The regulatory environment is a rapidly shifting landscape for CFOs. The pressure to meet changing compliance requirements can frustrate even the most level-headed executives. A comprehensive compliance and risk framework can actually create strategic advantage. With proper planning and precise execution, a well-designed compliance initiative can become a competitive secret weapon. Changing your perception of compliance might require a mental shift. Right now, compliance may seem like a necessary evil – a chore with punishments for tardiness or deviation. If that’s your thinking, view compliance as a lever, one that will help you operate your business better by providing visibility into operations and enterprise risk, while reducing waste. It can also help you take advantage of new market opportunities, especially when competing against other companies that haven’t made compliance a priority.
Improving enterprise performance and transparency
Most organizations begin their compliance efforts by simply trying to “check the boxes.” Programs are designed to meet the statutory requirements or keep executives out of jail, and little more. As companies gain expertise, however, they often expand their compliance programs to focus on avoiding minor or even critical enterprise risk. By using tools and processes to automate compliance efforts, these programs can increase efficiency, reduce related expenses, and accelerate cost savings, especially for internal and external audits. That’s great for the bottom line. But even more important is the impact of these more mature compliance initiatives on the business. Automation can help improve overall performance, reduce cycle times, and increase enterprise visibility. A holistic view of the business also allows executives to make decisions that limit the likelihood of enterprise risk, including fraud.
Think about how many companies struggle with false, inflated, or duplicate invoices for goods and services. Many incidents are discovered after the fact or never at all. Even when fraudulently dispersed monies are identified, they are not always recouped from the bank. In fact, the average company loses 5% of its annual revenue through fraud. A comprehensive compliance program that includes real-time monitoring of fraud and fraud prevention can add both top-and bottom-line benefit.
Mitigating catastrophic risk
The most advanced level of compliance focuses on avoiding catastrophic risk. CFOs who recognize the very real dangers of these threats pose are often the first to take responsibility for enhanced compliance. They must then develop a holistic strategy that not only identifies risk early but addresses how the company will handle any problems that are discovered. This advanced level typically includes an enterprise-wide framework for compliance, with the associated people, processes, and technology needed to support the program. Companies that embrace this approach can significantly improve their ability to detect and prevent catastrophic losses, such as the hacking of financial information, breaches of finance systems, or violations of anti-corruption mandates.