What is Compliance Control and How to Effectively Practice Compliance Management?

compliance management

Compliance risks are inescapable but you can tackle and reduce them effectively with compliance management. You may encounter many risks while trying to match up to the compliance standards. These risks have a significant influence on businesses where they end up dealing with consequential penalties.

Additionally, with the consistent change in industrial compliance policies, rules, and regulations, there is always a necessity to constantly update your compliance control system as well. In any business setup, compliance controls are essential for regulating the proper and ethical performance of the functions. Want to know how you can achieve this? Read further to find out. 

What is Compliance Management?

Compliance management is a process that follows a system of strategies and approaches to maintain and manage compliance control with the different industrial and legal policies, rules, and regulations in any business organization. With a compliance management system, all the expected standards can be met, and also deal with any compliance issues simultaneously. 

When compliance management is achieved through automation software by an organization, processes like tracking organizational details like employee qualifications, and training records to abide by the different compliance regulations, become so much simpler and achievable. It also makes tasks like auditing and reporting extremely manageable.

Internal Control in Compliance Control

Internal control is meeting your set organizational goals and objectives by achieving efficiency, accuracy, and effectiveness in the organizational conduction and also ensuring compliance with policies, laws, and regulations. Internal control is often associated with finance, but it affects all areas and departments of an organization like IT, marketing, procurement, etc.

Control management is essential when it comes to maintaining compliance. A proper system of control is implemented to effectively make the compliance program a success. So what exactly is this control? How can one define a control for compliance? Let us unfold the answer here.

Defining a Control

In general, it can be stated that a control program is an internal system of management that a company follows intended to nullify any chance of risk in the running of the business. Control is an abstract concept, hence, we will look into some definitions of control.

Marks Definition

Jonathan Marks is a partner at Marcum and a rich thinker on different subjects like audit, forensics, and internal control. According to Marks, the definition of Internal Control is:

“A process of interlocking activities that use properly designed policies and procedures which are preventive, detective, corrective, directive, and corroborative; along with training and continuous monitoring; to

  • Assure the achievement of an organization’s objectives,
  • In operational effectiveness and efficiency,
  • Generating reliable (complete and accurate) books and records,
  • In compliance with laws, regulations, and policies.
  • Which ultimately reduces the risk of fraud, waste, and abuse.”

Understandably, Marks emphasizes control being a process. Compliance control is inevitable as it is a systematic approach that assists you in arriving at your organizational goals without the risks involved. This is simply adopted to reshape the weak and inefficient business processes into stronger, more profound, and ideal effectiveness.

Other Control Definitions  

SEC Definition

According to the Exchange Act, internal control is defined as 

“A system of internal accounting controls sufficient to provide reasonable assurances that – 

  • Transactions are executed in accordance with management’s general or specific authorization;
  • Transactions are recorded as necessary (i) to permit the preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (ii) to maintain accountability for assets;
  • Access to assets is permitted only in accordance with management’s general or specific authorization, and 
  • The recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any difference.”

A drawback with the SEC’s definition is that it is only applicable to finance-related concerns or possible risks. This may not clearly define internal control for areas like cybersecurity, brand image risk, or any sort of harassment. 

COSO Definition

According to the Committee of Sponsoring Organizations (COSO), Internal control is defined as:

“A process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

  • Effectiveness and efficiency of operations;
  • Reliability of financial reporting;
  • Compliance with applicable laws and regulations.”

Importance of Compliance Management

There are different categories of compliance obligations that an organization takes care of. The first category would be the category of laws that are specific for protecting certain types of data. These include PCI DSS (Payment Card Industry Data Security Standard) and HIPAA (Health Insurance Portability and Accountability Act of 1996), as well as data privacy laws like GDPR (General Data Protection Regulation), CPRA (California Privacy Rights Act of 2020), and similar types of laws.

Businesses also have other compliance regulations over different sets of responsibilities like preventing fraudulent activities, money laundering, etc. Moreover, organizations voluntarily work and adopt several other compliance standards such as SOC 2 and ISO 27001 to maintain a smooth working environment. 

Even though this is an important aspect of running a business, a lot of risks are involved which makes the process more complex. With the update and constant renewal of these standards, it is quite difficult and hectic for businesses to keep up with the changing policies. The entire organization, including the employees, its stakeholders, and its customer base, must be aware of all these changes as well.

Hence, a compliance control framework for management is essential and must be implemented to ensure the above case. This management system will take care of possible compliance failures so that any significant financial penalties can be avoided at the right time. 

So, what can be achieved with an effective compliance control framework? Here are some compliance control examples

  • Organizational policies compliance
  • Compliance with the rules and regulations
  • Lowered organizational risks
  • Process compliance
  • Accuracy and consistency in reporting across all the business units
  • Continuous communication and flow of information
  • Control in management processes
  • Proper delegation of roles and responsibilities
  • Preventive control

Some Key Steps in a Compliance Management Process

As discussed in the previous section, managing compliance is a risk-oriented process, and it is an ongoing process. Hence, here are some key steps involved in the compliance control process. 

Determine the Compliance Responsibilities

Only with a clear understanding of the organization’s regulatory compliance responsibilities, to begin with the compliance management for your business. To achieve this, you will have to familiarize yourself and the different parts of your business with the respective compliance policies, standards, and regulations. With this, you will be able to gauge the requirements and match them. 

