Achieving Proactive Regulatory Compliance and What to Overcome

Proactively ensuring due diligence in maintaining compliance is, essentially, “doing the right thing, even when no one is watching,” to quote C. S. Lewis.  The principle behind proactive regulatory compliance is when an organization takes steps to identify potential risks and implements measures to mitigate them before they result in non-compliance – rather than waiting for regulatory authorities to take action.

A lot of compliance management today is reactive, patching up compliance gaps as enforcement actions are issued. One of several reasons behind that is the sheer volume of regulatory change and new legislation being introduced. The amount of data to comb through is enormous, and with the number of bills, laws, and regulations exploding in recent years, it is next to impossible to track and manage this process manually.

Challenges to becoming proactive in compliance

Regology conducted a 2023 State of Regulatory Compliance Survey among compliance professionals, and 58% of respondents said the biggest challenge in regulatory compliance today is keeping up with the frequency of regulatory change. The runner-up was ‘having the ability to advise, but limited ability to execute’. The survey also determined that regulatory compliance professionals love what they do and have high job satisfaction (98%), which can be an indication of wanting to be more proactive in their compliance programs but lacking the necessary means to do so.

To successfully implement a proactive approach to regulatory compliance, internal teams must overcome several challenges, such as:

Complex regulatory environment but no turn-key framework

Alongside the high pace of regulatory change and more legislation being introduced more often, there is also a lack of a clearly defined starting point. As companies expand into new markets or launch new products, they enter a new regulatory environment. And there is no framework that gets you to a certain level of completion or setup to jumpstart the process. It becomes a constant question of whether your new compliance program for that specific business expansion matches up to the company's overall compliance level. With so many laws and regulations to keep track of, you face an uphill battle every time.

Little to no ability for horizon scanning

Organizations must be aware of the regulations and laws that apply to their industry, products, and services at all times. Lack of awareness can lead to unintentional non-compliance.

Determining emerging regulations and compliance trends is critical to mitigating any potential compliance gaps down the line. This is why scoping any changes in the legislative (bills) and regulatory landscape (regulatory change gazettes and registers) – otherwise known as “horizon scanning” – is important to detect early signs of an amendment.

Resource constraints but an ever-increasing workload

According to our 2023 State of Regulatory Compliance survey, almost 40% of the respondents think they don’t have the necessary resources to comply with their regulatory requirements. This is a concerning finding as non-compliance with regulatory requirements can have severe consequences, such as fines, penalties, and reputational damage. And 32% indicated that they lack appropriate funding for compliance.

Implementing proactive regulatory compliance requires time, money, and skilled personnel. The number of legal requirements will only go up, while the processes of managing regulatory change are mainly manual, time-consuming and labor-intensive. Also, they cost many billable hours whether in-house or outsourced. More investment in managing compliance with foresight, rather than hindsight, must be made.

Ineffective communication and lagging compliance effectiveness

Siloed workflows and communication breakdowns between regulatory compliance teams, management, and employees can hinder effective compliance as well as its proactive management. In fact, survey respondents chose increased efficiency and productivity as the next most commonly cited measure of success in efforts to comply with new regulations.

You may also have disparate lists of “Legal Requirement Obligations” or “Compliance Requirements”, managed in spreadsheets among team members. However, juggling a variety of documents that are irregularly updated, prone to human error, and create multiple sources of truth is, often, unreliable.

Technology Regulatory Compliance

What to do to become proactive in compliance

To enhance their regulatory compliance programs and become more proactive in them, organizations must stay informed of emerging trends and best practices in the field, dedicate adequate resources to their compliance efforts and prioritize a culture of compliance throughout the organization. Automation tools and purpose-built solutions are a great way to help your compliance teams get ahead of the game.

Today’s automation tools have evolved from automating repetitive tasks to preemptive automation. The use of artificial intelligence (AI) in technology complements human expertise by adding efficiencies of scale, thereby freeing up time and resources for more high-value priorities.

While some solutions fulfill a very specific need within a compliance function (like providing regulatory alerts or risk management), there are more comprehensive options that cater to the entire regulatory intelligence process – tailored law library, regulatory change management, and compliance management.

The future looks optimistic. According to the survey, the median percentage of compliance budgets expected to be spent on technology in two years is between 41% and 60% of the overall budget. This indicates that many organizations are recognizing the value of investing in compliance technology to support their compliance management efforts. What’s more, 87% of respondents say they are currently evaluating the use of new technology within their compliance department or will be doing so within the next year.

To view the entire survey, please visit our 2023 State of Regulatory Compliance Survey page to download a free copy.

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