Elements of An Effective Compliance Management System

Compliance control is an essential part of any financial institution to ensure that consumer protection regulations and laws are in place to manage risks. Compliance Management System (CMS) helps financial organisations streamline their risk management process and efficiently mitigate potential risks. Failing to implement a CMS might result in civil money penalties, litigation, fines and formal enforcement actions.

What is a Compliance Management System?

A CMS is a cohesive system of written processes, tools, documents, and functions designed to help the business employees maintain compliance and mitigate risks, while also implementing iso standards to ensure adherence to regulatory requirements. It is integrated with the employee’s day-to-day tasks to limit business risk and assists them in understanding their responsibilities regarding company regulations, providing a mode for the organization to monitor employee performance.

Why is it Necessary to Build an Effective CMS?

Business compliance refers to the process of ensuring that the employees and the business follow the standards, laws, regulations and ethical practices about the business. It is present to identify, prevent and remedy the risk of breaching the Competition and Consumer Act (CCA) 2010 legislation passed by the Australian Competition and Consumer Commission. It also aims to create a work culture in compliance with the business by detecting illegal and fraudulent behaviour early on. Unlike before, every company must have an established CMS, and the process can be daunting. Therefore, listed below is an outline of all the elements required to build an effective Compliance Management System.

Elements of a Sound CMS

An institution’s CMS must have a written program that includes,

Written Policies, Standards, Procedures and Conduct

Foster uniformity regarding compliance expectations in a company by clearly specifying compliance policies and procedures that the management and the employees have to follow. It will ensure a successful implementation of the system with minimal doubts and confusion.

Identification Of Board, Program and Management Oversight

Appoint a team to enforce, monitor and oversee the compliance program and to serve as the company ‘watchdog’. They need to be alert for any fraudulent behaviour in the company and be answerable to the management with questions and concerns. They need to also check for oversight of commitment to CMS, identify risks arising from the products, activities and services of the company, and monitor the corrective action undertaken for the issue.

Providing Training and Education to The Employees

Employees at every level must understand the compliance expectations and standards and agree to comply with them. This includes implementing a refresher course or a training session to clarify the code of conduct and update them with any changes made by the management.

Creating Two-Way Communication at Every Level

One of the components of this training program is to set forth the expectation for all the management and the employees to establish two-way communication. It means that they must proactively communicate regarding any ethical concerns, compliance questions, or issues they witness in the company. Companies can also include a mode of anonymous communication for the employees to report compliance issues without the fear of retaliation.

Developing An Auditing and Monitoring System

A review team must measure the effectiveness of the company’s compliance system and identify problem areas and risks through internal and external monitoring and audits.

Enforcing Discipline

The companies must develop a plan to implement impeccable safety standards and standards of conduct. Failing to adhere to this could lead to the employees facing disciplinary actions.

Noting Down Consumer Complaints

This component involves the appropriate filing of consumer complaints, including categorizing, prioritizing, and resolving them as needed.

CMS ensures that the company takes timely action against violations and vulnerabilities, protecting the company.

*This is a collaboration post