COMPLIANCE MANAGEMENT SYSTEM: Definition and Importance

Compliance Management System
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Table of Contents Hide
  1. What is a Compliance Management System?
  2. Why Is Compliance Management System Important?
  3. What are the 7 Elements of Compliance?
    1. #1. Implementing Policies, Procedures, and Conduct Standards
    2. #2. Designating a Compliance Officer and Compliance Committee
    3. #3. Conducting Effective Training and Education
    4. #4. Have a Functional Communication Line
    5. #5. Internal Monitoring And Auditing
    6. #6. Enforce Standards Through Well-Publicized Disciplinary Guidelines
    7. #7. Detecting Infractions And Corrective Action
  4. How Do You Implement a Compliance Management System?
    1. #1. Run a Self-Risk Assessment On Your Business
  5. #2. Create Policies and Procedures
    1. #3. Employee Training 
    2. #4. Set up Good Communication Channel
    3. #5. Feedback System for Reporting Non-compliance
  6. Who is Responsible for Compliance Management?
  7. What Are Compliance Activities?
  8. What Are Compliance Tools?
  9. Compliance Management System Template
  10. Compliance Management System Software
  11. What Is Compliance Management System Software
  12. What Are the Types of Compliance Management System Software?
  13. #1. All-Purpose Compliance Management Platforms
    1. #2. Industry-Specific Compliance Management Tools
  14. #3. Governance, Risk, and Compliance (GRC) Software
    1. What are the Features of Compliance Management System Software?
    2. Buying a Compliance Management System Software
  15. Compliance Management Examples
    1. #1. Identify Regulations in line with your Industry
    2. #2. Place Laws In Order of Importance
    3. #3. Come Up With Be Review Rules
    4. #4. Plan Employees Training
    5. #5. Draw Up a To-Do List Calendar
  16. Conclusion
  17. Compliance Management System FAQs
  18. What are the four essential parts of a compliance management system?
  19. What are three phases of managing compliance?
  20. Related Articles
  21. References

Every industry in the business environment has rules and regulations guiding it from local and federal bodies. There’s no excuse for not adhering to these regulations. Moreover, the consequences of non-compliance are usually not favorable. That’s why businesses integrate a compliance management system into their administration to monitor compliance with national and self-imposed regulations. Employees may veer off from national rules, leaving the businesses to take the blame. To avoid this too, some businesses came up with the idea of using software in their compliance management system. That way, everything from policy making to adherence, monitoring auditing, and reporting are kept in perfect check.

What is a Compliance Management System?

The compliance management system includes all structures, processes, and measures put in place by a business or organization to ensure compliance with the law and regulations governing its existence. It’s a company’s established company-wide guidelines for rule-compliant behavior. CMS is interwoven into every organizational role and department. One of its primary objectives isn’t just about satisfying varying demands and regulations but also proactively eliminating potential risks that can affect your business. 

According to Compli, a compliance management system is an integrated system comprised of written documents, functions, processes, controls, and tools that assist an organization in complying with legal requirements and minimizing harm to consumers as a result of legal violations. A good compliance management system should include a method for developing, modifying, disseminating, and monitoring compliance policies.

Why Is Compliance Management System Important?

The primary importance of a compliance management system is that it manages risks that can result in litigation, monetary loss, and possibly lawsuits that can have a negative influence on your business. In fact, companies integrate compliance systems to protect themselves. 

In the long run, it can come in handy and help a company deal with any activities that could affect the operation of their business. This can range from fraud, abuse, discrimination, and other practices.

According to the Federal Deposit Insurance Corporation (FDIC), the major importance of CMS is that it manages possible risks that can result in litigation, monetary penalties, and other forms of formal punishment

What are the 7 Elements of Compliance?

  • Implementing Policies, Procedures, and Conduct Standards
  • Designating a Compliance Officer and Compliance Committee
  • Conducting effective training and education
  • Have a functional communication line
  • Internal monitoring and auditing.
  • Enforce standards through well-publicized disciplinary guidelines.
  • Detecting Infractions and Corrective Action

#1. Implementing Policies, Procedures, and Conduct Standards

Don’t just have a policy, make sure it’s written. You must also ensure the written procedures, and standards of conduct are easily understandable to ensure compliance while performing job functions.

