Understanding a compliance framework

In our previous blog, we discussed the importance of governing compliance within an organisation and the many factors involved when it comes to gaining a better understanding thereof.

 

Compliance (in a corporate or organisational environment) refers to following and complying with all relevant laws, policies, regulations, rules, and external and internal controls that an organisation must conform to. This is where a compliance framework comes in.

 

It is essentially a structured set of rules and guidelines to aggregate, coordinate, and merge all requirements for compliance applicable to your organisation. It is a cohesive collection of all relevant regulatory documents, procedures, manuals, policies, mandates, mission statements, and other compliance-related aspects.

 

It is crucial to implement a practical compliance framework. It serves to provide an established, professional standard to detect and prevent risks, and efficiently manage and control all compliance-related matters within your organisation.

 

The implementation of a compliance framework not only provides an effective way to monitor and manage compliance but also has many other benefits:

 

  • Operating under all applicable laws and regulations
  • Creating a culture of honesty and integrity while meeting high ethical and professional standards
  • Preventing fraud and unethical conduct
  • Detecting compliance issues early
  • Assuring prompt corrective action
  • Building employee trust and confidence with higher employee retention
  • Improving operations and safety – reduced legal problems
  • Improving public relations

 

Certain pivotal and essential elements are necessary to guarantee efficiency and overall success of a practical compliance framework. These crucial elements can be divided into three main areas:

 

Prevention

 

  • Implementing written policies and procedures

Written policies need to include and outline any expectations related to the compliance framework, including a code of conduct that applies to all employees. Essential documentation consists of a detailed description of compliance within the organisation – focusing on governance, company processes, organisational structure, and reporting.

 

  • Designating a compliance officer and compliance committee

A compliance officer (playing a senior role, reporting directly to the board of directors or CEO) needs to be appointed to harness effective control over all compliance matters. Once a compliance officer has been appointed, a compliance committee needs to be assembled. All committee members should be actively involved and meet regularly, with a charter detailing their responsibilities.

 

  • Conducting training and education

Educational programmes must be implemented to train and educate staff in all general compliance matters, including fraud, unethical conduct, favouritism, bribery, abuse, and anything that may put the organisation at risk for non-compliance. Training, as part of the onboarding process of all new personnel, needs to be documented for future reference if needed.

 

Detection

 

  • Developing effective lines of communication, i.e. a reporting hotline

Employees are often afraid of reporting a co-worker or even a manager or director. Therefore, an anonymous and confidential hotline needs to be implemented to encourage employees to report all compliance risks and issues.

 

  • Conducting internal monitoring, auditing, and reporting

Every organisation needs to have annual risk assessments – to review compliance challenges that surfaced in the past, corrective actions taken, and the outcome of challenges. Internal controls, policies, and accountability need to be reviewed regularly to ensure that compliance within the organisation remains efficient.

 

Corrective action

 

  • Enforcing standards through disciplinary guidelines/policies

Clear disciplinary policies must be in place for anyone who has engaged or is engaging in unlawful or unethical actions. The policies should apply across all organisational levels, irrespective of title or position – employees, board members, and third parties. Board members must be removed, and third parties and employees terminated if there is any misconduct.

 

  • Promptly responding to detected problems

Once a compliance issue is detected, it is crucial to respond quickly and effectively with corrective actions to ensure complete compliance and minimise all risk to the organisation. It is also essential to analyse these issues to determine where they stem from, why or how the problem was caused, the best way to solve the issue, and how to prevent it from happening again in the future.

 

In essence, a compliance framework consists of leadership, risk assessment, standards and controls, training and communication, and oversight. To learn more about implementing and establishing an effective compliance framework within your company, please feel free to contact us at Okina Company Secretarial Services.

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