Compliance Study_complet - pwc

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© PricewaterhouseCoopers - Protecting the brand, May 2005 37 Perfecting the balance Prevention is better than a cure The role of “trusted advisor” shifts the balance more towards preventative measures than has necessarily been the case in the past in Anglo-Saxon countries. Effective prevention requires a multi-pronged, holistic approach (which naturally may instigate corrective measures): • Anticipating regulatory intentions, and making an early assessment of potential impact on business from a compliance perspective, coupled with effective lobbying, can help ward off or rationalise requirements where the cost may far outweigh the potential benefits. Such assessments also feed into longer-term strategic business considerations. • Correctly interpreting new regulations, and the specific implications for business practices and processes, can ensure that suitable plans are made to adapt business practices and processes to the new requirements in a timely and costeffective manner. • Thoroughly assessing compliance risks, in terms of their probability and materiality in line with the “risk tolerance” of the organisation, enables effective prioritisation of scarce resources. • Ascertaining whether existing business processes are configured to be compliant, and that technology facilitates this, can i) clarify inherent difficulties and risks of non-compliance, and ii) simplify the adaptation of business processes to reflect new regulatory requirements. • Ensuring that sufficient knowledge of how to remain compliant guides day-to-day business through appropriate “handholding”, training and awareness raising initiatives, and appropriate communication strategies, which simultaneously enhance business knowledge of compliance-related issues and the profile of the compliance function. • Ensuring that compliance ramifications are fully considered in all new business ventures and transactions, from both a strategic and a tactical perspective, in order to effectively streamline innovation and associated costs. • Analysing trends to ensure that potential systemic compliance weaknesses are identified early is essential in the context of a dynamic business environment. Interface with regulators As we have seen, study respondents identified the principal challenges to achieving compliance as the rising bar of regulatory expectations, uncertainty due to regulators’ moving the goalposts retroactively, and the increased, and increasing forcefulness of both regulators and law enforcement. Particularly, they stressed that detailed rules can create cost impediments to business. Nevertheless, ultimately, compliance, like risk management, is one of the costs of conducting and
38 © PricewaterhouseCoopers - Protecting the brand, May 2005 staying in business. In order to be in a position to advise business proficiently, Compliance needs to play an active and intrinsic role supporting management in interfacing with regulators in terms of all four aspects of the regulatory relationship mentioned above. In effect, Compliance can represent an effective communication conduit between management and the regulators. The police officer informs the counsellor The pendulum should not be allowed to swing unreservedly in the “counsellor” direction. Compliance has a critical role to play in compliance oversight and monitoring in order not only to provide the necessary comfort to (senior) management but also to frame the advice it provides going forward. A clear delineation needs to be set between “doing compliance” and “monitoring compliance”. Sufficient knowledge needs to be ingrained in the business in order to execute the necessary compliance controls: this responsibility should not be confused with the role of oversight and monitoring which should remain with the compliance function (whether or not supported by other control functions, such as internal audit). Admittedly, this distinction can be difficult to achieve at the local level. However, management needs to clearly differentiate between the two roles, and their intrinsic, separate importance when configuring the compliance function, setting compliance objectives, allocating resources to the compliance function and determining the nature of its interaction with other support and control functions both in the short- and longer-terms. Evidently, to be able to advise management and the business proficiently, compliance officers need a deep understanding of the business, a detailed knowledge of relevant regulations, and insights into regulators’ expectations, as well as pragmatism. Many respondents stressed, however, compliance officers’ communication and influencing skills as key to engendering trust. How well their advice is trusted, however, should not rely solely on their influencing skills: management should always be prepared to listen and act.
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Page 20 and 21: Challenges to achieving compliance
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