Regulatory compliance is when businesses follow state, federal, and international laws and regulations to operate their business. Regulatory compliance helps businesses to set the highest state of conduct, integrity, safety, and ethical behavior in business.
Financial and banking services worldwide face their greatest compliance challenge in keeping up with regulatory changes. Regulations often go through changes and keeping up with the volume and complexity of these updates can be a tough job.
To stay compliant, businesses must track changes in laws, policies, and regulations, then generate regulatory intelligence. This data is then used to create a strategic action plan, such as modifying compliance procedures to avoid fines.
Also, compliance professionals must be updated about the constant flow of regulatory changes to follow state, federal and international laws that are pertinent to the company. They must gather and analyze new information from regulators, governments, and related agencies to decide the best course of action for the company. Hence, along with the changing norms and tightened enforcement activities, staying current with regulatory changes has become more important than ever.
In this article, we’ll help you understand some basic principles and ways that could help your business to develop a strong regulatory change management framework, track, monitor the constant regulatory updates and effectively apply the same.
So, without any delay, let’s understand the regulatory change management process in businesses, shall we?
For numerous businesses, maintaining compliance with constantly changing regulations can be overwhelming. Regulatory change management involves staying updated on and applying new policies, standards, and controls to meet new regulatory demands. It is a key part of any business and compliance program, but keeping up with ongoing changes can be challenging. Here is everything you need to know about regulatory change management.
Regulatory change management is a critical process for businesses, especially financial institutions, to ensure compliance with changing laws and guidelines. This practice adds the systematic approach to identifying, assessing, and executing regulatory changes to maintain compliance and stimulate business growth.
The dynamic nature of regulations demand businesses to be flexible and adapt continuously. With a well-handled management of regulatory changes and needs, companies can avoid penalties, improve operational efficiency, and support sustainable growth.
Regulatory changes can take many forms, including new laws, amendments to existing laws, guidelines, and informal communications from regulatory bodies. Since the global financial crisis, the complexity and frequency of regulatory changes have grown on a huge scale.
Businesses are met with many challenges due to these changes, including the need to interpret complex regulations, deal with ambiguities, manage regulatory divisions across jurisdictions, and deal with operational disruptions and associated costs.
The following six core principles help businesses develop a strong regulatory change management framework. This will also support organizations with the needed tools to handle regulatory changes effectively and stay ahead of the curve.
Identifying applicable regulations involves continuously monitoring regulatory updates from relevant authorities, industry associations, and legal sources. Organizations need to determine which regulations apply to their operations, considering factors like industry, jurisdiction, and business activities. This step ensures that the organization is aware of all relevant regulatory requirements.
Relying on an automated regulatory change management system is very important for identifying and managing applicable regulations effectively. This system should automate the collection of regulatory updates, categorize them based on predefined criteria, and distribute them to the relevant stakeholders. By integrating tools for tracking and analyzing these updates, organizations can ensure timely compliance. Regular training sessions for employees and establishing clear procedures for updating policies and controls are essential components. Additionally, leveraging technology to create alerts and reminders for upcoming regulatory changes can help keep the organization proactive and prepared.
Organizations must keep up with regulatory updates from both global and regional authorities, sourcing information from regulatory publications, industry associations, national and local media, and specialized content providers like LexisNexis and Thomson Reuters. Given the multitude of sources and the volume of content to analyze, this can be a resource-intensive and time-consuming task.
A well-designed regulatory monitoring system can greatly uplift compliance management. This system involves subscribing to regulatory updates from government agencies, industry associations, and legal firms. By receiving timely updates on relevant regulations, organizations can stay ahead of compliance requirements. The system can deliver customized content via RSS feeds, alerts, or email notifications, ensuring that compliance professionals are always informed. By setting predefined rules based on regulatory attributes such as industry, jurisdiction, topic, and due dates, the system ensures that the right information reaches the appropriate stakeholders in real-time.
Global organizations often face inconsistencies in regulations across different regions and business operations. Establishing a standard regulatory taxonomy aligned with the organizational hierarchy, and consistency in terms of language, terminology, and structure, improves communication among stakeholders and simplifies the setup of a strong compliance framework. It also helps in categorizing, storing, and delivering regulatory updates without frequently modifying the system’s rules and linkages.
One effective approach is to set up a centralized GRC (Governance, Risk, and Compliance) repository. This repository can store all regulatory updates from across the organization, index them according to the organizational hierarchy, and map them to various GRC attributes such as risks, controls, and policies.
Clarifying the roles and responsibilities of those who manage the compliance function is important for accountability. A cloud-based content platform is perfect for the right information to reach the right users, who must be seasoned compliance professionals capable of scrutinizing regulatory updates and determining their applicability to the organization. Identifying relevant SMEs (Subject Matter Experts) within the organization who understand the laws and have sufficient knowledge to analyze these updates in detail is crucial.
Clearly document these roles and responsibilities, setting up the base for accountability throughout the information lifecycle, from the delivery of a new alert to its successful execution. Plus, senior management should be actively involved at each stage, with the board having clear visibility into the entire process.
Every regulatory update needs to be assessed for its impact on the organization. After an initial applicability assessment, each business unit should perform a detailed impact analysis to identify affected risks, controls, policies, procedures, training, and reports that need revision.
Grouping similar regulatory updates helps eliminate duplicates and identify trends and patterns in the affected areas. This analysis should be rolled up according to the organizational hierarchy to provide a holistic view of the impact across the enterprise. At any time, an organization should be able to view the number of regulatory updates affecting them both holistically and by business unit or functional area.
Policies, procedures, and control mechanisms are foundational elements for ensuring compliance within an organization. They provide a structured approach to manage and reduce risks associated with regulatory requirements. Regularly reviewing and updating these elements is essential to adapt to regulatory changes and ensure continuous compliance.
