Compliance Management Systems (CMS)

Just as a citizen has to obey the rules and laws of their country, a business has to abide by a specific set of rules and legal boundaries set by the government and regulatory authorities. In business parlance, this is known as ‘compliance.’ Compliance is the broad structural framework by which companies are expected to abide by industry-specific guidelines, as well as local or federal regulations and laws that streamline operations.

The compliance management system is the coordinated program that governs this system and is responsible for maintaining policies, training employees, and collecting evidence for accrediting bodies and regulators. This system gets you compliance-ready by overseeing the enforcement of security controls, internal audits, a wide range of technologies, third-party risk assessments, and more.

In this article, we will explore the importance of compliance management, emphasizing the crucial aspects of adhering to security standards, key challenges, and how you can systematically overcome them.

What is compliance management?

Compliance management is the process of monitoring, assessing, and tracking systems to ensure adherence to applicable industrial, governmental, or regulatory requirements. Some compliance management examples are: 

• Corporate Compliance: It encompasses internal procedures, rules, policies, behavioral standards, and performance standards that every employee in the organization has to follow.
• Regulatory compliance: This includes adherence to laws, regulations, and rules by external entities like employee unions, governments, regulatory bodies, or industry standards. Examples include GDPR, FCRA, CCPA, HIPAA, OFDSS, SOC2, FDIC, and ISO 27001. 

Depending on the type of service you provide and the industry regulations applicable, you may need to comply with more than one regulation. The above are just a couple of examples. Keeping up with multiple regulations with distinct requirements is not easy. This is where a compliance management system comes in.

Importance of compliance management 

Compliance management enables businesses to avoid legal complications, support risk management strategies, ensure business continuity, improve operational effectiveness, and maintain reputation by mitigating the impacts of security breaches. 

Here are four reasons why compliance management is integral to the business’s success:

1. Protection from legal penalties

Failing to comply with relevant laws and regulations is prohibitively expensive. On average, the cost of non-compliance is 2.71 times that of compliance.

In 2021, Toyota paid $180 million for violating the Study: Total Cost of Compliance with Data Protection Regulations Clean Air Act Protocol. Southern Water paid £90 million for illegal discharges of sewage that polluted rivers and coastal waters.

Even worse, failure to comply can lead to suspending services or products. For instance, the Consumer Product Safety Commission (CPSC) can ban toys, appliances, and tools that pose a consumer risk. The Environmental Protection Agency (EPA) can shut down organizations that violate environmental laws.

2. Shields from data breaches

The lack of preventive measures makes organizations vulnerable to data breaches. Cybersecurity practices like remote monitoring, data encryption, and multi-factor authentication help businesses avoid security incidents. Compliance audit programs ensure organizations identify system vulnerabilities and proactively fix security issues.

For example, data protection regulations like the General Data Protection Regulation (GDPR) in the EU or the California Consumer Privacy Act (CCPA) enforce data protection regulations, consequently preventing potential data breaches.

3. Maintains reputation and trust

Compliance frameworks like ISO and SOC 2 helps organizations demonstrate good security practices to customers and stakeholders. 

Compliance can be your business’s superpower as it demonstrates a commitment to ethical business practices. However, an increasingly complex global regulatory and enforcement agenda presents some unique challenges.

How to implement a compliance management process?

Compliance management involves continuously checking and evaluating systems to make sure they meet industry and security standards, along with following company rules and legal regulations.

Here are 5 compliance management steps:

Identify relevant laws and regulations

The first step to compliance management is identifying the laws and regulations that apply to the business. For example, SaaS firms that process personal data on behalf of their clients must comply with data protection laws, such as the General Data Protection Regulation (GDPR) in Europe or the California Consumer Privacy Act (CCPA) in the United States.

Perform risk analysis

Once you have identified the applicable laws and regulations, perform a risk assessment. 

Pinpoint areas for improvement and evaluate which systems and processes pose non-compliance risks. For a SaaS company, this commonly involves conducting a thorough review of data processing practices, identifying potential security risks, evaluating the effectiveness of existing policies, and then prioritizing the remedy according to criticality.

Create compliance rules and regulations

The next step is to develop comprehensive compliance management guidelines and systems to address the identified risks and meet the requirements of relevant laws and regulations. Furthermore, organizations must implement policies and procedures to ensure actual compliance. An example of regulatory compliance management is data protection.

For example, a SaaS firm must implement policies regulating how the company securely stores, processes, and transmits personal data as per data protection laws.

On the other hand, a corporate compliance guideline would be a code of conduct. The policy would explain how employees must deal with company assets, gifts, conflicts of interest, donations, etc.

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Train employees on compliance

There needs to be more than just developing a compliance guideline. To ensure consistent implementation, organizations have to create a culture of compliance. To that end, training employees on the policies and procedures is crucial, and it helps them adhere to compliance requirements and understand their role in ensuring compliance. Managing compliance also involves establishing a compliance team to monitor and enforce compliance.

Regularly review and update policies

Continuous monitoring and review is the final step to effectively manage compliance over time. Review policies and processes, conduct internal audits, and assess the effectiveness of the compliance management system. Moreover, update the system when necessary to remain compliant with new legislation affecting the industries.