Compliance management ensures that an organization’s policies and procedures align with a specific set of rules. The organization’s personnel must follow the policies and procedures to ensure compliance with the set of rules. These rules are based on legal, regulatory, and industry standards.The goal of the compliance management program is to reduce an organization’s overall risk of non-compliance with the legal, regulatory, and industry standards that apply to the business. Effective corporate compliance management covers internal policies and rules and federal and state laws.
Compliance management can include policies, procedures, internal auditing, audits by independent third parties, security controls, documentation, and technological enforcement.
The laws and standards specific to an organization regarding compliance management vary depending on certain factors, including the size of the company, its industry, and jurisdiction. However, there are certain key factors that apply to all companies in terms of compliance management:
- Managers must understand their responsibilities and their companies’ processes to keep up to date about market trends or new legislation affecting their industries.
- Ensure employees understand how to adhere to compliance requirements.
- Align the business functions with applicable standards and procedures.
- Review processes and operations to ensure compliance requirements are met in all areas.
- Correct and update violations where necessary and relevant.
There are two main models for implementing compliance management: the rigid approach and the flexible approach.
A Rigid Approach to Compliance Management
This rigid approach to compliance management describes the rules for compliance management and severely punishes organizations that don’t adhere to the rules. This approach to compliance management usually applies to large enterprises whose compliance managers spend considerable effort conducting extensive research developing a compliance policy for their organizations to follow.
For the most part, this compliance model is inflexible and works best when there is little room for interpretation regarding requirements.
Flexible Approach to Compliance Management
Many times, the flexible approach to compliance management lets organizations make judgment calls even if the regulations note that a particular rule must be followed.
This flexible approach to compliance management is important as many organizations have to follow compliance management standards that may overlap or conflict with each other. Issues arise when two compliance management standards directly contradict each other for the same organization. Leadership must decide which standard to follow and be consistent with the approach. For instance, follow the more stringent standard or adopt the less restrictive standard?
This model affords a company implementing compliance management standards some flexibility to make these judgment calls without suffering harsh penalties for being required to follow a rule that may not apply to the business.