of compliance requirements, the organization needs complete situational awareness and holistic understanding throughout the enterprise into compliance requirements that can be scattered across systems, departments, processes, people, and data, To complete this vision, an organization needs also to have full visibility on the risks associated with compliance requirements, as well as the related controls that mitigate them to make sure that they are contained at acceptable levels in line with the company risk appetite.
The importance of internal controls, although not solely dedicated to managing regulatory compliance is essential as it provides unique insights to Compliance professionals regarding the organization's defense system. Compliance officers can easily leverage and integrate into their compliance program valuable information regarding the effectiveness of internal controls sourced by control owners.
Why are internal controls important in ensuring Compliance in an organization?
Internal control definition and objectives
Internal control as defined by COSO is broadly defined as a process, effected by an entity's governing body, management, and other employees, designed to provide reasonable assurance regarding the achievement of objectives regarding: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.
The role of internal control in Compliance
As stated above the role and contribution of internal control in an organization is paramount in ensuring compliance status in order to cover up potential vulnerabilities to risk such as fraud in payable system, conflicts of interest, poor segregation of duties, etc... To that end, Internal control and Compliance usually work in pairs to ensure accurate reporting, and compliance with laws, regulations, and policies. This joint effort benefits also Internal auditors by providing them with a shared vision on the compliance actions.
Effective internal controls are therefore essential in achieving compliance and must be embedded in the organizations’ processes and procedures. By implementing elements of internal controls in their compliance program and regularly testing the effectiveness of specific internal controls linked to compliance, organizations have an opportunity to support business objectives, in accordance with regulations and ensure operational resiliency.
Companies that want to foster even further this approach of symbiotic relationship between Internal Controls and Compliance can embed those two essential components right from the process design phase.
Benefits of integrating Internal Controls and Compliance in the process design
There are many benefits to embedding internal controls and Compliance into your organization's processes including but not limited to:
- Avoid regulatory fines and reputational damages
- Reduce the cost of managing compliance activities throughout the organization
- Lower costs in internal audit preparation and fees
- Operational costs reduction as a result of standardization
A proactive approach allows the organization to function at a higher level and quickly respond to compliance incidents throughout the organization without a major disruption to the enterprise as a whole. This also allows the organization to meet regulatory and compliance requirements without difficulty and to benefit from a holistic oversight over the entire enterprise.
Key functionalities required in a system leveraging internal controls and compliance
Managing regulatory compliance with a software solution can increase efficiency and ensure compliance within your business objectives, policies, and procedures. There are some key functionalities a software solution should cover to ensure compliance while improving employees' efficiency:
- Business process modeling. Define your business processes and model how they function to understand how your organization operates.
- Regulation mapping on processes. Map your regulatory obligations to your business processes. When a regulation changes it is now easier to know what business processes need to be reviewed.
- Central repository to store policies and regulations. Once you understand your processes and the regulatory obligations they have to meet, you can now write the policies and procedures to govern those processes and store them in a central repository accessible to all stakeholders
- Regulation mapping on risks and controls. Map your regulatory obligations and policies to your risk and internal control register. Visualize how the risks linked to failure to adhere to regulations and policies are effectively covered by compliance controls.
- Compliance assessment engine. Next is ongoing monitoring and assessment of the compliance controls to ensure that business processes conform to regulatory requirements and procedures.
- Monitoring and notifications. Regulations are constantly changing, and you need to monitor regulatory change in the context of business operations and processes to notify the right stakeholders if new internal controls need to be implemented or processes modified to meet new requirements.
- Audit trails. Provide regulators and management with full traceability on compliance initiatives and actions.
