Technology is changing the way the businesses operate and at times these changes can be burdensome. But technology is the answer when it comes to managing the increasingly complex world of compliances. In India, Section 134(5)(f) of the new Companies Act, 2013 clearly states that it is the responsibility of the Board Members of the Company to device a proper and effective system to ensure compliance with the provisions of all applicable laws and that such systems are adequately monitored for its effectiveness.
Beyond internal controls, the problem of being in compliance with multiple sets of regulations is a difficult and time-consuming task without software. Therefore, most of the Companies felt an urge to move from the traditional way of conducting audits and ensuring compliance. CMS or Compliance Management System tool is the answer and an effective CMS comprises of three inter-dependent elements:
- Board and Management Oversight
- Compliance Program
- Compliance Audit
10 Essentials for your Compliance Management System!
1. Management Support:
Management rely on the outcomes and analysis of the auditing effort to provide insight into their exposure to compliance risk and uses these results to drive improvement decisions. The support and active involvement of top management are essential for an effective and robust CMS tool.
2. Mobile Tools:
A web-based management system is an essential in today’s time. The advantage, apart from making the audit more efficient, is that audit data is collected only once and is available in digital form for instant reporting and analysis. This drives down compliance costs. It has an added advantage of viewing all the compliances in one place with the proof of compliance if any.
3. Automatic Communication:
Automating communications significantly reduces administrative overhead. The solution must provide a wide range of trigger points which initiate emails which will typically include the following: due date of an audit, who will be conducting the audit, location of where the audit will take place when the audit is completed and the outcome of the audit.
4. Defined Audit Lifecycle:
Defining each audit lifecycle improves efficiency, communications, and security. A planner can move on to other tasks once a planned audit has been confirmed by the auditor and auditee. Also, a defined workflow can be used to limit both audit visibility as well as access rights.
5. Action Management:
The system should be able to identify instances of non-compliance and should have workflow and task management capability. This would help in tracking and resolve any non-compliances.
The solution enables users to perform self-assessments on demand in order to maintain a compliant state, or to prepare for an upcoming vendor audit. All potential instances of non-compliance can be identified in a consistent way and targeted audit plans can be developed.
7. Checklist and Questionnaire:
Centralized audit management system helps in streamlining the entire audit process and also presents an updated status report. The accountability is defined and the pending tasks can be tracked easily.
At different stages of an audit, different people might have access to the system/data. A defined workflow can be used to limit both audit visibility as well as access rights.
9. Analyze Performance:
Performing self-assessment audits and identifying areas of non-compliance would enable the management to analyze the overall performance better. It is helpful when the company has an overseas business or multiple locations.
10. Scoring Methodology:
An automated scoring methodology gives a clear picture of the performance of each department and the company and helps while creating reports or during external audits. Also, convenient while sharing results and progress while collaborating externally or internally.