Understand The Importance Of A Central Compliance Function For Business

The global enterprise governance, risk and compliance (eGRC) market is projected to grow to USD2.2bn by 2026, from USD1.3bn in 2021, at a CAGR of 10.9%, driven by multiple factors.

Compliance mandates across industries are becoming more stringent, and organisations need to step up their compliance frameworks to meet regulatory demands.

Organisations are also leveraging technology, especially artificial intelligence, machine learning and blockchain technologies, like never before, requiring more transparency and data compliance from their systems.

These shifts have led to eGRC emerging as a specialized vertical, with more businesses looking to outsource their central compliance functions to knowledge partners with superior expertise, tech-enabled solutions and access to bespoke research and operations solutions.

Here are eight reasons why businesses are investing in robust compliance frameworks:

1. Serving corporate governance: A company has a responsibility towards its stakeholders – investors, shareholders, customers, clients and employees. Functioning without a framework of compliance puts its corporate governance at risk. This is especially important as companies grow in scale and wealth. Complying with all corporate governance regulations is an investment in the sustained success of the business.

2. Fostering a culture of trust: In a connected world, the currency of trust has risen even higher. Sans trust, the social and financial equity of a business is always at risk. The foundation of trust associated with a brand grows stronger and gets institutionalised when an internal framework of rules and regulations is followed.

3. Investing in reputation-building: The world has seen several instances where companies that spent years building a legacy have suffered a loss of reputation in minutes when internal irregularities are exposed. Even if fraudulent activity is undertaken by one or two individuals, the reputation of the entire business is affected. Compliance frameworks help reduce the scope of any fraudulent activity.

4. Defining and following core values: Every business has core values around which key decisions are taken every day. A central compliance framework guides employees and other internal stakeholders when navigating business challenges and opportunities, nurturing higher accountability in the system.

5. Ensuring sustainability of the business: The lack of a robust central compliance framework has led to the downfall of several businesses, even if all stakeholders were not aware of the fraudulent activity. Exposure can result in the closure of the business as well as criminal charges being levied against the perpetrators.

6. Protecting sensitive data: Millions of gigabytes of data pass through a business’s ecosystem every day. A central compliance framework ensures the safety, proper handling, and confidentiality of data, especially if it is sensitive. Data includes emails, social profiles and financial information.

7. Complying with regulators: Every industry is regulated by one or more institutions that keep fine-tuning rules to help insulate the industry from fraud and nurture best practices. Technology is playing an increasing role in helping businesses comply with regulation. For instance, trade surveillance leverages technology in a big way, helping detect irregular trading patterns and avoid false positives.

8. Building legal resilience: Central compliance covers a wide spectrum, including how data is stored and recorded. Complying with rules and regulations is beneficial, especially when a company is faced with legal disputes and data becomes part of the evidence. The ability to access data in a transparent, legally-compliant format could potentially save a company millions of dollars in a lawsuit.

Takeaways

Although compliance frameworks are needed across industries, including the non-profit sector, financial institutions require them even more, as they control millions of dollars of individual and institutional investors.

The sector includes investment banks, venture capital firms, stock trading platforms, private equity firms and other organisations in the banking, financial services and insurance (BSFI) sector, which is highly regulated.

Knowledge-based service providers such as Acuity Knowledge Partners offer comprehensive central compliance support, spanning the entire ecosystem of businesses in the finance sector. Central compliance verticals typically come equipped with in-depth domain expertise and analysis, compliance tools, bespoke research and operating models.

Organisations must approach compliance outsourcing as an investment and not as a cost, as it frees them up to focus on creating value in their core business.

Nishisingh

Nishi Singh is a professional journalist and editor in New Delhi. She has studied Mass Communication from National Institute of Mass Communication.