What Are the Elements of a Successful Compliance Management System?

Achieving a successful compliance management system (CMS) requires two primary elements: sufficient management oversight and a robust compliance program. By developing a comprehensive CMS, your organization will be able to maintain regulatory compliance and reduce risk—both to your company’s reputation and financial standing.

What is a compliance management system?

In a nutshell, compliance management systems allow organizations to manage various compliance risks associated with doing business. Maintaining compliance requires a comprehensive set of tasks such as performing internal audits, compiling supporting documentation, and ensuring your organization is vigilant in following numerous compliance guidelines.

A compliance risk management system includes how an institution establishes its compliance requirements, how it communicates those requirements to its employees, and how it ensures regulatory measures are followed and incorporated into business processes.

Further, a CMS helps organizations review their operations to ensure business processes meet legal requirements. Finally, your senior management should be able to take corrective action where needed and update all relevant risk management tools and materials.

What is a compliance tool?

A compliance tool can be enormously helpful for allowing your organization to manage its various compliance requirements. Falling out of compliance can have dire effects on your company, from leaving it vulnerable to cyberattacks to violating industry regulatory standards. 

Not only could this damage your company financially, but it could also have adverse reputational repercussions.

Compliance tools help companies stay on track with compliance updates and auditing requirements. With the right compliance management system, an organization can stay on top of important reporting and insights such as compliance status, gap analysis, and determining audit readiness. 

Compliance tools can also help an organization determine benchmarks for success, comparing current operations relative to industry competitors.

How do you implement a compliance management system?

Implementing a compliance management system requires organizational buy-in from leaders in your company. Ultimately, the board of directors is responsible for the organization’s compliance, requiring internal oversight and in-depth knowledge of industry regulations.

Compliance management also requires a robust risk management system alongside internal auditing and identifying clear steps for corrective action. Typically, an organization’s chief compliance officer will take on many of these responsibilities.

The Consumer Financial Protection Bureau (CFPB) recommends establishing a compliance program that addresses components including policies and procedures, training for employees, monitoring and auditing current systems, and managing consumer complaints.

Establishing policies and procedures

Mitigating risk should be at the forefront of your compliance management framework. Your organization should establish and implement formal compliance policies and operational procedures that will help prevent violations. 

Internal policies should manage compliance risk in all services and activities of the organization and be consistent with board-approved compliance mandates. All procedures should be established in accordance with applicable laws to help prevent violations and to reduce risk to customers. All policies should be easily accessible by all members of your organization to help promote adherence and compliance.

Ensure appropriate training

Once your organization has solid policies and procedures in place, the next crucial implementation step is compliance training. Each employee should have appropriate training to help promote compliance, from procedural details to highlighting risks associated with their particular role in the company.

Conduct internal audits  

It’s vital that your organization maintain proper compliance monitoring procedures and conduct internal audits to self-identify and correct any compliance gaps. Monitoring should be ongoing and can be informal—consistency is key to help identify any compliance issues before they become problematic. 

A compliance audit, however, is a formal process that should happen about once per year. Common compliance audits include HIPAA, PCI-DSS, SOC 2, and SOX. Your organization’s internal auditor should be looking at risks to compliance and security, along with determining whether the company is following internal controls such as corporate bylaws, policies, and adherence to consumer protection laws.

Responding to consumer complaints

To round out your compliance program, your organization should make a good faith effort to follow up with consumer complaints. Your company’s processes for consumer complaint response should be comprehensive, from establishing consistent response procedures to recording and categorizing each complaint.

Creating a successful compliance management system involves a considerable effort from various parts of your organization, from developing overarching policies and procedures to training, auditing, and monitoring for ongoing compliance and security risks. By creating an effective CMS and taking advantage of compliance tools, your organization will be able to prevent compliance violations and remain in good standing in your industry.