- What is the meaning of compliance for your organization?
- Best practices for regulatory compliance
- What is a compliance department?
- What is corporate governance?
- Common areas of compliance
Policies and procedures provide the backbone for operations in any organization. Without structure and standards to guide expected behavior and best practices, a company's procedures can soon become haphazard, chaotic, and change with the whim of whoever is doing the work at the time.
So smart companies have a set standard with their policies and procedures manuals. But even the best-laid rules and strategies are no good without compliance.
But what is compliance?
Compliance is the act of complying with a command, desire, wish, order, or rule. It can also mean adhering to requirements, standards, or regulations.
Both of these compliance definitions are important for your organization. To be successful, your organization must take steps to make sure every staff member is complying with internal policies and rules you put in place.
You also must ensure that your entire company is in compliance with any external laws, regulations, or standards relating to your industry. In fact, some policy and procedure manuals incorporate third-party content that updates as these laws and regulations change.
What does compliance mean for your organization?
In general, a full workplace compliance definition includes two parts:
- Regulatory compliance: The steps an organization takes to comply with relevant external laws, regulations, and guidelines.
- Corporate compliance: The actions and programs an organization sets in place to ensure compliance with internal policies, procedures, and accepted behavior, as well as external regulations.
Both types of compliance policies are essential and go hand in hand to protect an organization and its employees.
An organization that neglects regulatory compliance may face federal fines or legal action, and could even be shut down. An organization without a corporate compliance program may have chaotic, wasteful, or unethical practices. Learn more about the role of ethics and compliance in corporate culture.
Usually, companies ensure compliance by creating policies and procedures and then establishing a compliance department to ensure everyone adheres to the policy.
You can visit our website to learn about how much compliance actually costs.
What is a compliance department?
Many organizations create a compliance department or committee to help enforce compliance at work. Some companies may have one chief compliance officer and a committee of people who do this as a part of their responsibilities.
In any case, a chief compliance officer or department makes sure everyone does what they’re supposed to do. This may include educating employees about regulations and policies, monitoring behavior, and following through on any necessary corrective or disciplinary actions.
What is compliance monitoring?
Compliance monitoring is a process that ensures employees are following an organization's policies and procedures. The purpose is to spot compliance risk issues in an organization's operations or function.
Compliance monitoring happens from within the organization and usually falls to the compliance officer and their committee to oversee.
Compliance department members
A compliance department's structure will look different for every organization. Some companies may create a compliance committee made up of supervisors from different areas of the organization. Others may hire a chief compliance officer who has training and experience in compliance enforcement.
The structure will depend on the size and reach of the organization.
Small organizations, like a small brokerage firm, may only have a single compliance officer or may outsource it to a third-party compliance monitoring company. But large companies that do business internationally may need several compliance officers or committee members in each region. Local compliance professionals will ensure the organization complies with the local laws and standards in every area where they operate.
Compliance directors should hold themselves to the highest standard of integrity and ethics. They should be vigilant, proactive, and thorough. They may seem to be ultra-conservative in their approach to most new ideas, but this is the type of person you want because their attitudes will protect your company from running afoul of any laws or regulations.
Depending on your industry, a compliance officer or compliance committee member may need to have certain licenses or qualifications. For example, in the brokerage industry, compliance managers must have a general securities sales supervisory license to act as a supervisor.
What does a compliance officer do?
There are five main functions of a compliance officer:
1. Identify the risks an organization faces
Compliance officers will regularly run risk assessments and advise management on the areas that pose the biggest potential risks to the organization.
This may include reviewing audit results, recent litigation, compliance complaints, employee claims, industry enforcement trends, and policies in each risk area.
2. Create and implement processes to protect against those risks
Once a compliance officer has identified a risk, they will work with management to design controls to prevent that risk. The method of prevention will depend on the issue. It could mean revising existing policies and procedures. Or it could require additional training or revamping safety and security measures.
Some risk is unavoidable, but having compliance controls in place can help if you do end up in a lawsuit. As a Rutgers School of Law report stated: “An organization that has made a robust effort to prevent and detect violations of the law by its employees and others acting for it will be treated less harshly than one that was indifferent to complying with the law.”
3. Monitor and assess the effectiveness of those risk-prevention processes
Effective compliance and risk prevention is an ongoing process. The compliance officer must ensure the internal controls actually help the organization comply with laws, regulations, and policies.
For example, let's say a compliance officer identifies a safety risk in the company warehouse. After consulting with corporate leadership, the compliance officer implements a new safety policy.
However, after a few months, the compliance officer revisits the warehouse situation and finds the problem did not just lie with the policies, but with an outdated piece of equipment.
The compliance officer can then take steps to increase compliance before an incident occurs, such as recommending a new piece of equipment. And they can point to the costs of regulatory fines, workman's compensation, and even a lawsuit brought by an injured worker in order to make their argument.
4. Resolve compliance issues
The compliance officer should know the organization’s policies and procedures backward and forward. They should be able to answer any questions about industry regulations and business laws. And they should also know the company’s values, goals, and workplace culture.
All of this together will help them ensure that the organization’s operations are legal, ethical, and meet the highest level of compliance.
5. Advise the organization on better ways to minimize risk and comply with laws and regulations
Laws, regulations, and industry standards are always changing. Compliance officers should be aware of updates to those laws and regulations and ensure the company's policy manual meets those same requirements.
You can visit our website to learn more about how a compliance officer can encourage policy and procedure compliance in the workplace.
