For many business owners and captains of industry the mere mention of regulations and compliance can induce cold sweats, rolling eyes and a brief consideration of early retirement. Compliance to regulatory frameworks are often complex, expensive, and labour-intensive.
Coupling this with the flux of general change in the world around us, and a business can easily find itself on the wrong side of compliance and end up playing a very expensive game of catch-up, or worse.
Changes, changes, changes…A change is as good as a holiday… unless the 4×4 is a cell, and not a vehicle!
We all know there is no choice – compliance to many of the regulatory frameworks are guided by the various laws of countries or shared laws for trading blocks and international agreements.
Few sectors today are light on or without governance, and those that do belong to this category are most likely still informal and in the process of being formalised and regulated. This, in essence, is one of the bedrocks of a functioning contemporary society.
The demand on every contemporary commercial operation is to be able to remain competitive in a very dynamic market and so change, it seems, is ever present and ever demanding, not to be escaped. However, it is also a typical trait of many organisations – and, more specifically, the human makeup – to rather remain fixed in patterns and behaviours that have been proven through life experience to be effective.
Once a rhythm is established and an organisational ecosystem has crystallised, it can often become predictably resistant to change. It is here that an every-changing regulatory obligation is beneficial (although not necessarily comfortable). Whilst changing market conditions might be noticed in a business, it often does not provide enough pressure for an organisational adaptation (or at the speed to remain competitive), and such businesses remain trapped in commercial inertia.
Famously, Kodak remained resistant to an in-house prototype of a digital camera and this well-known example lead to a huge loss of what later became a global standard in photography. Regulatory requirements for organisations to change to become or remain compliant are of course different to normal changing trade and market conditions because they are legal obligations imposed on businesses operating within the relevant market, and therefore leave no choice but to comply or face penalties, prosecution or other legal sanctions.
Non-compliance can, in many contexts, often extend not only to the business but can also be levied against the individual responsible decision-makers. Implications of non-compliance can have consequences which range from a mild reminder and a wrap over the knuckles to an impact so severe that it could cause permanent damage and potential ruin to a business or even an industry, for reasons such as cashflow restrictions, imposed trade sanctions, and reputational damage – to name a few.
Up your game, follow the rules
Consider this: the kind of forced change to be regulatory compliant to regulations can actually be a benefit in many regards. Below is a brief summary of some key aspects where this benefit can be incorporated into your organisational spend and strategic plans to achieve compliance changes:
- Given that there is a tendency in businesses to rather maintain the status quo (and develop increasing inertia to change and innovation) forced change could bring strategic advantages. Not only does it overcome the inertia problem, but also creates an opportunity to incorporate innovative and new ways to do old things, as part of the changes and developments brought under the compliance design. Proverbially, whilst the bonnet of the car is open and work is happening for compliance, a business might as well use this opportunity as a slingshot and add other innovations and improvements to existing processes and systems. In fact, often regulatory and ore business processes often go hand in hand, and whilst initially it might seem like a burden to add regulatory processes to existing ones, this also introduces a compelling opportunity to find robust automation and innovation opportunities to apply to the entirety of the development work to achieve not only compliance but an overall streamlined and improved process.
- Being an early adopter or first to market with new regulatory changes can provide a long term larger market share to your business and avoid unnecessary costs in the form of non-compliance down the line;
- Being compliant – especially in industries where high risk and strong trust expectations exist in the clients, such as banking and financial services industries – can strengthen the overall brand perception and value and lead to a stronger sense of trust and loyalty in the consumer base;
- Gaining a reputation for taking compliance seriously can signal that a business has strong ethical core values. Again, this increases trust (both with other organisations that do business with it, such as in banking), brand value, and eventually will positively contribute to the bottom line and sustainability of the business. In addition, think of the following scenario: when first introduced into the banking environment, Know Your Customer (KYC) regulations were cumbersome for clients. However, as banks over time adopted increasingly sophisticated technology solutions to cater to this, to the point where some are able to provide a seamless and automated solution that is not onerous on the client any longer, they also managed to win over the admiration of those clients. Alongside this, banks started incorporating the KYC requirements into their onboarding and maintenance processes for clients and this provided the advantage of providing better customer insights and stronger alignment of market offerings to client demands. Slowly, knowing your customer was no longer the terrain of grudge-compliance but has become something of a good practice… “knowing our clients? Hey, that’s actually not a bad thing for business growth and value offering to the market!” Reframing the spirit of what the KYC regulation wanted to achieve, suddenly made sense as a really good practice to employ in a financial services provider.
