Compliance reporting is a very important process for entity management. It is not enough to operate a law-abiding, ethically sound organization. You have to be able to demonstrate how your company abides by all legal obligations and ethical standards within the industry. In short, you have to show your work. Compliance reporting is one way to do that.
So what exactly is compliance?
In a nutshell, compliance is the process by which an organization ensures that it, and all of its employees, are following the laws, regulations, ethical practices and standards of operation that pertain to its industry. A well-developed compliance program will oversee the successful fulfillment of all legal obligations on a state and federal level as well as all internal policies that come from within the organization itself.
One of the main goals of a compliance program is to protect the organization from the effects of illegal or unethical behavior, either from within the company or by its association with clients or vendors. An effective compliance program can significantly reduce the risk of illegal activity such as fraud or violation of industry-specific regulations. In addition, if illegal activity does occur, the presence of a robust compliance program can help mitigate the chance of further legal trouble and maintain the corporation’s reputation among the general public.
But how do you know compliance reporting is working?
Clearly, the importance of compliance can hardly be overstated. When operating smoothly, a compliance program should help steer the company away from legal and reputational trouble. But does the mere absence of a crisis mean the compliance program is functioning optimally? Not necessarily. For this reason, regular testing, continual monitoring and formalized reporting should be part of every compliance program.
Conducting a compliance review is the first step in establishing the data behind a compliance report. Too often, compliance review responsibilities are passed on to managers or administrators who already have a full plate of duties. A designated compliance officer who has the expertise and resources necessary to successfully oversee the project should spearhead compliance reviews. If an organization is unable to hire a dedicated compliance officer, then it is integral to the process that they find a way to relieve the compliance review manager of some of their day-to-day duties for the duration of the review. The compliance officer will be responsible for maintaining a thorough and up-to-date knowledge of all relevant regulation. The compliance officer may also be in charge of directing corrective measures and communicating policy changes with affected employees.
The best compliance reviews are data driven, so it is important for the review team to gather as much reliable data as possible. This may come in the form of transactions, incident reports, employee tests or registered complaints. As part of the review process, the compliance team should also interrogate the measuring and data processing systems themselves. A higher-than-usual rate of noncompliance with one particular rule may indicate that the policy is poorly communicated or misunderstood.
Another important aspect to remember is that while the actual compliance report may be an annual requirement, the most effective compliance initiatives are actually a year-round
affair. Compliance reports can be a good way of understanding what is working well and what is missing the mark, but without adequate follow-up, the report is just a static snapshot, not a tool for improvement. Once the annual results are processed, it is best to share the findings with all relevant players and make a plan for ongoing actions in the future.
Who reads these reports?
Compliance reports vary depending on their intended audience and scope of interrogation. Some may originate from in-house with the intention of evaluating a department’s compliance integrity or educating a portion of the workforce, while others are more formalized reports addressed to regulatory bodies. The tests and monitoring schedules that inform these reports can give valuable, reliable information to all relevant stakeholders of the ethics and compliance program:
Regulators. Many aspects of compliance are not just suggestions; they are binding law. Regulators act as enforcers, ensuring that organizations meet their legal obligations. Some common areas of compliance can include workplace safety, data security, human resources and financial services.
Board Members. Board members require updated knowledge and awareness of ongoing compliance and ethics initiatives in order to execute their fiduciary duties. Without a working knowledge of the organization’s compliance standing, board members will find it difficult to work in the company’s best interests.
Internal and External Counsel. Legal departments use compliance reports as a way of establishing their organization’s relationship to ethics and fair dealing. This can be particularly important when distinguishing between an isolated, illegal activity and company-wide, systematic wrongdoing.
Employees. Employees need to be kept aware of the findings of any compliance report. Establishing reliable channels of communication and clear company-wide expectations are both hallmarks of a successful compliance program.
Customers, Vendors and Investors. While some reports may remain internal to the company, others will have a ripple effect to the wider business community. Customers, partners and investors all want to align themselves with organizations they can trust and believe in.
Leverage compliance reporting with technology
Compliance reporting is an integral part of any successful compliance program. Whether the result of federal requirements or as an internal measure of a company’s adherence to policy, compliance reporting provides a barometer of a company’s transparency and integrity. To learn more about how best to use compliance reporting to move your organization forward, contact a Blueprint representative.