Scan for Compliance Gaps

When the compliance gaps are located and scanned, the organization will be able to identify the flaws in the existing compliance and bridge the gaps in them. Some examples of these gaps could be a lack of security controls, rusted or vulnerable systems, or even devices that failed to comply with corporate business policies or regulatory requirements. 

Develop a Remedy Plan

Once the gaps have been identified, it is time for you to develop a remedy plan for removing those gaps from your existing compliance system. A compliance gap analysis has to be performed here which will help you to identify multiple issues and the extent of their severity, influence, and impact on the business processes and your working environment. Solving these identified issues and developing a remedy plan based on your remedy plan can help reduce the possibility of such gaps in the future, and it will also help you maximize the return on investment.

Implementation of Remedy Plan

Once the remedy plan for the compliance gaps has been constructed, the plan can be implemented as the official compliance strategy.

Testing and Documentation

The remedy plan cannot be left alone just after the implementation. Constant monitoring has to be performed to analyze the effectiveness of the implemented strategy. The strategy must be studied to know whether this is applicable to the issues and ensure it rectifies it. This has to be done over a period of time as the changes may not show results right away after the implementation. 

Challenges in Compliance Management

Once the compliance management process is decoded, we can deduce the possible challenges that can arise in it. Business organizations can face several challenges when they try to manage all of the processes, roles, responsibilities, and even compliance in the organization. Some of the common challenges found in compliance management are as follows:

1. Constantly Changing Requirements

The important thing to keep in mind is the consistent renewal of the existing compliance rules, regulations, standards, and policies. This is inevitable as it happens to tackle the rising cyber crimes and threats. Due to this, the need for constantly changing the flow of work and its conduction also has to be changed in a business.

This regulatory change can often affect the smooth running of the business. With a changing rule framework within the working system of the business, the purpose, functionalities, roles, responsibilities, and areas of jurisdiction change. It is a huge disadvantage to overcome. 

2. Implementation of the Requirements

In reality, regulation and compliance standards are set and formulated, and they only describe the capabilities and controls that an organization can exercise and do not state how companies can achieve their set goals. The company has to dictate these requirements with their implementation and explain how your organization must adapt to the new system of working. The organization is also responsible for the demonstration of how the new internal control strategy and processes meet the updated compliance control. 

3. Large and Complex IT Infrastructure

The IT industry is a sector where infrastructural development takes place at a very high pace. The arrival of new technological devices and software like Cloud computing, the Internet of Things (IoT), remote work, and more changed the face of business processes itself. In such a scenario, compliance control often takes drastic turns, to which business organizations are expected to adapt. The compliance management system has to be up to date which will enable the business to ensure that compliance control is achieved and maintained in all parts of the organization. 

4. Organizational Silos

Larger the company, the larger the infrastructure, workforce, and customer base, and the chances of silos increase which will eventually obstruct coordination among all of them. Over this, maintenance of compliance becomes a laborious task. Additionally, the organization will have to respond to data leaks, theft, and other possible threats that could impact compliance control. 

5. Relationships with Third-Parties

Many organizations have third-party relationships with different service providers like cloud service providers, vendors, multiple levels of supply chains, etc. These third parties often have access to certain data and systems that come under their area of compliance control. Such a situation is risk-prone and complex to handle. 

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Best Practices in Compliance Management

When implementing a new system, it is always ideal to know some best practices that can effectively and successfully let you adopt and adapt to this dynamic management system. So, let us look into some of the best practices in compliance management.

Perform the Scans Regularly

Business organizations are often vulnerable to compliance gaps which could compromise security and exploitation can be easier. Due to this, performing regular compliance scans is very essential to any organization. This allows the organization to identify, locate, and rectify issues before they can instill damage to the flow of work that may cause consequential costs. 

Automate your Compliance Management

As technology grows adapting to a flexible system is necessary. A manual compliance control system is difficult to manage and unscalable. Therefore, automation is an ideal solution, where common tasks can be converted to more faster and scalable performance. Cflow is an efficient option to automate your compliance management system. It is a no-code workflow automation platform that focuses on enhancing the productivity of business processes. This offers more consistency and effective maintenance of your organizational compliance control. 

Scan and Test for Pitfalls

New infrastructural developments always make businesses susceptible to downfalls, or compliance gaps. Regular investigation of your compliance system is crucial and helps deal with the pitfalls found. 

Integrate Security Solution

With the expanding corporate working environment which is more distributed and interconnected, the security of your business is in your hands. Therefore, it is a best practice to integrate security solutions. Cflow allows integration with any external application or tool, which will make the job easier for you. 

Cflow’s Versatile Compliance Management System

Cflow is a no-code workflow platform that can effectively study and manage compliance requirements for your organization. As a cloud-based platform, Cflow can seamlessly streamline all the key processes in compliance management.

This enables the users to easily ensure the proper working of the business. With its user-friendly features, Cflow also allows integration with 1000+ applications promising a smooth movement of all the business processes. Moreover, features like customizable workflow templates, rules engine, cloud storage, and instant approvals enable easy tracking of all the documents making the compliance control process more systematic and viable.

To Conclude

A compliance management tool can drive your organization’s compliance control to finish efficiently. A tool like Cflow has the potential to make the compliance control process seamless with its advanced features like automated compliance tasks and document management.

Hence, our platform guarantees you an enhanced overall operation system where compliance management does not have to be your concern and it enables you to focus on your set organizational goals. To experience a concrete compliance control sign up today with Cflow.

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