What Does a Compliance Management System Look Like?

Automated tools allow your compliance management system (CMS) to work effectively. A CMS is less a technology and more a corporate compliance program, where multiple, distinct pieces of a larger whole all work together.

A compliance management system is a collection of policies, procedures, and processes governing all compliance efforts. As technology becomes more central to business and compliance requirements focus more on cybersecurity, IT security is increasingly a core part of the CMS.

What is a Compliance Program?

A compliance program helps a company meet its legal requirements and comply with applicable laws and regulations. Ideally, your CMS is an integrated system to govern that program, including employee training, focused business processes, operational reviews, and corrective action strategies.

The Federal Deposit Insurance Corp. (FDIC) defines a CMS as how an institution:

• ​Learns about its compliance responsibilities
• ​Assures that employees understand these responsibilities (via a compliance training program)
• ​Assures that compliance requirements are incorporated into business processes
• ​Reviews operations to confirm that responsibilities are carried out and requirements are met
• ​Takes corrective action and updates materials as necessary

An effective CMS typically includes:

• ​Board and management oversight
• ​The compliance program itself
• ​Regular audits of the compliance program

What Is the Difference Between a Compliance Program and a Compliance Plan?

A compliance plan is a public, written document outlining the rules an organization intends to follow while putting compliance aspects into practice. It must accurately reflect the organization’s compliance obligations and be reviewed and revised regularly.

A compliance program consists of formal organizational mechanisms designed to avoid, recognize, and address possible issues. A compliance plan is foundational to a compliance program, but a program is more than just a document—it is an operational model and a way of thinking that develops over time.

What Is Compliance Risk?

Compliance risk is the threat posed to a company’s financial, organizational, or reputational standing, resulting from violations of laws, regulations, codes of conduct, or organizational standards of practice.

In banking, for example, regulators such as the FDIC, OCC, or CFPB can impose high fines for compliance issues. Examples include:

OCC

In June 2020, the OCC warned banks about compliance risks related to the COVID-19 pandemic, including altered operations, remote work, and new federal programs. The OCC also cautioned about interest rate risks, operational risks, increased cybersecurity risks, and compliance risks related to the Bank Secrecy Act, consumer compliance, and fair lending.

FDIC

The FDIC advised financial institutions to have risk management programs for social media, including monitoring and responding to consumer complaints that may arise on such platforms.

CFPB

The CFPB is a consumer protection agency that responds to consumer complaints. In 2018, it levied a $1 billion fine against Wells Fargo Bank for unfair, deceptive, or abusive acts and practices associated with home and auto loans.

Compliance risk management requires a complex web of activities to assure all business units conform to applicable laws. A CMS orchestrates that work efficiently.

How to Create an Effective CMS

A CMS should focus on protecting data and responding to consumer complaints. Steps include:

Board of Directors

The board sets business objectives for managing and mitigating risks.

Compliance Program

A compliance program consists of written policies and procedures, training, monitoring, and corrective actions. As firms use SaaS platforms, privacy and compliance with laws like GLBA become important.

Consumer Complaint Management Program

Organizations must respond to consumer complaints, track and analyze them, and protect customer data from unauthorized access.

Compliance Audit

Engage third-party auditors to verify compliance with requirements, especially regarding IT infrastructure and data security.

Who Needs to Be Involved?

A CMS incorporates various internal and external parties:

Senior Management

Senior management begins the vendor risk management process, reviewing documents to assure vendor security practices align with required controls.

Compliance Officer

The compliance officer oversees the CMS, researches updates, reviews risk profiles, policies, and processes, and maintains insight into information and vendor handling.

Front-Line Employees

Front-line employees are the first defense against improper access to customer data. Controls must assure safe passwords and authorized access. All employees should be appropriately trained for their roles.

Why Is a Corporate Compliance Program Important?

Authorities have increased actions against corporate misconduct, including significant fines. The best way to avoid fines is to show sincere effort to abide by regulatory obligations, evidenced by compliance programs.

For example, periodic training on laws like the FCPA can demonstrate compliance efforts. Cooperation with investigators and providing evidence can shift liability from the firm to the individual employee.

Evidence of a successful compliance program shows awareness and earnest efforts to abide by regulations. Without a program or proof of training, the firm could be liable for employee misconduct.

What Are the Elements of an Effective Compliance Program?

A compliance program ties together several components, covering evaluation, prevention, cooperation, and enforcement. Key elements include:

Guidelines and Practices

Written policies, such as a code of conduct or ethics, define expectations for all employees and guide appropriate behavior. Policies and procedures support effective compliance by integrating controls into business processes.

Committee for Compliance

A compliance manager chairs an in-house group managing compliance initiatives, with representatives from senior management and operations. Regular assessments and audits contribute to a compliance culture.

Risk Evaluation

Risk assessment is continuous, helping detect high risks and prioritize remediation. Thorough risk analyses should be conducted at least annually or before new products/services.

Regulations and Standards

Companies must follow established compliance frameworks. Internal controls and documentation confirm the program is active and effective.

Communication and Education

Training is essential for all members, covering laws, rules, policies, and prohibited behaviors. Annual training routines are recommended.

Reporting

Active feedback from all parties is necessary. Internal hotlines for anonymous reporting foster a compliance culture.

Surveillance and Audits

Continuous monitoring and periodic audits enhance internal controls, address risk management, and drive accountability.

Spreadsheets have long been used for GRC tasks, but as risk and compliance management becomes more complex, dedicated GRC tools may be needed for efficiency and scalability.

What are the Benefits of Implementing a GRC Program?

1. 1.Improved Compliance: Integrates regulatory requirements into daily workflows.
2. 2.Risk Mitigation: Proactively identifies vulnerabilities and enables swift remediation.
3. 3.Enhanced Decision-Making: Provides real-time metrics for data-driven decisions.
4. 4.Increased Efficiency: Streamlines processes and automates manual tasks for unified workflows.

How to Create a Strong GRC Program

1. 1.Assess Your Needs: Identify risks and tailor the GRC strategy.
2. 2.Set Clear Goals: Define measurable objectives aligned with standards.
3. 3.Assemble Your Dream Team: Collaborate with stakeholders across business units.
4. 4.Implement Efficient Tools: Invest in advanced GRC software and automation.
5. 5.Continuous Monitoring and Adaptation: Conduct regular audits and keep stakeholders informed.

Ramping and Scaling Your GRC Program

1. 1.Be ready to move: Deploy a GRC platform quickly for fast ROI.
2. 2.Start with one framework map to many: Use unified control mapping for multiple frameworks.
3. 3.Automate audits: Import/export data and leverage mapping for efficient audits.
4. 4.Think about the future: Choose a scalable platform for future needs.
5. 5.Partner with the pros: Use outside expertise for advice and support.

Streamline Your Compliance Program with ZenGRC

Several compliance frameworks are available to help your CMS work effectively, and technology tools can automate tasks to drive program effectiveness.

ZenGRC offers compliance, workflow, and risk management capabilities, bundling many CMS tasks into a single tool. Dashboards, metrics, and audit management features provide insight into IT infrastructure, data privacy, and task prioritization, improving communication and ensuring nothing falls through the cracks.

Worry-free compliance management is the Zen way. Contact ZenGRC for more information on how it can enable your CMS.