- If implemented correctly, being compliant is a necessary and effective mitigation and management approach for risk. Two good examples illustrate the role of compliance as risk mitigation: firstly, in the pharmaceuticals industry it is essential to remain well within the ambit of all medical and related governance and regulation to avoid the high risk of harm to consumers. A quick search on your browser will bring up terrifying examples of pharmaceuticals getting it wrong through non-compliance to regulations, with dire consequences both for the business as well as users. The second example is one that currently South Africans can relate to. The Financial Intelligence Centre Act of 2000 (FIC) in South Africa requires, amongst other things, that banks Know their Customers (KYC). Typically, this takes the form of key pieces of customer information to be obtained, and some verified, by the bank on all of its clients. Retail bank customers will readily recognise the need to submit their Identification (ID) and Proof of Residence (POA) to their bank at various stages of their account holding history. Whilst this can be seen as cumbersome by customers, the benefit is that it creates a security net that combats major fraud and money laundering, and this has greatly contributed to the fight against and exposing of major fraud activities, for which the current government is creating structures to deal with this large scale and far-reaching looting of powerful people. Whilst not fool-proof, it provides for regulation that consistently is updated and aims to combat all fraud and money-laundering activities that could befall people. In addition, it also benefits the economy as a whole. Consider for instance how resilient the South African banking industry was during the 2008 global financial crisis compared to international counterparts – this, thanks to strict banking regulation around bank cash reserve thresholds.
Many good examples can be found across many industries where historical high risks abounded, until regulations were introduced to reduce and in some cases – eliminate – what sometimes amounted to serious injury, impact to quality of life, or death, to workers, communities or consumers of certain products or services of those historical organisations.
In fact, if regulations were not in place, life would be very difficult as ordinary consumers would be vulnerable to the point of daily exploitation and harm being inflicted on them as a result of our highly connected and digital world.
Quo Vadis? Turn to Technology
So, the case for framing regulatory changes has been sketched and the suggestion to make good use of the compulsory changes that compliance bring is that it be seen as an opportunity to do broader improvements and create strategic currency in your business. However, one element is absolutely indispensable in enabling businesses to become and remain compliant through the evolution of the various requirements, and that is the role of technology.
Specifically, it will be cardinal that your business benefit from scalability and flexibility of systems so that your changing processes and operational environments do not misalign with what your solution has been designed to do.
Rather, a good solution – take a workflow or case management platform such as FLOW – has to be able to mold and flex to continue to provide the value and operational backbone for which it is intended, as the regulatory landscapes continually become more sophisticated and circumspect.
Not only will your business stay on the right side of compliance with all the benefits of cost avoidance and the right to have brag value for your brand to customers, but it will continue to legitimise your business and its trading right in a very competitive environment, build trust with consumers, suppliers and other interested organisations around your own which make up your ecosystem, as well as provide you with improved operational costs on your bottom line through being cost-effective to keep aligned and change it to your developing needs.
In addition, a workflow and case management solution such as FLOW must also future proof your business in that it must be able to seamlessly integrate with both existing and new technologies and systems that your business uses, as well as stay able to provide enhanced value through ease of use and customer and user-centric design and functions.
Additionally, it is a core requirement to demonstrate compliance to various regulators and for this, a solution such as FLOW performs well in that it provides dynamic, configurable, and specific reporting outputs tailored to provide you with the necessary data to demonstrate continued evidence of compliance.
As an example, it is very able to provide case management functionality of your client base, provide you with set regulatory triggers and management flags for any client maintenance or interventions required for regulatory compliance (such as keeping your KYC information fresh and up to date without having to inconvenience clients because your records are not kept well, or automation of consuming customer data is not automated and has to be manually given by your customers in regular intervals) and many other customer portfolios related management functions.
Allowing your business the freedom to evolve to changing and increasingly sophisticated ways to understand your world, your customers and their needs, and your greater ecosystem is not negotiable for any organisation wishing to remain competitive and relevant in the changing world where it operates. However, this will not be possible if your technology solutions do not provide the flexible and scalable framework needed for this, whilst still remaining reliable and robust to manage your workflow and operational processes and automate many functions currently manually done.
FLOW is designed to provide you with this value, and it allows space and functionality to continue to support and enable you with your digitisation needs in order to optimally deliver your core value proposition to your market, without the constraint of being held back by an inability to operationally achieve this in a digitised solution space.