#2. Designating a Compliance Officer and Compliance Committee

Having a compliance advisory committee usually ensures that adequate resources that support the structure of the organizations are available. They also ensure compliance programs, promote standards of conduct, and establish a clear means of communication for reporting noncompliance. In simpler terms, they detect noncompliance and treat it before it becomes a problem.

#3. Conducting Effective Training and Education

An organization’s education and training mustn’t be every day or week, but it must be held at least once a year. When employees are reminded and updated to date in case there’s a modification to the regulations, they easily adjust to fit the regulations. This simply means that your compliance committee must be up to date on recent happenings in your industry. They can do this by networking with professionals in their relevant industry, reading articles, attending conferences, or being part of a group.

#4. Have a Functional Communication Line

Companies can integrate an anonymous hotline, email address, or survey that they can use to maximize feedback. 

#5. Internal Monitoring And Auditing

Establish an annual work plan for internal monitoring and auditing, identify any areas of risk, and proactively audit and review the compliance program. This way, there are no loopholes at any point or the other.

#6. Enforce Standards Through Well-Publicized Disciplinary Guidelines

It’s never enough to establish regulations, disciplinary measures must be defined too. This will ensure that everyone irrespective of their rank or position adheres to the rules. 

#7. Detecting Infractions And Corrective Action

Aside from the auditing and monitoring team, there must be a system that detects noncompliance. There must also be a way of keeping track of corrections made to ensure there’s no record of deviation. If there are no corrective measures in place, then compliance is of no use.

How Do You Implement a Compliance Management System?

The following steps will help you implement your CMS

  • Do a risk assessment.
  • Employees’ training
  • Creates policies and procedures
  • Set up a good communication channel
  • Feedback System for reporting non-compliance

#1. Run a Self-Risk Assessment On Your Business

The first step to implementing a compliance system is to run a risk assessment on the company in question. Companies adopt compliance management systems to protect themselves from risks. Since different industries face different risks, there’s a need to define what poses risks to your company. The perfect way to do this is to run a risk assessment test tailored to your business requirements. If you’re unsure about where to begin, you can check out COSO. They will always be glad to help. This will help you to address all identified risks and strategically provide solutions to these possible risks. But then, you must also be ready to modify things as soon as the need arises. 

#2. Create Policies and Procedures

When it comes to implementing compliance within a company, there’s a need for a policy. A policy will is the compilation of all the rules and regulations guiding business conduct. Business policies differ even for similar industries. Simply, it’s a code of conduct.

#3. Employee Training 

Training and educating employees is one of the elements of the compliance management system. Each company must integrate an educational model that educates its employees on the company’s compliance system. When employees are well informed, they can be held accountable for their actions and thus adhere to the compliance program. 

#4. Set up Good Communication Channel

Communication is as good as setting up the policy that guides operation. It’s also necessary to ensure your information employees’ training is impactful. 

#5. Feedback System for Reporting Non-compliance

This is also one of the elements of the compliance system. Companies must ensure there’s a hotline or an anonymous means of reporting non-compliance. Secondly, there must be an appropriate means of investing the report. Then appropriate correctional measures, also help businesses ensure compliance.

Who is Responsible for Compliance Management?

The board of directors or a compliance officer appointed by the board of directors is responsible for compliance management within an organization. However, they are usually occupied with other responsibilities, and designing a compliance management system is one way they take care of this. In addition to designing a compliance management system, directors also assign a compliance officer to oversee things on their behalf.

What Are Compliance Activities?

Compliance activities include every action geared toward adherence to an organization’s compliance management system. These include policy making, reporting, employees’ training, tracking, audit, corrective actions, and so on.

What Are Compliance Tools?

Compliance tools are generally software that automates or simplifies the management system that every business must implement in order to meet its industry, legal, security, and regulatory requirements. They are also known as software.

Compliance Management System Template

Creating a template is critical to the success of any business compliance management system. If you’re having issues with creating an overall compliance management template, you can break it down into bits. For instance, you can create a template for risk assessment, employee training, monitoring and auditing, policy, correcting non-compliance, etc.

Compliance Management System Software

Considering the enormous work involved in integrating CMS into businesses, having software that helps coordinate its activities without much supervision will be great. So the question is, is there software or applications that help a business with its compliance system? Of course, there are, but before we list out the top best CMS software, let’s find out what is it.

