The automation of compliance processes can keep companies up to date with a constantly evolving regulatory environment and out of trouble with the law, writes MP Birla Group’s Subhadeep Bhowmik.
Adhering to statutory compliance is mandatory to keep businesses safe and avoid negative consequences such as penalties, disqualifications, licence confiscation, fines and lawsuits. A deep knowledge of statutory compliance is required to minimise the risk associated with non-compliance.
India’s laws and regulations are not static, and can change frequently. Compliance officers must track changes to dates, deadlines, forms, duties and interest, penalty calculations, additions of compliance items, rare deletions of compliance items, and the introduction of new acts. Of the changes in law between March 2020 and December 2021, about 2,600 updates came from the central government, and about 900 from state governments.
Several cement manufacturing companies have faced various non-compliance issues relating to overtime, ambient air quality and legal metrology. Some factory inspectors, in a disturbing trend, issued lengthy show-cause notices to factory occupiers (usually managing directors or chief operating officers) citing various trivial statutory non-compliances.
To overcome such hassles, industries have much to gain from multiple tech-based options available today to manage compliance. To cope with the growing list of regulatory obligations, automation offers accuracy, efficiency and, most importantly, ease of use.
Automation software such as Compfie, from Aprajitha, and Legatrix are user-friendly and up to date for in-house counsel.
An in-house counsel’s understanding of the business is as important as their understanding of the law. For compliance automation, the in-house counsel’s role is vital, as they form a bridge between the automation implementation team and company departments such as human resources and taxation. In the following activities, the in-house counsel takes a leading role to implement compliance automation:
Automation can increase compliance efficiencies and improve monitoring as required by regulators. It relies on technologies such as artificial intelligence (AI) to continually check systems for compliance. Automation replaces manual processes and manual tasks such as risk assessments, alerts and notifications, streamlining compliance workflows and reducing process redundancy.
Corporate legal departments of all sizes across the globe are rethinking how they work, and are seeking ways to radically improve their process performance to optimise compliance activities.
When an organisation automates compliance, it makes processes more accurate and removes faults that can occur while handling information. That reduces work-related anxiety by removing compliance reporters’ fears or concerns over misreporting incidents.
Human errors are the greatest impediment to successfully maintaining validation and compliance operations. For example, every individual, company, society or corporation that pre-packs or imports any commodity for sale, distribution or delivery must authorise its directors to exercise all powers and steps to prevent the commission of an offence under the Legal Metrology Act, 2009.
But in most organisations no directors are nominated to do that. Employees may perceive that living with errors is an acceptable business practice. The number of errors may increase due to the “fungus effect”, which spreads to other parts of the business and destroys confidence. Organisations are then likely to become more reliant on third-party contractors and consultants to resolve issues, thereby increasing costs.
Organisations should be aware of new regulations for accountability purposes. Automated programmes are equipped to immediately implement novel compliance standards as they are introduced. Most automated programmes also enable current compliance and audit statuses to be tracked in real time on a convenient dashboard.
Automation organises messy processes within a company, so no step is overlooked. Compliance officers have myriad responsibilities, and so can accidentally misplace or misreport information. Automated systems remove that burden, enabling officers to focus their efforts on other aspects of company compliance.
In-house counsel or compliance managers ensure a company operates in a legal and ethical manner while meeting its business goals. They are responsible for developing compliance programmes, reviewing company policies, and advising management on possible risks.
It is their responsibility to regularly audit the company’s procedures, practices and documents to identify possible weaknesses or risks, and create and manage effective action plans in response to audit discoveries and compliance violations.
Automation can be customised to meet state and central regulations, which is especially important for companies with large geographic footprints. Whenever compliance standards and regulations change, the system can integrate the new information in real time.
The switch to remote working in the pandemic has affected compliance due to a lack of a central depository for unautomated compliance filings and the difficulties in controlling the compliance mechanism. The majority of companies that switched to automated processes are sailing smoothly, while those still dependent on manual processes have faced a rough time.
TAKING ON AN ADVISORY ROLE
Automation saves senior executives’ time, money and relationships with their company by continually and automatically staying on top of the most current regulations. Running an automated program is more efficient than relying on employees to conduct every process accurately. Although automation does not eliminate the need for compliance officers, it reduces costs because it is less expensive than paying multiple employees to manually oversee each process.
Since automation is more adept at processing vast amounts of data in a short time, that gives compliance officers comprehensive insights into how to elevate organisations’ ethics and performance. The responsibility of completing mundane tasks is shifted to the program and the compliance officer can act more like an adviser to find and address problems.
When compliance standards are checked manually, an employee must enter the data weekly, monthly or annually, as required. That leaves room for errors that can go unnoticed. An automated system monitors data continually, alerting officers immediately if something is out of place.
Compliance automation tools create a depository of permits and licences in one place, and generate various types of reports, such as performance, legislative and task-wise compliance reports. An organisation can define risks as critical, high, low, medium and very low, and gain better control by customising the frequency of tasks.
Automation is the future of compliance management but the role of compliance officers is equally vital to guide the process.
Subhadeep Bhowmik is deputy general manager of legal at MP Birla Group.