The Difference Made by a Proactive Compliance Risk Management Approach

Every business knows that it has to manage its compliance risks, but not every business is able to achieve the level of compliance they want. The problem is that businesses have traditionally used a reactive approach towards compliance which results in missed issues and delayed reactions. The advantages of a proactive approach are well known but there was no sustainable way to be proactive before the advent of compliance risk management technology.

Why Reactive Approaches Are the Norm

Reactive approaches are the only possible approaches when compliance risk is being managed manually. Simply looking at the work processes involved in manual compliance management makes it clear why this is the case. Under a manual approach the only way to discover something is to actively look for it. If a problem is caught by an audit or assessment it is solved, but only when it is caught. There is no mechanism to detect compliance and risk problems when they occur, instead they must be dealt with when they are discovered.

This can be very problematic for businesses. If a business performs audits every month an issue can lay undiscovered for a month. If the audits happen every quarter, then problems may not be known about until the quarter has passed. In such a scenario firms can only hope to contain the damage that has already been caused and prevent further damage from occurring.

There is another problem with reactive approaches – the business may get fined by regulatory bodies if it is too slow in dealing with problems. If the regulatory bodies assess that the business did not have the right compliance risk management framework in place to detect the issue the business will be fined not just for the violation, but also for not having a mechanism that could have detected the problem.

How Technology Has Enabled Proactive Compliance Risk Management

Under a manual compliance risk management framework the only way to find out about problems and issues is when an audit uncovers something or when there is a complaint from a customer or a regulatory body. Compliance management technology change the scenario by allowing banks to discover problems as they occur. This capability is a game changer and completely changes the approach a business takes towards compliance.

KYC processes are a great example. If a front line employee forgets to collect important KYC information, it opens the bank up to a huge risk. KYC processes are necessary to ensure that no fraudulent transactions take place. These processes can weed out not just scammers and thieves but also terrorists and entities that have been sanctioned by the government. However, the issue will only be discovered when someone audits the KYC documents or if a violation is caught by a regulatory body. This can lead to major punitive damages to the business.

Check out our recent post Why Your Business Needs Regulatory Compliance Software.

The same situation plays out very differently when we have a compliance risk management framework in place. Such a system will automatically check all KYC documents and ensure that everything that is legally required is present. If anything is missing the front line employee will be notified instantly and they will be able to get the required information or document from the customer. Thus, instead of the violation becoming a part of the system and the customer making transactions they shouldn’t be able to, the problem never enters the system and is proactively dealt with.

The automation that is a core component of compliance and risk management technologies allows business to catch issues before they become a problem for the business. This proactive approach is possible because checks and balances are being kept by computers and computers are exponentially better at checks and balances than humans.

If you want to see how your business can benefit from compliance risk management automation, then you need to see how the Predict360 Compliance Management solution can help you. This American Bankers Association endorsed compliance solution can be demoed and tested on a trial basis by interested customers. Get in touch with our team for a demo and a trial.

About the Company

360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.

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