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Compliance Automation: Reducing Risk and Increasing Efficiency

Ensuring regulatory compliance can be a complex process if done manually. Tracking individual employees’ spending and behavior to identify anomalies is time consuming, arduous, and prone to human error. And since regulations are frequently shifting and changing, it can be difficult for compliance officers to keep track of all the industry requirements, thereby risking noncompliance and the associated consequences.

Fortunately, there’s an answer to this conundrum, and it’s the future of regulatory compliance.

What is compliance automation?

In nutshell, compliance automation is the process of streamlining compliance management processes using machine learning. In industries like financial services and healthcare, there are regulations in place that protect both companies and their end customers, while ensuring all operations are honest and “above-board.” Firms typically have their own compliance teams responsible for checking all employee behavior against industry regulations — a tall order, since regulations are, by nature, incredibly exhaustive.

Compliance software (also called regulatory technology, or regtech) includes a rules engine that detects potential compliance risks and red flags and escalates the issues to the appropriate party. These tools can integrate with a firm’s existing internal systems and implement new regulatory constraints as soon as they are introduced.

Compliance automation takes much of the onus off human team members to ensure airtight compliance. Software solutions like these save time and reduce risk by handling repetitive monitoring and administrative tasks, thereby freeing compliance teams up to address more complex and nuanced issues.

More organizations are investing in compliance automation as technology improves. Leadership teams have come to understand that regtech solutions increase their firm’s value, since their staff’s talents can be utilized on higher-value tasks. Compliance software also helps enterprises avoid fines and other consequences of noncompliance, thereby preserving their reputation and their customers’ trust.

It should be noted that compliance and security are two different concerns; however, cybersecurity teams can sometimes double as compliance teams in many enterprises. Since protecting a company and its assets is an altogether different job from ensuring employee compliance, these dual-purpose teams risk missing a significant number of red flags. This is yet another reason why compliance automation — with built-in security measures — should be a high priority for firms across industries.

What does compliance automation look like?

Compliance automation will look different for every company, but a general implementation process looks like the following:

  1. Industry-specific regulations, security protocols, and compliance procedures are loaded into a compliance software program.
  2. The software is programmed to automate repetitive compliance tasks, including pre-clearance approvals and reporting.
  3. The software’s rules engine is “taught” to identify anomalies that could signal compliance breaches and notify the appropriate party.
  4. Depending on the specific compliance automation tool or solution, these digital rules can be integrated into existing systems or tools.

Once implemented, the compliance software runs itself. Team members’ responsibilities are usually limited to responding to alerts and updating the rules engine to comply with new regulations.

For example, a financial services compliance tool will solve for regulations like:

  • Senior Managers and Certification Regime (SMCR)
  • Individual Accountability and Conduct Guidelines (IACG)
  • Securities and Exchange Commission Rule 10b-5 (insider trading regulations)
  • Regulatory License & Registration requirements

Automated compliance software can track all employee activity and records in one centralized place, including documents, trades, and certifications. Enterprises can then be confident that they are adhering to industry regulations, policies, and standards and can provide the necessary documentation to relevant regulatory bodies in the event of an audit.

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Any firm or organization responsible for safeguarding and managing customer data as mandated by industry regulations can benefit from compliance automation. Automated compliance solutions are often utilized by:

  • Financial institutions: Responsible for safely and securely handling customers’ finances in a way that instills trust.
  • Legal teams: Obligated to uphold the law and deliver ethically sound legal counsel with utmost discretion.
  • Hospitals and healthcare systems: Must maintain strict standards for patient health and safety while ensuring compliance with HIPAA (Health Insurance Portability and Accountability Act).
  • Enterprises: To prevent insider trading and employee conflicts of interest.

Why automate your compliance processes?

As more and more industries digitize their processes, firms with regulatory compliance needs should consider compliance automation, if they haven’t adopted it already. There are many reasons why compliance automation is an essential solution for firms across multiple sectors.

Cost-effective: When compliance processes are automated, it cuts down on the need for compliance specialists and administrative staff, who can then be utilized elsewhere in higher-value roles, leading to faster business growth. Compliance software can also help firms avoid staggering fines and reduce business disruptions.

