Compliance
The term compliance describes the ability to act in accordance to an order, set of rules or request. In the context of financial services businesses compliance operates at two levels.
Level 1 - compliance with the external rules that are imposed upon an organisation as a whole
Level 2 - compliance with internal systems of control that are imposed to achieve compliance with the externally imposed rules.
While financial organisations have always had to cope with compliance and regulatory legislation the pace at which legislation is now introduced is proving to be a major challenge. New rules such as Basel 2, and EU directives such as the conglomerates and prospectus directives require senior management to commit a significant amount of time and effort to their implementation. A specialist Compliance Manager must be in place to work with management and staff to identify and manage regulatory risk. The general responsibility of the Compliance Manager is to provide an in-house compliance service that effectively supports business areas in their duty to comply with relevant laws and regulations and internal procedures. This can be broken into the following areas:
1. To identify the risks that an organisation faces and advise on them (identification)
2. To design and implement controls to protect an organisation from those risks (prevention)
3. To monitor and report on the effectiveness of those controls in the management of an organisations exposure to risks (monitoring and detection)
4. To resolve compliance difficulties as they occur (resolution)
5. To advise the business on rules and controls (advisory) Regulatory compliance requires the organisation to ensure that personnel are aware of and take steps to comply with relevant laws and regulations.
Every employee is individually responsible for exercising good judgment and applying high ethical standards to his or her work, and acting within both the letter and the spirit of the laws and regulations that govern the business and the internal policies and procedures set down by the organisation.
Clearly there are significant costs associated with compliance requirements such as: staff training, changing of systems in terms of measurement, monitoring and management of the risk. Many business leaders may object to the stringent corporate regulations that have emerged in the past two years, but organisations that have deployed reporting tools to help them meet regulatory requirements are increasingly finding that the systems also deliver unexpected business benefits. While many firms initially deployed reporting systems simply to provide an automated way of proving financial processes were in line with legal requirements, there is now awareness such systems can be used to help optimise those same processes. Investment in Workflow, Document Management and Business Intelligence technologies have given firms visibility and control over their processes and flushed out a lot of inefficiencies. By simply applying more control over data entered into the company database it is not only possible to prove that the organisation is adhering to compliance requirements but it enables executives to know the position of the business each day so that they can make quicker, better informed decisions.
