Today, I invite you to focus all your attention on a function that is sometimes superficially seen by some managers without appreciating the true scope and benefits for their companies and the possible negative consequences that could result from this lack of vision.
Compliance is the function that is responsible for ensuring fulfillment of the legal and regulatory standards that apply to an organization.
Although this concept was born to address the general considerations of the legal field, later, thanks to the regulations imposed by Law 21.595 and CMF Regulation 461 (Chile), it is now linked to many more aspects.
This role has become increasingly important in recent years due to the growing complexity of regulations and the increased associated risks; therefore, it should be viewed seriously.
Within this business environment, it is essential to understand that compliance is multidimensional, covering different areas such as financial, tax, labor, environmental, and information security and protection.
Multiple dimensions: new challenges
The importance of compliance lies in the fact that it enables organizations to prevent and mitigate legal, reputational, and operational risks that may affect their sustainability and competitiveness.
In addition, compliance contributes to building trust and transparency among the company's stakeholders, such as customers, suppliers, employees, shareholders, regulators, and society.
This complexity poses challenges and problems for managers of organizations, especially in the Chilean context, where legislation and regulation are increasingly demanding and changing. Some of these issues are:
- Little understanding of the multidimensionality of compliance can lead to a partial vision of the actors and elements that shape this concept, leading to a need for more alignment between strategy and compliance.
- Integrating compliance into the organizational culture is necessary, which implies promoting values and principles among employees and establishing communication, training, and monitoring mechanisms.
- There is a need for more human and technical resources to implement and manage compliance, which may limit the company's capacity to respond and adapt to regulatory changes or contingencies.
- Resistance to change or lack of commitment to compliance by leaders and employees can lead to conflict, demotivation, or non-compliance.
Some risks in the spotlight
The reasons mentioned above may lead managers to underestimate or ignore the importance of compliance for their companies, which may have negative consequences in the short and long term, such as:
- Loss of competitiveness and business opportunities: Failure to comply with regulations may result in a competitive disadvantage compared to other companies that do comply or even prevent access to specific markets or customers that demand a high level of compliance.
- Loss of resources and sustainability: Non-compliance can result in legal, economic, or administrative sanctions, as well as lawsuits from those affected, which can be costly for the company and put its viability and sustainability at risk. Penalties could result in fines in the millions of dollars (depending on the sector), including the closure of the company or even legal charges involving imprisonment.
Steps for effective compliance enforcement
Faced with these issues, managers must adopt a proactive, comprehensive, and dynamic approach to compliance, enabling them to identify, assess, manage, and improve compliance-relevant issues. To this end, it is recommended to:
- Perform a diagnosis of the current state of compliance in the organization, considering not only legal and regulatory requirements but also the risks and opportunities arising from them.
- Define and implement an action plan that establishes objectives, responsibilities, deadlines, and compliance indicators and determines tools to manage prevention, detection, correction, and improvement.
- Evaluate the performance and effectiveness of compliance by monitoring indicators and detecting opportunities for improvement.
- Review and update compliance based on the results obtained, regulatory changes, market trends, stakeholder expectations, and best practices, among other inputs.
Technological tools: a comprehensive solution
Addressing such actions can be an excellent effort for companies, which must dedicate human, technical, and financial resources to implement and maintain an effective and efficient compliance system. However, software technology can be a great ally to solve these challenges, offering several advantages such as:
- Automating and optimizing compliance processes such as information gathering, analysis, storage, and reporting, reducing time, costs, and errors, and improving the quality and consistency of results.
- Facilitate and streamline access to relevant information, such as regulations, standards, risks, measures, evidence, and reports, using digital platforms, databases, search engines, and alerts, improving the availability and updating of data and facilitating decision-making and corrective action.
- Integrate and connect compliance systems, both internal and external, through common interfaces, protocols, and standards to improve coordination and collaboration between different departments, areas, and levels of the organization, as well as with authorities and stakeholders.
To achieve these objectives, be sure to choose technological tools that allow you to:
- Implement and monitor all compliance dimensions, identifying the most up-to-date legal requirements and control measures through reports and evidence.
- Identify your business's required general and sector-specific permitting requirements and simplify their management to avoid wasting time.
- Facilitate communication between employees and the company, integrating information from different areas or departments.
- Verify and evaluate the degree of compliance with norms and standards by performing tests, reviews, and analyses of the company's processes and operations through monitoring and notification of the progress status of each requirement in real time.
- Apply methodologies, techniques, and standards for software testing, validation, and verification to improve management effectiveness and security.
From this perspective, the difficulty observed among organizations to address compliance management is understandable.
Multidimensionality is the element that projects greater complexity to reach a better understanding. Consequently, this is part of the challenges to be addressed by companies in concise terms to adapt to regulatory and market requirements.
Learn how M-Risk software can help you in compliance management.