What Is Compliance Management System Software

Compliance management system software is a program that continuously tracks, monitors, and audits whether business processes are in accordance with applicable laws, organizational policies, and consumer and business partner standards. With CMS software, a business can easily centralize all its compliance knowledge as well as regulate these compliances.

We can also define compliance management software as a program that a business integrates into its system to continuously track, monitor, and audit its adherence to its self-imposed regulations, organizational policies, industry demands, and other government regulations.

What Are the Types of Compliance Management System Software?

There are three types of CMS software available presently. Your business needs must fit into one. But then you need to ensure you understand your industry’s need to choose the right software. Below are the types of compliance management system software;

  • All-purpose compliance management platforms.
  • Industry-specific compliance management tools
  • Governance, risk, and compliance (GRC) software

#1. All-Purpose Compliance Management Platforms

An all-purpose, otherwise known as an all-in-one compliance management platform, has the ability to manage compliance in any sector.

#2. Industry-Specific Compliance Management Tools

This is specifically for highly regulated industries such as healthcare, the financial sector, the manufacturing field, and so on.

#3. Governance, Risk, and Compliance (GRC) Software

The governance, risk, and compliance (GRC) software is actually more advanced than the industry-specific compliance management tools. This compliance management system software has a wider range of features for risk management and corporate governance than just generic compliance management. GRC is the only compliance management system software that integrates IT risk management, business continuity planning, and legal management.

What are the Features of Compliance Management System Software?

The following are the features of CMS software;

  • It gives no room for errors.
  • It manages the compliance registry and sets of policies.
  • CMS software allows for e-learning training.
  • It ensures compliance monitoring.
  • It ensures control and report
  • Manages conflicts
  • It has a multilingual interface
  • It serves as survey tools
  • Prevention and control of fraud.
  • Competent handling of transitions and knowledge of applicable rules

Buying a Compliance Management System Software

CMS marketers are all over trying to convince businesses to buy their software. Businesses need to fully assess their needs before making their purchase or upgrading their compliance tools. The following steps will help you make the right choice;

#1. Determine the Extend of Your Business Risk

While it’s true that CMS software helps businesses manage their compliance risk, not every business needs software. So first define your business risk by conducting your risk assessment.

#2. Define Business Line and Need 

Is your company in a highly regulated industry? There are industries that have high regulations, such as financial services and health. Secondly, you can consolidate other relevant needs into your CMS software but you have to first define what your business needs are. 

#3. I.T  Needs

It’s important to define your I.T needs before integrating your CMS. To cut down on expenses, keep an eye on software packages that do come with I.T. That way, you won’t have to incur extra expenses on it.

Compliance Management Examples

Hey, every business falls into one industry or the other, so most compliance management systems you will see online are likely suggestions. You’ll have to draw up your business’ compliance management system using your industry regulations and your risk assessment repost not an online example.

#1. Identify Regulations in line with your Industry

As said before, every industry has a set of rules or regulations that it must adhere to. Before creating a CMS program or management system, compile a list of the rules that your company.

#2. Place Laws In Order of Importance

This doesn’t mean there are unimportant regulations. It only means that some require more attention than others, but in all, all must be obeyed. Placing them in order of importance will help you determine how often you want to review those regulations. There are some that require constant review, audit, and monitoring. There are some that don’t require much attention and a yearly review is perfect for these.

#3. Come Up With Be Review Rules

After compiling a list of your primary responsibilities, try breaking them down into monthly “To Do” lists. When should the board hear about these issues? Write them down so you won’t forget. When will these new regulations take effect? Send the most up-to-date version and the due date in an email to the person in charge of reviewing it a month or so beforehand.

#4. Plan Employees Training

Don’t overlook the importance of training, both for your staff and your leadership.

#5. Draw Up a To-Do List Calendar

Having a compliance calendar to-do list will help you do things at the right time.

Conclusion

Managing risk is always better than allowing it to get out of hand. So if you have a business without a compliance system in place, do integrate one. The effect of not having one was that it cost more than putting one in place. And if you have one, do ensure to monitor, audit, and make modifications where necessary to stay abreast of your industry regulations.

Compliance Management System FAQs

What are the four essential parts of a compliance management system?

  • Board and management oversight,
  • Compliance program
  • Response to consumer complaints
  • Compliance audit

What are three phases of managing compliance?

  • SOD Tips
  • Identify and catalog the threats facing the company
  • Continuous audit and compliance.

References

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