In today’s highly regulated business environment, compliance monitoring has become a critical aspect of organizational success. These regulations can range from data privacy laws like GDPR to industry-specific rules such as HIPAA in healthcare or SOX in finance. Compliance monitoring involves continuously assessing and adjusting organizational activities to meet these obligations, preventing non-compliance risks from escalating into significant issues.
In June 2023, a HIPPA privacy and security breach led to Yakima Valley Memorial Hospital paying $240,000 to resolve the issue and agree to implement a plan to update their policies and procedures that safeguard protected health information.
What is Compliance Monitoring?
Compliance monitoring is an ongoing process involving surveillance, review, and analysis of an organization’s adherence to various legal, regulatory, internal policy and regulations. It includes regular risk assessments and the development of strategies to address potential violations before they result in costly consequences.
Failure to comply can result in fines, legal actions, and reputational damage. A GDPR violation by Meta led to Ireland’s Data Protection Commission (DPC) to impose a fine of €1.2bn ($1.3bn). As per GDPR guidelines, serious infringements such as breach of privacy can levy a fine up to €20 million or 4% of the previous annual global turnover, whichever is higher.
The global importance given to compliance monitoring has led to an increase in the number of organizations opting to automate their compliance monitoring software. AI based compliance monitoring creates a better risk management system by saving time and money and catching real-time violations. Automation of the complex compliance protocols and requirements can help streamline the process and improve organizational efficiency.
Importance of Compliance Monitoring
Avoiding Legal and Financial Penalties
One of the most immediate consequences of non-compliance is legal action and fines. Regulatory bodies are increasingly vigilant, and even minor infractions can result in significant penalties. Effective compliance monitoring can mitigate this risk by identifying and addressing violations early.
Protecting Corporate Reputation
Non-compliance can tarnish a company’s reputation. Negative headlines can reduce customer trust, discourage investors, and damage relationships with partners. A robust compliance monitoring system ensures that a company stays on the right side of regulations, protecting its image and brand.
Enhancing Operational Efficiency
Compliance monitoring doesn’t just help avoid penalties; it can also streamline internal processes. When a company has clear protocols and systems in place, it enhances efficiency and reduces the likelihood of errors. Automated compliance software can help detect discrepancies, improve reporting, and ensure that operations align with regulatory requirements, leading to smoother and more efficient workflows.
Building Trust with Stakeholders
Transparency and adherence to laws build trust with stakeholders, including customers, investors, and employees. A company that actively monitors and enforces compliance demonstrates its commitment to ethical practices, boosting confidence and fostering stronger relationships with key partners.
A compliance policy serves as a company’s internal set of guidelines and procedures, ensuring that all employees are held accountable for following relevant laws, rules, and regulations. Developing strong compliance policies as a standard across the organization lets businesses enforce adherence and significantly reduce the risk of regulatory breaches. Compliance monitoring is the next step to preparing your organization for risk mitigation.
Invest in Your Future
Organizations often believe they cannot budget for compliance monitoring; however, the cost of non-compliance is 2.71 times more costly than the cost of compliance. Different industries face varying levels of regulatory oversight. Heavily regulated sectors like finance, healthcare, and energy may require more robust and specialized compliance monitoring tools. In these industries, failing to invest in appropriate software could lead to costly mistakes, making the investment crucial.
A comprehensive compliance monitoring plan promotes long-term stability and growth of the organization. Leveraging AI (machine learning, visualization, anti-money laundering applications) can reduce manual workload, enhance accuracy, and allow compliance teams to focus on more strategic tasks. 89% of professionals working in compliance, risk, and fraud see the advantages to adopting AI in their sector.