Compliance reporting helps a company understand its position in relation to overall compliance.Though risks are inevitable, an effective compliance program prepares your organization for them, whether emerging technologies, changing regulations, political upheaval or an internal scandal.
How can companies understand their overall compliance posture in a business landscape where regulations and risks are ever-changing? Through effective and continuous compliance reports delivered by robust regulatory compliance tools.
In this blog, you'll discover the following:
- What is a compliance report and why it's important
- Difference between regulatory compliance reporting and internal compliance reporting
- The compliance reporting process: what a compliance report should include and who requires them
- Examples of compliance reporting
- Benefits of compliance reporting
What Is a Compliance Report?
Compliance reports offer detailed accounts of an organization’s progress on particular compliance initiatives or, taken collectively, can provide a broad summary of your company’s compliance efforts. These reports can also build off ongoing compliance monitoring or provide insight into your compliance with industry frameworks like ISO.
In most large corporations, a compliance report falls under the direction of the Chief Compliance Officer (CCO). The CCO is responsible for establishing company-wide standards and implementing procedures to ensure that an organization’s compliance programs can effectively and efficiently identify, prevent, detect and correct issues of noncompliance with applicable laws, regulations, industry standards or company policies.
In smaller organizations or organizations without a compliance officer, the reporting responsibility may fall on members of the legal department or another qualified employee(s).
Why Is Compliance Reporting Important?
Compliance reporting is important because it helps organizations prove their compliance with relevant regulations, whether they need that proof for internal reporting or for reports to external regulators. Industry regulators might even require this reporting.
But even if it’s not required, compliance reports can support your regulatory reporting. Since compliance reports evaluate your compliance posture, you can use them to prove your compliance with any security certifications.
Customers and shareholders may also want to see your compliance reports before they engage with you. A compliance report can show them that your organization is trustworthy, secure and meets ethical standards.
Regulatory Compliance Reporting vs. Internal Compliance Reporting
Compliance reports can have various audiences, depending on the particular focus of the report and whether or not the report is internal or external.
Regulatory Compliance Reporting
External reports are usually part of a standard regulatory regime or specific compliance audit that an organization undergoes as part of its regulatory compliance reporting. These reports are reviewed by the appropriate regulatory agency and can be integral in determining whether the organization faces fines, sanctions or other penalties.
A thorough compliance report indicates that the organization is meeting regulatory requirements or operating in good faith and may sway a regulatory board to work with the company toward remediation.
Internal Compliance Reporting
Internal compliance reports are often more targeted in scope and, depending on their focus, may be read by many different groups throughout the organization. A broad summary of compliance efforts might be presented to board members or select stakeholders to demonstrate the company’s position in reference to current regulations.
The details of a compliance report might also be of concern to a select department whose work with new regulations informs their business dealings or future plans. Finally, the lessons gleaned from a compliance report may be used to educate the wider workforce on the importance and necessity of following standard procedures and policies.
Understanding the Compliance Reporting Process
What Should a Compliance Report Include?
Compliance reporting should include any information required by the law or the regulation on which you’re reporting. Though some regulations require a specific format, all compliance reports will have the following:
- A Scope: This explains what the compliance officer did and did not review to compile the report.
- A Process Review: Reports should also evaluate what compliance processes are in place to meet requirements and how effective they are.
- A Report Summary: The compliance officer should include a summary of their findings. This should explain whether or not the processes are working, opportunities for improvement and any known risks.
- Next Steps: Compliance reporting should explain the organization’s steps to improve its compliance process and solve any vulnerabilities.
Who Requires Compliance Reports?
Many regulations require compliance reporting, but they can be different from industry to industry. Below is a list of compliance report examples, arranged by industry:
|
Regulation |
Industry |
Reporting Requirements |
|
Healthcare |
HIPAA has two parts that each require compliance reports. The HIPAA Privacy Rule sets standards for protecting medical records and personal health information, and the HIPAA Security Rule requires certain processes for handling health information electronically. |
|
|
Retail, finance, and Businesses that handle credit card data |
The PCI Data Security Standards establish standards for any organization that processes, stores or transmits credit card transactions, as well as organizations that develop software and applications for those transactions. |
|
|
Businesses with customers in the EU |
GDPR is a data security and privacy law that regulates how businesses can target and collect data for people in the EU. |
|
|
National Institute of Standards and Technology (NIST) |
Technology and cybersecurity |
The NIST Cybersecurity Framework establishes best practices that help organizations manage their cybersecurity. |
|
Businesses with customers in California |
The CCPA allows customers to make more choices about how businesses can collect their data. |
What Are the Benefits of Compliance Reporting?
Compliance reports identify areas within the company where compliance initiatives are met effectively and those areas in which more work is needed to meet the standards of regulation or internal controls. With this knowledge, business leaders can make more effective decisions about resource allocation, risk management and strategic planning for the future.
In addition, compliance reporting has five key benefits for organizations:
- Peace of Mind: The most obvious benefit of compliance reporting is the peace of mind it offers owners and other stakeholders. Compliance is a complicated endeavor, with many goals seeming like moving targets. Compliance reporting provides concrete evidence that your organization is on the right side of regulations and controls and can be the starting place for any plan to reconcile noncompliance issues. Annual compliance reporting can be an integral way of identifying likely problems before they develop into full-fledged violations.
- Client Assurance: A thorough yearly compliance report is like a clean bill of health. With it, your organization can demonstrate to clients and potential investors that your operations and controls are trustworthy. As the list of mandatory regulations grows, more and more clients expect organizations to be able to provide proof of compliance before they enter into contracts or invest funds. Those who cannot do so might cause hesitation or concern for potential business partners.
- Reduce the Cost of Compliance: Regular compliance reporting helps organizations understand which compliance processes are working and which aren’t. This can cut costs by identifying and prioritizing risks, then streamlining the responses to them by proving which controls are effective.
- Create a More Compliant Culture: Compliance reporting is vital in building a culture of compliance. Since reports create more visibility into your organization’s compliance culture, your team will know what they need to do to mitigate risk and keep your organization competitive.
- Prove Your Compliance: Not all regulations require reports. But that doesn’t mean you shouldn’t create them. Creating regular compliance reports can help you meet higher compliance standards since you’ll have an ongoing process for proving your compliance and assessing how effective your compliance processes are.
Keep Up As the Importance of Regulatory Compliance Increases
The corporate world is evolving faster than ever before. New technologies spur new regulations, creating a quick-moving cycle that makes adapting difficult. What is the best way to stay ahead? Compliance reporting.
Compliance reporting checks off many of the most labor-intensive regulatory compliance boxes, like auditing, documenting and reporting. Once you have a reporting process in place, you’ll spend less time proving your compliance and more time staying ahead of the regulations relevant to you.
Learn more about the most important regulatory compliance requirements by market and by sector.
