A 5 Step Guide to Incorporating Proactive Compliance into Your Business

The word compliance is often synonymous with audits, a fallout of the reactive approach to compliance, that we are all familiar with. Starting with a checklist of rules and regulations, compliance has been muted to simply ticking off items on auto-mode and scheduling audits to ensure observance. This approach to compliance is largely driven by a need to maintain a bare minimum level of adherence at lower costs, leading to a self-defeating cycle.

The disadvantages are many. Higher long-term payouts due to lower efficiency, lack of management visibility, and greater long-term risks arising from the inability to foresee and manage risks.

Proactive Compliance

Proactive compliance is fundamentally distinct and requires a very different approach, especially in this age of global businesses. While it is also modeled on adhering to rules and regulations, the elemental difference between the two lies in that proactive compliance is also in lock-step with the business.

Proactive compliance, a more holistic method, maps processes, controls, audits, and risk plans back to the business. Being dynamic in nature, it re-evaluates risk every time there is a change and prepares mitigation plans accordingly.

5 Steps to the Holy Grail of Proactive Compliance

Think of proactive compliance as a virtuous cycle.

It allows you to stay compliant while increasing management visibility and reducing total long-term costs. It pushes the traditional boundaries of compliance to impact other strategic areas such as risk management, scenario planning, corporate benchmarking, and strategy execution.

Moving to a proactive compliance management process may cause some short-term pain, but the rewards are yours for the taking once everything falls into place.

Here are 5 steps that can get your organization started on this journey:

1. Create a culture of compliance

With the fast fading divisions in business, the cost of non-compliance has gone up significantly – from penalties and litigations to audits, diminished brand value, and higher attrition rates. Hence, proactive compliance starts with roping in every part of the business and every employee of the company. Look for ways to make compliance a part of everyone’s job. Adherence to rules and non-tolerance of unethical practices should be part of the company’s core DNA.

2. Create strong holistic processes

The success of any plan, whether compliance-related or not, depends hugely on its robustness and ability to endure long-term business pressures. Therefore, the next step to proactive compliance is to develop processes and procedures that are in tune with the business, considering long-term sustainability and their ability to mold with change in the business landscape. While this is easier said than done, the idea is to push the compliance office to take small steps in this direction every time a new policy or procedure is formulated.

3. Communicate and then communicate some more

Communication plays a key role when it comes to reinforcing the compliance message throughout the entire organization. It not only helps to percolate the message down to the ranks but also creates a mechanism for receiving feedback from the ground an essential tool for creating a sustainable compliance process. Regular training, sharing of case studies, and having open deliberations are just some of the ways to encourage a healthy conversation around the topic.

4. Make technology work for you

Due to the excessive human effort involved, compliance staff in most organizations remain merely involved in managing documents and reconciling information as opposed to actual regulatory risk and compliance planning. Technology can help introduce checks and balances into processes, automate repeatable tasks and create an audit trail to track actions. The right technology tools can reduce efforts spent on risk assessment, testing, reporting, and issue management.

IRIS Carbon is one such platform that helps you manage your financial compliance and SEC reporting. A cloud-based collaborative platform, IRIS Carbon provides a robust and easy way for you to create and manage 70+ form types including the filing your 10-K, 10Qs, and 8Ks. And by using IRIS Carbon, challenges of traditional reporting such as too much back and forth on mails, version management of documents, and pressing need to make frequent updates including last-minute edits right until filing can be easily addressed.

5. Capture and analyze data

The last but important step to implementing proactive compliance in the company’s DNA is to move from data aggregation to data analytics. Use the objective as well as anecdotal information being gathered in the organization to derive meaningful insights. Create dashboards that can highlight critical risk factors and also suggest ways to improve the current systems and processes. Establish formal protocols to escalate identified issues to the management.

The so-far widely held cost-center view of compliance is fast disappearing. Compliance today is closely meshed with strategy and is moving from the backbenches to where the action is front and center. A strong compliance office can not only help the organization mitigate risks but also gain a competitive advantage through efficient, effective, and proactive management.


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