Importance of Compliance Management System for your business
Importance of Compliance Management System
You’d agree that risk is all around us, marked by Volatility, Uncertainty, Complexity and Ambiguity (often called the “VUCA” world). Organizations which did not have business continuity, disaster recovery plans or were not agile enough to put one quickly, have been negatively impacted by invisible and unmanaged risks. Unmanaged risks has the potential to disrupt the operation and malign the reputation of your organization.
Apart from operational risks, organizations also face the risks of non-compliance, contract breaches and control failures. These risks need to be proactively managed. Many organizations still have a reactive approach towards compliance and legal risk management.
Gone are the days of few legislative changes and miniscule penalties for non-compliances. Non- compliances are no more “easily managed”. Today laws are updated daily, with strict penalties of non-compliances or control failures, bringing forth the need of an integrated approach to “Compliance Management.”
Compliance Management Systems bring order in the chaotic world of Compliance Management. The includes software which helps in automation of processes like dashboard and email alerts and digitization of documents enabling authorized access 24*7. The system also ensures robust processes for identifying and mapping compliances with near real time access to applicable Legal Updates.
Key changes in the Compliance Management Paradigm in recent times
Digitization: Digitization and e-Governance is fast changing the job profile of the regulators and government officers. From managing manual files and records to an effective and stricter scrutiny and oversight, Robotics and Artificial intelligence are playing key roles. With a click of a button, thousands of show-cause notices are issued and e-assessments are convened. Ministry of Corporate Affairs (MCA), Income Tax Dept, GST Dept, RBI, SEBI, Trademarks, PF, ESI and many more government departments are completely on digital platforms and the remaining ones are following soon.
Integration: Enabled by the digital databases, sharing of information between different government departments has become a lot easier. We have seen notices from the revenue departments over allotments filed with the Ministry of Corporate Affairs. Similarly, it is important to be compliant with the labour laws while applying for Shops and Establishment license as information is shared seamlessly between the two departments.
Severity: Sample this: The penalties under Companies Act, 2013 are up from a few thousand rupees to a range of Rs. 1 Lacs to 1 Crore or more; for FEMA contraventions you may have to cough up over 300% penalty of the amount involved; TDS and GST non-deposits carry huge interest and penalties. Every law that is amended/replaced with a new one, increases the penalties from a few hundred rupees to a few lacs rupees or even more. Many non-compliances carry imprisonment provisions for Directors and Key-Managerial Personnel and threaten cancellation of business license.
Pace of change: The pace of change in the law has increased significantly in the last few years. Gone are the days when laws used to be amended once in every 10-15 years. Not only are the laws changing frequently but so is the governance and compliance.
Complexity: Tracking, understanding, and analyzing the impact of numerous legal changes under different applicable laws is becoming increasingly difficult for any single professional or a small team.
Examples of recent changes in the Compliance paradigm
- Companies Act compliances got digitized with Ministry of Corporate Affairs
- Income Tax Returns got digitized and refunds became faster.
- GST reporting is online
- Reporting to Reserve Bank of India for Foreign Direct Investment got digitized
- Compliances of Stock exchanges, Depositories, SEBI etc are online
- Application for Trademarks all over India got digitized
- Social security compliances like PF, ESI etc. are online
- Shops and Establishment Licenses are issued online by a lot of States
- Stamp duties are paid online by most of the states
- STPI / SEZ Compliances are online
- ……and the list is endless and is growing by the day.
Challenges of current Compliance Management Systems
As you are aware, compliance with various laws, regulations, and standards is a crucial aspect of running a business in India. However, compliance management systems can also be challenging and time-consuming. I wanted to bring to your attention the main challenges that companies may face in terms of compliance management in India.
- Keeping up with changing laws and regulations: The Indian legal system is dynamic, and laws and regulations can change frequently. It can be difficult for organizations to stay updated with latest Legal Updates and ensure compliance.
- Complexity of compliances: Compliance with the various laws, regulations, and standards in India can be complex and challenging to understand. This can make it difficult for companies to determine their obligations and take the necessary steps to comply.
- Lack of awareness and training: Many organizations in India may not be aware of all the laws and regulations they must comply with, or they may not have properly trained employees for compliance procedures.
- Identifying and managing risks: Compliance involves identifying and managing potential risks like financial, operational, and reputational. Apart from financial penalties like interest payments and late payment fees, there are risks for license cancellation and imprisonment of Directors or Key Management Professionals.
- Enforcing compliance: Enforcing compliance can be difficult, particularly in situations where companies lack compliance culture and have poor Governance track record. This could also be result of lack of proper infrastructure in terms of compliance tools and software.
Related: 10 Tips for Implementing Compliance Management System Successfully in Your Organization
Advantages of Compliance Management System
In a rapidly evolving regulatory landscape, Compliance Management Software not only aids in maintaining legal conformity but also fosters a proactive approach, enabling businesses to adapt swiftly to changing compliance requirements in the Indian business environment.
Compliance Management Software helps organizations with the following.
- Avoid Legal Consequences: Compliance Management Software helps companies avoid legal repercussions such as fines, penalties, imprisonment, and litigation. Non-compliance can lead to regulatory investigations, lawsuits, and potential financial losses, which can severely impact the company operations and bottom line.
- Protect Reputation and Trust: Non-compliance also tarnishes a company reputation and erodes customer trust. Rebuilding trust and reputation is often a challenging and time-consuming process.
- Mitigate Financial and Operational Risks: Non-compliance can also disrupt operations, leading to production delays, supply chain disruptions, and loss of business opportunities.
- Enhance Stakeholder Confidence: Implementation of Compliance Management Software demonstrates a company commitment to ethical practices, transparency, and good governance. It instills confidence in investors, shareholders, employees, and business partners, making the company an attractive and reliable entity to engage with.
- Keep Pace with Evolving Regulations: Laws and regulations are constantly evolving and creating challenges for various stakeholders. Compliance Management Software helps organizations stay updated with the most recent Legal Updates and adapt to regulatory changes, mitigate risks, and demonstrate a commitment to responsible business practices.
Staying Compliant with Complinity
Complinity is India’s Leading Governance, Risk and Compliance (GRC) Software has helped 1000+ companies from 50+ industries by giving access to 26,000+ compliances across 2000+ laws. Our integrated software with 13+ modules helps organizations with streamlining their Compliance, Contract, Audit, Litigation, Internal Financial Control, ERM and other GRC processes.
Well, here are 6 GREAT reasons why you should consider Complinity:
- Comprehensive Compliance Checklist: Track Regulatory compliances on a single platform covering Central, State and Industry specific Laws comprising 2000+ Laws and 32,000+ compliances and growing.
- Real-Time Legal Updates: Be on top of changes in laws via notifications, circulars, orders, forms, new regulations etc.
- Multiple Modules: Access 13+ Governance, Risk and Compliance (GRC) modules on a single platform, highest compared to any of our competitors.
- Automation and Digitization: Automate all GRC processes with real time and user-friendly dashboards and email alerts. Digitize all GRC documents and information and share selectively with relevant stakeholders.
- Robust Information Security: SOC2 compliant, ISO 27001, ISO 27701, ISO 9001, GDPR certified.
- Mature Product: The product has evolved over a period of 6+ years with inputs from existing customers, prospects, and our market research team. Quarterly version upgrades ensures that customers are at the center of our product development.