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As the regulatory landscape is constantly evolving, following an old approach of meeting the minimum compliance requirements is no longer enough. With the ever-growing expectations for transparency and accountability, stronger emphasis on due diligence and raised bar for data privacy and cybersecurity, organizations of all sizes and jurisdictions need to adapt and adopt effective strategies to prepare for regulatory compliance. This report focuses on 10 strategies for implementing proactive compliance, helping organizations stay on top of emerging regulations and offering a competitive advantage.
When companies aim to transition from reactive to proactive compliance, they need to build awareness of the forthcoming changes. By fostering industry relationships with external teams, consultants, partners, vendors and media, organizations can stay relevant with industry trends, share best practices and have early enablement processes.
In the constantly changing regulatory landscape, organizations need to be selective about the sources they choose to get information and seek the most efficient ways to stay ahead of the changes. For example, many teams choose to participate in panels, workshops and webinars to connect with advisors and professionals operating in the same industry to learn about new regulations and brainstorm on how to address them. Other approaches include checking online resources on compliance, signing up for newsletters and partnering with industry experts.
Once the teams identify the new trends in compliance, they need to assess the applicability, impact, and consequences of forthcoming regulations. Meanwhile, starting the process early provides more flexibility and additional time to evaluate how new regulations affect each entity belonging to an organization in each jurisdiction.
For example, this strategy helped many global organizations access the applicability and understand the impact of the US Corporate Transparency Act in advance. By reducing the information noise, identifying the impacted entities and checking available exemptions, many companies were able to follow a proactive approach, ensure timely stakeholder engagement and have processes in place long before the CTA came into effect on January 01, 2024.
Assessing new regulations is tied to establishing comprehensive due diligence processes, which are required for change planning. This strategy implies breaking down new regulations into elements to achieve a full understanding of the steps needed to prepare for the changes.
Setting due diligence means having a system in place to follow the regulatory developments as they evolve. In doing so, many companies find it helpful to document the process on diagrams and other records and share them internally to get timely stakeholder engagement.
Once an organization has assessed a new regulation and the exact ways how it impacts each of the organization's entities and stakeholders, the teams need to implement their change management processes. Many companies found it useful to apply the RACI Matrix to identify who is responsible for implementing each task, who is accountable for the end results, and who needs to be consulted with or informed about the process execution. By defining the roles and responsibilities in implementing changes, the teams can enable a structured approach, enhancing transparency and accountability and improving the organization's agility in responding to changes.
Typically, the change management stage covers three phases, including:
Many organizations find it efficient to go beyond simply preparing for the implementation of new regulations in advance. Instead, companies aiming for smoother transition choose to adopt new enactments to the greatest extent possible, even before they come into force. Such a strategy can be especially useful for global organizations having to provide for compliance across all their jurisdictions so that each of their entities is prepared once the respective country adopts a similar regulation.
This strategy can be further enhanced by running pilot tests of new compliance procedures before full-scale implementation. When running such tests, the teams can further engage with regulatory bodies asking for clarification, for example, requesting a private ruling to address uncertainties in legislative requirements and seek guidance in navigating the evolving regulatory landscape.
As the quality of data is paramount not only for compliance but also for decision-making, organizations need to implement the best practices to improve the speed and accuracy of reporting. While corporate compliance is a multidisciplinary endeavor, organizations cannot follow a siloed approach to data and need to have all their teams on the same page. Companies need to implement a single source of truth (SSOT) for the whole organization, including all their entities and branches, to enable effective compliance processes and ensure that all their data are accurate and up-to-date.
In the modern business environment, leveraging technology for compliance is no longer a nice-to-have but a strategic imperative, enabling companies to:
In implementing RegTech (regulatory technology) solutions, organizations can also leverage the tools they are currently using, integrating them via API capabilities into a global compliance solution. In the context of compliance, it is always recommended to concentrate on solutions offering greater visibility of corporate structure, including entities, funds and investments, to streamline compliance efforts.
As the regulatory environment becomes more complex, simplifying compliance guidelines becomes a crucial step to ensure their implementation across the board. Organizations can employ multiple strategies to achieve a better understanding of compliance guidelines by their teams beyond training sessions or distributing their governance policies.
For example, one of the successful cases of delivering compliance guidelines across organizations has been using cartoons for cybersecurity education, which are much easier to digest and remember compared to formal multi-page PDF documents. Companies can further enhance the delivery of compliance guidelines by localization of their official rules taking into account operational context and cultural differences across their operated geographies.
With the introduction of new rules to ensure stronger enforcement of the European GDPR law and the evolution of new data privacy laws across the globe, organizations have to navigate more stringent regulations while managing their deal flow and cross-border investments. Under these circumstances, companies need to strike a delicate balance between protecting Personal Identifiable Information (PII) while ensuring overall transparency and sharing data among multiple stakeholders.
Tasked with ensuring the legitimacy of investments and overall compliance, the teams need to have a system in place to set up various roles, permissions and access rights to corporate records for all stakeholders. Assisted by technology, such as modern entity management software, companies can embrace transparency and compliance while ensuring the safety of their data.
Last but not least, organizations need to keep a constant eye on compliance and seek improvement of their processes. By running regular internal audits, companies can modify their processes on the go to ensure that they not only stay compliant but also evolve their compliance framework as they grow and operate in the changing regulatory landscape.
In implementing monitoring and improvement of compliance, companies need to maintain robust support networks, both internally and externally, involving in-house teams and industry experts. One of such practices includes creating groups of internal "compliance champions" who become the point of contact for various stakeholders to share, discuss and develop new ideas and compliance strategies.
The above strategies can help achieve the best results when used as a holistic framework for practicing a proactive structured approach to regulatory changes. These recommendations are developed on the basis of case studies of various organizations, including global companies, venture capital, private equity firms, asset management firms and other businesses and delivered by the Athennian team of experts during the live webinar. For more information about these strategies and introducing technology for compliance support, please don't hesitate to contact the Athennian team to request a free demo.
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