Why Compliance Controls Should be Embedded into Your Business Processes

Compliance is an intricate and difficult practice that many enterprises have siloed into departmental issues and concerns, but it is essential for the success of an organization. The difficulty with compliance is enterprises are attempting to regulate all rules and processes with a disorganized, inadequate, and an unregulated system.

Compliance is defined as “the process of conforming with external rules and regulations and internally defined directives and standards.” In order to fully meet compliance standards, every internal and external rule and regulation must be considered and embedded into the process. If controls are not embedded into the process, the organization is vulnerable to risks and attacks that could be expensive if not detrimental.

Why Compliance is So Important

For most industries the impact of strict regulations is burdensome and according to The Chamber of Commerce of The United States of America, “business executives and small business owners tell us that regulatory requirements pose the top challenge to U.S. organizations – and have done so for years. The burden of complex and changing government regulations ranks higher than economic conditions, competitive pressures, hiring challenges and customer issues,” but in order to be compliant and continue doing business every regulation must be met.

While meeting compliance standards is necessary, it is also beneficial to the company’s reputation with consumers and its culture. We can recall how horrifically Volkswagen's utter disregard of compliance trickled down throughout the company and has had a lasting impact on its reputation and the trust of VW consumers.

Benefits of Embedding Controls into the Process

Embedding controls into your processes creates an efficient system that meets the demands of compliance management with ease. Controls are the set of activities that guide, manage, and regulate toward a specific directive. Embedding controls is about assessing risk, providing oversight, and reporting on the company’s control posture. Some of the potential cost benefits to embedding controls into your processes are:

• Reduction in audit preparation costs
• Reduction in external audit fees
• Reduction in operational costs because of standardized testing, reporting, and documentation
• Reduction in managing compliance activities costs
• Reduction in centralizing control creation costs

A system that embeds controls into the process is a higher level functioning system that is proactive to risk and can quickly adjust and error-correct when necessary, without a major disruption to the enterprise.

Simply, a control is a rule that should be followed so that an expectation can be met. Using this simplistic definition, let’s imagine a school classroom of 25 nine year olds. The teacher knows that in order to have a well-managed class filled with obedient students, the rules must be explained early and often. On the first day of class, first thing in the morning, the teacher explains the rules and consequences to the class. She does this everyday for the first few weeks. Now her students are familiar with the rules and consequences, so that when a poor choice or mistake has been made, the teacher just needs to quickly refer to the one rule broken, enforce the aforementioned consequence, and the class continues on with little disruption. The teacher has embedded the controls into her process. Every student knows the rules, and knows what to expect if they are broken.

Risks of Not Embedding Controls into Processes

When a company is functioning without embedded controls, it is constantly reacting to issues and risks rather than being proactive. Some of the most overbearing consequences are that controls become a burden as they are difficult to grasp and visualize enterprise wide, remediating issues becomes time and man-power consuming, teams are not confident in test results, and operational costs increase. These issues are felt across the enterprise.

Using our classroom example, let’s imagine that the teacher does not take the time to explain the rules to the children. The children have no idea of the rules and consequences. Then suddenly, the teacher is yelling because one of her rules has been broken. The teacher punishes the children and explains the one single rule that was broken. This creates a huge disruption to their day. This disruption occurs multiple times throughout the year, every time a student happens to unknowingly break one of the teachers rules. This teacher has wasted many classroom hours, does not have the trust of her students, and is constantly searching for the next issue to arise, rather than focusing on the education of her students.

Now while this is a very simplistic view of business controls and processes the concept is the same. Embedded controls ensures there is no deviation or variation within the enterprise. It greatly reduces risk of unknown outcomes.

At LogicGate, we have created a robust and agile GRC Solution that automates controls and processes that will grow with the ever changing demands of your business. With controls embedded into your process, external and internal audits are not stressful events that are demanding of your resources. Ensure compliance enterprise wide with easily automated workflows and controls embedded into the processes, so that you can actually build your business and not just manage it.