Risk reduction: Not only does noncompliance incur financial penalties, but the reputational damage caused by a breach can be devastating. Automation reduces the dual risks of human error and intentional malfeasance.

Improved accuracy: Likewise, machines can produce repeatable results in a way humans cannot. Compliance software ensures that risks are quickly and accurately identified every time they occur.

Vigilance: Automated compliance tools have exceptionally strong monitoring capabilities that never take a day off.

Fewer duplicated efforts: Poor communication can lead to time wasted on duplicate tasks. With real-time data reporting, automated compliance tools ensure that tasks are performed correctly the first time.

Privacy breach mitigation: With customer data under 24/7 surveillance, internal and external privacy breaches become much less of a concern.

Fewer hiring needs: With repetitive tasks now automated and existing employees utilized on higher priorities, firms can ease up on hiring pushes and keep budgets down.

Remote employee management: When working from home, remote employees likely use different networks and servers, which is an open invitation for hackers to breach a firm’s (potentially ineffective) security measures. It’s also more difficult to ensure remote employees follow process for activities like reporting insider trading risks and breaches in Material Nonpublic Information (MNPI).

Centralized data: With all regulatory and employee data in one place, compliance officers, auditors, and stakeholders can easily access, search, and verify information. This also avoids repeatedly having to log in and out of different platforms.

Real-time updates: If a compliance officer or manager logs a regulatory change, the automated system can generate a notification to inform all team members of the update. This ensures everyone stays on the same page.

Visibility: With built-in reporting capabilities and an intuitive UX, it’s easier than ever for stakeholders to view and understand your firm’s progress and compliance status.

Smooth audits: Centralized, accurate, and streamlined compliance data makes auditors’ jobs much easier (and reduces stress for the party being audited). Any risks identified by the software would have already been seen and addressed by the compliance team, so nothing should come as a surprise during an audit.

Peace of mind: Above all, compliance automation allows firms to rest assured they are doing everything they can to comply with regulations and avoid risks.

How to Automate Your Compliance Systems

Automating your compliance processes takes research and preparation before adoption.

First, identify the specific issues compliance automation will solve, as well as the current systems that will be replaced or streamlined.

Second, determine who will own the implementation process, who will be using the tool on a day-to-day basis, who will require access, and who will be responsible for ongoing maintenance and updates.

Once you’ve determined answers to the above, decide which type of compliance solution will be most effective and appropriate for your organization. Do you need a full-scale, integrated digital platform? Will you need a mobile app? Do you want a comprehensive end-to-end software solution, or would you rather choose a la carte tools? Some possible routes include:

  • Digitizing your compliance rules
  • Creating an internal custom solution
  • Adopting a full-scale compliance software

    On a related note, many firms explore the possibility of building a compliance automation solution themselves. While doable, this can end up being a huge internal lift, so it’s important to consider whether building or buying is in your company’s best interests.

    After identifying your preferred type of solution, determine how the new tool will integrate with your existing systems, if applicable. What kind of relationship, if any, will you have with external software providers?

    What will the training and onboarding process look like? You will likely have the choice between providers who manage the training for you, or using internal resources to train stakeholders.

    If you end up weighing several different compliance automation options, establish a standard vetting process. Be sure to involve all stakeholders who may be interacting with the system.

    As you test out different solutions, consider how compliance automation will affect the makeup of your compliance team. Will the new tool lead to downsizing, reskilling, or talent reallocation? How might automation affect company culture, for better or for worse?

    If business growth is a part of your firm’s objectives, you’ll need to consider how scalable your compliance solution needs to be.

Regardless of internal scalability, your compliance automation tool needs to be future-ready without being complex. As the world’s most intuitive, configurable compliance software on the market today, the STAR Platform helps firms around the globe reduce risk, streamline their processes, and comply with confidence. Reach out to our experts today to see what employee compliance automation might look like in your organization.

Making compliance simple and easy

Our user-friendly tool is solving today’s biggest compliance challenges. See for yourself why 250+ financial institutions across the globe trust StarCompliance.