Often organizations think of compliance as an afterthought within an organization or they outsource it as something that lawyers for the organizations must take care of. Compliance requirements for different industries are different and these are laid out by regulatory bodies, the governments and internally within the organization.
The Merriam Webster dictionary defines compliance as “the act or process of complying to a desire, demand, proposal, or regimen or to coercion”. In a business context, it basically means that you would need to conform to certain rules and regulations that have been laid down for the industry that you work within.
Compliance can be broken down largely into two areas –regulatory compliance and internal compliance. Regulatory compliance is the legal requirement that organizations must adhere to, while internal compliance ensures that the organization has internal policies and standards. Staff management, stock handling, employee management, advertising, negotiation with customers, employee salaries, buying and selling, safety rules, and more all fall under compliance. This, therefore, makes compliance an important part of any organization.
Particularly for regulatory compliance, the following are some of the steps that are mandatory compliances especially for private organizations:
- Auditors: You must look to appoint an auditor starting 1 month within operation of the organization. This will help them identify the regulations required for you to follow within
- Accounts auditing: A chartered accountant is required to audit your company’s financials at the end of every financial year. The are then required to provide a report for accounts report and a financial statement that is filed with the register.
- Holding General Body Meetings: This is an important compliance requirement for all organizations. This is mandatory for every year and must be done at least 6 months from the start of a financial year.
- Annual Report Filing: Annual returns are filed for between April 1st and March 31st of the following year. This is done typically after 60 days of the general body meeting.
- Filing of Financial Statement: Balance sheet with statement of profit and loss, all these must be filed by every private company.
- Directors Report: This will need to be prepared by every organization.
Internal compliances include ensuring your staff and employees work in a safe working environment, buying and selling is done ethically, fair compensation for work done is assured, and ensuring that both your customers and employees remain engaged and happy is focused on.
The reason compliances are important include:
Avoiding Litigation: The rules that regulatory authorities have set up must be taken seriously. Non-compliance is a very serious issue and leads to a lot of litigation. All members of the organization responsible for compliance may be prosecuted and fined for the time that compliance was not adhered to. To avoid wasting time, energy and money; organizations are better served to simply just follow the rules.
Going Beyond Financial Regulation: Public enterprises do not just benefit from financial regulation. This form of conformance also leads to environmental compliance and supply chain integrity. It also ensures that ethical codes of the organization are complied with.
Increasing Funding: Most investors that look to invest in organizations often want to go through the financial records and compensation rates of the organization. Keeping to compliance helps enterprises get better funding at better interest rates.
Increasing Productivity: Compliance leads to best practices, and this information is also spread across the organization. Privacy protection and continuous record keeping leads to higher productivity. When an organization has arrived at best practices, it automatically increases productivity.
Adhering to Corporate Responsibility: It is every organization’s responsibility to ensure that their employees are safe in their work environment. They also must ensure that the work environment is inclusive, not discriminatory and accessible. This also increases corporate value and encourages growth.
Channeling Public Relations: Organization’s that show their compliance typically have better public relations. The trust amongst customers and potential customers increase when they know that the organization is following the rules and regulations. Compliance increases customer loyalty, customer trust, and overall builds a positive image for the organization.
Ensuring Employee Retention: Protecting your employees needs is a very important aspect of compliance. Organizations that focus on providing its employees a safe, fair and professional environment tend to have better chances of employee retention. When an organization prioritizes compliance, employees tend to feel safer about not being penalized for non-compliance. Additionally, when the organizations are able to convince their employees they are being aptly compensated for the work they do, they tend to work harder.
Conquering Risk: When the compliance is taken care of by an organization, the cost towards risk management is much lesser. For instance, if all the checks and balances are in place, automatically the cost of insurance comes down.
Ensuring Consistency: When it becomes practice for an organization to adhere to compliance, the organization automatically becomes consistent in terms of how to follow the rules and regulations. This consistency leads to reduction in unforced errors.
Increasing Profitability: There is enough research to suggest that organizations that focus on governance and compliance tend to be more profitable than those that have not been compliant over the years.
Reducing unforced errors: There is a common misconception that risks are external in the form of hacks, natural disasters and so on. However, little do organizations focus on wastage within the organization and analyze how some of the processes may be actually harming, rather than helping, the organization. Compliance fixes this by ensuring these unforced errors are addressed and fixed.
There are many salient reasons for compliance as you start adapting it into your organization. Compliance is not only mandatory, it is also getting more challenging. This is where latest technology is helping greatly. There are some things that you have to pay attention to and change with the changing requirements.
Role of Top Management
For any organization to successful comply, the top management must buy-in and ensure that it is part of the rules of engagement within the organization. This will ensure a trickle down of compliance making it mandatory for every employee to follow suite. Compliance takes time, planning and implementation, all of which needs a leader who is willing to drive it in the right direction.
Risk Assessment
Ensure you understand what your risks are. There are different compliance rules for every type of organization; not everything will or needs to be applied to your line of business. So, ensure your financial and internal auditors knows and identifies what suites you and also what your particular organization’s weaknesses are. This will help you carve out a better solution for compliance and avoid any forms of litigations in the future.
Nature of Compliance
Processes and compliances are not static; however, they often requires a starting point. Start with the code of conduct and basic policies and build it from there.
Ensure that you meet the deadlines set externally by the regulatory authorities. Delays and inefficiencies can lead to many issues and run in with the authorities.
Ownership
Not only should you know what is going to be managed and how it should also reveal who is going to manage this. This ensures that responsibility and ownership is marked out to ensure that the team owning this is able to do all that is required to align with compliance.
Training
In the case of compliance, you can have all the rules that you want; however, if your staff is not trained to follow the rules or are ill-informed about them, you might be run into trouble with the government agencies that require the details only your employees have access to. Therefore, training is an important part of compliance. Train your employees and conduct internal audits to ensure they are following it.
Finally, look for changes in the compliance rules and always verify them with your auditor and regulatory authorities. As the world is changing so are the compliance rules. Compliance, though is a legal term, it is created to protect you. So, go ahead, take that extra step. Make that effort to keep your organization and employees safe.