Regulatory compliance best practices
The sheer volume of compliance laws that companies need to follow make regulatory compliance challenging and complex. What's worse, workplace compliance requirements are often changing. Failing to comply can result in legal and financial penalties, as well as violate your customers' trust and tarnish your reputation.
If you want to improve corporate and regulatory compliance, you should know (and follow) regulatory compliance best practices.
- Determine your end goals. Start with where you want to end up and identify the specific areas you want to improve. That means looking at goals and objectives and identifying key results. It also means establishing clear metrics you will use to measure your success in meeting those goals.
- Know your industry’s regulatory environment. Not every organization has the personnel or expertise to keep up with every piece of legislation and its requirements. Find people within your organization who can add these responsibilities to their job or hire someone new to work in this role. Or you can work with an outside consultant to manage this.
- Create effective policies and procedures. Your written policies will help reduce your regulatory risk. The key to compliance lies in your ability to manage, distribute, and track all those policies and procedures to ensure employees know and understand them.
- Hold employees accountable. Your employees are often your first line of defense against non-compliance, so you need to track that they have received and acknowledged their policies. Don't rely on paper sign-off sheets; you need an online system that will quickly and easily track who has signed and acknowledged they have received, reviewed, and understood the policies.
- Conduct a compliance audit. You need to review all of the regulatory compliance areas that will affect your company. This will help you establish a baseline of where your compliance efforts currently stand, and you can learn what the improvements will do for you. For example, you can see how many violations your company has had, how much they cost you, and if you have at risk areas that could be fined. Now you'll know how much you'll save by complying with all the necessary regulations.
- Build a comprehensive document repository. Storing your critical documents in a central location means everyone should know exactly where to find any compliance information to do their jobs. You can also make sure that everyone has access to the latest, most up-to-date information available.
- Track violations (and costs). The ongoing monitoring and tracking of violations serve as another compliance best practice. You will also want to monitor the costs associated with these violations to see how much non-compliance costs your company’s bottom line.
- Compliance training. If your policies are the first line of compliance defense, training is the second. It helps increase your employees' comprehension and awareness of the rules and regulations in your company. With PowerDMS, you can connect your training content to your specific policies and deliver it all online via any device at any time.
- Communicate clearly and regularly. If your employees don't know your policies exist, then why even have them? It's critical that your leadership and compliance officers communicate the importance of your policies clearly, frequently, and consistently.
- Regularly review your compliance program. Every good plan needs regular reviews so you can find weaknesses, out-of-date information, and inconsistencies. At the very least, this should be done annually.
You can visit our website to better understand regulatory compliance and why it's important, or learn more about regulatory compliance best practices.
What is corporate governance?
An organization cannot achieve compliance without strong leadership and corporate governance.
Corporate governance are those structures and relationships that dictate an organization’s management, direction, and performance. A healthy corporate governance structure is essential for compliance.
Corporate governance includes the relationship between the company’s employees, management, board of directors, shareholders, and more. It defines the guidelines for decisions and specifies who has the authority to make decisions and govern the organization.
So the governing body should help create and enforce a compliance program. The compliance officer or department must have access to the organization’s governing body, must be able to enforce the rules, and be able to hold both employees and management accountable for violations.
Common areas of compliance
There are many different areas to consider when defining the role of a compliance officer in your organization.
These will differ depending on the industry, area, and size of the company. But here are a few common areas of compliance:
The Occupational Safety and Health Administration (OSHA) creates and enforces standards for workplace safety. Your organization must comply with the Occupational Safety and Health Act of 1970 and all other relevant laws.
Under the OSH Act, employers are required to “provide a workplace free from serious recognized hazards.” This includes:
- Performing regular safety checks and equipment maintenance.
- Providing training in a language employees will understand.
- Keeping records of work-related injuries.
- Informing employees of their rights and responsibilities.
You can find a full list of laws and standards on the OSHA website.
While there is no comprehensive federal law governing data security, there are many general communications laws that apply to data and personal information.
These include laws such as HIPAA, the Fair Credit Reporting Act, and the Federal Trade Commission Act.
Many states also have laws governing data disposal and security. Your security officer should make sure that your organization is in compliance with all data security regulations and standards.
Finally, there are often business insurance requirements regarding cybersecurity and what is supposed to happen when there is a data breach or when customers' personally-identifiable information has been compromised.
Human resources cover some of the most important areas of corporate compliance. It is essential that your organization complies with laws regarding areas like discrimination, harassment, bullying, employee benefits, parental leave, and overtime pay.
Failure to comply with laws and standards in these areas can result in serious legal ramifications and open your organization to very expensive lawsuits and damage to your reputation.
IT compliance includes processes for complying with laws governing data security. But it also includes internal policies that cover technology and electronic communication.
IT policies should specify who has access to sensitive company data and information. They should include how the organization will monitor things such as technology use and email communication.
IT compliance can help prevent computer hacks and harmful viruses, protect information, and ensure that employees aren’t using company devices or servers to access or download illegal content.
Financial compliance covers everything from payroll to taxes to financial disclosures.
While non-compliance in other areas can lead to legal trouble, failure to pay your taxes can result in the government shutting down your organization. It’s important for your organization to be transparent with finances and ensure compliance with all federal and state laws in this area.
Be sure to visit our website for the complete guide to compliance management.
So, what does compliance mean for your organization?
It’s essential for your organization to make sure all your operations follow laws, regulations, and standards for your industry. A dedicated officer or department can help identify potential risks and create a plan for compliance.
Policies, procedures, and accurate records are an important part of ensuring and demonstrating compliance in key areas.
If you would like to learn more about corporate and regulatory compliance, please visit the PowerDMS website.