An effective solution involves setting a systematic process for updating policies, procedures, and control mechanisms in response to regulatory changes. This includes assigning responsibility to specific teams or individuals for monitoring regulatory updates and kickstarting necessary changes. Automated tools can be used to track regulatory changes and set updates in motion across the organization. Also, regular training sessions and clear communication channels helps employees understand and adhere to the updated policies and procedures. Moreover, periodic audits and reviews can help verify that the applied changes are effective and aligned with compliance objectives.
Training is essential for ensuring that all employees are aware of and understand the regulatory requirements relevant to their roles. Continuous training programs help maintain a high level of compliance awareness and competency across the organization, reducing the risk of non-compliance.
Using a detailed training and awareness program involves creating a structured training plan that includes initial onboarding sessions for new hires and regular refresher courses for existing employees. Scenario-based training can be used to illustrate real-world applications of regulatory requirements, enhancing understanding and retention. Also, trusting on e-learning platforms can provide flexibility and accessibility, allowing employees to complete training at their own pace. Additionally, incorporating assessments and feedback mechanisms ensures that training programs are effective and identify areas where further improvement is needed. Regular communication and updates on regulatory changes keep employees informed and prepared.
Regular compliance reviews are important for finding gaps and checking whether the organization follows all regulatory requirements. These reviews help in assessing the effectiveness of current compliance measures and identifying areas for improvement.
Establishing a strong review and audit compliance framework involves setting up regular internal audits and compliance reviews to evaluate adherence to regulatory needs. This framework should include predefined schedules for audits, clear criteria for evaluating compliance, and mechanisms for documenting and addressing any identified issues. Using compliance management softwares like VComply can streamline the audit process, providing real-time tracking and reporting of compliance status. Also, engaging third-party auditors can also provide an objective assessment and additional insights into the organization’s compliance posture. Moreover, continuous monitoring and feedback loops ensure that compliance efforts are effective and responsive to changing regulatory landscapes.
Formulating action plans and listing tasks that need to be assigned to relevant users is the next step. Standard workflows should be defined for review and approval processes, with escalation capabilities for overdue tasks. Moreover, notifications and reminders via standard email help to see that nothing is missed.
At each stage of the implementation process, reports and dashboards should provide stakeholders with real-time status updates, accountability, and the overall impact on the organization. Logging issues or findings with clear remediation plans helps with quick and efficient resolution and closure.
To streamline these steps, organizations can opt for a comprehensive regulatory change management solution such as VComply that sets a common foundation to facilitate multi-dimensional mappings with other GRC elements. Such a solution centralizes disparate, siloed, and manual operations across business units and geographies, aligning them with the organization’s overall business goals and objectives. This not only helps track and analyze frequent regulatory changes but also promotes effective and efficient implementation.Upon adopting these principles and using the right tools, organizations can stay ahead of regulatory changes and maintain a strong compliance framework that helps to promote a culture of accountability and continuous improvement.
Of course, yes! Some of the best practices are:
To understand the importance of regulatory change management, you have to first understand the challenges organizations face due to regulatory changes. Below are five of the most major ones.
1. Complexity and acceleration of regulatory change
The regulatory world is complex and constantly changing, with a vast range of regulations at local, national, and international levels. Regulatory changes often occur at a rapid pace, driven by factors such as technological advancements, geopolitical shifts, and emerging risks. Keeping up with both the volume of regulatory changes and understanding their implications can be daunting.
2. Interpretation and ambiguity
Regulatory requirements are subject to interpretation, which can be difficult to do without previous experience performing audits or working in internal compliance at an organization. Typically, regulatory requirements are either very specific and complex or broad and too general. This ambiguity makes it difficult to know what measures to implement and can sometimes result in regulatory scrutiny or legal disputes.
3. Regulatory fragmentation
For organizations operating across multiple jurisdictions or in certain industries, navigating the regulatory landscape may be particularly difficult in the face of overlapping or conflicting regulations from multiple regulatory bodies. Navigating this regulatory fragmentation, coordinating tasks and priorities, and ensuring compliance with all relevant requirements can be complex and resource-intensive.
4. Operational disruption
Implementing regulatory changes may disrupt existing operations, requiring organizations to make adjustments to processes, products, and services. These disruptions can lead to delays, inefficiencies, and increased operational costs.
5. Costs
Compliance with regulatory changes often requires significant financial investments in updating systems, processes, training, and hiring specialized personnel. While the costs of keeping up with regulatory changes may be high, the costs of failing to do so are higher. Failure to comply with regulatory changes can result in significant penalties, fines, legal actions, and reputational damage. These fines can be a lot higher than any of the costs or investments in maintaining compliance. Organizations must actively monitor regulatory developments and implement robust compliance measures to mitigate the risk of non-compliance.
Here are some solutions you can implement for the challenges that surface in regulatory change management:
The evolution from manual efforts to automated regulatory intelligence (ARI) has significantly transformed regulatory change management. Compliance softwares like VComply provides numerous benefits, including
The customizability, scalability, centralized nature and real-time functionalities of these advanced solutions are highly useful and needed for effective regulatory change management.
Regulatory compliance is an ongoing process that demands continuous monitoring of regulatory changes to ensure the company’s success. Its mindful usage is integral for maintaining compliance and supporting organizational growth.
Professionals can use innovative and intuitive cloud-based GRC management tools, such as VComply, to efficiently track changes in relevant topics and convert the data into actionable goals.For more details about using VComply for regulatory and compliance management, contact VComply’s support team. You can also start your 21-day free trial to try this user-friendly GRC platform today!
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