When you work with teams – large or small – you learn very quickly that a team is only as strong as its weakest link.
And one of the best examples of that can be found in your compliance policy. If something isn’t quite right, your business could feel the impact in a big way. We’ve talked about the potential causes of compliance failures before. But understanding the potential causes won’t get you very far if your business isn’t equipped with the training to face them. Without the proper internal controls, processes and training, your business could be left vulnerable to a wide range of compliance threats, from sanctions violations to health and safety and everything in between.
Those are some pretty big problems for your business to tackle, especially when you could be working with hundreds of customers and suppliers that pose potential threats. When you create a culture of compliance in your business, it unifies your compliance program so that everyone’s on the same page. And one of the best ways to do that is by implementing internal controls like monitoring, documentation and training. These internal controls are absolutely crucial for compliance – your compliance program won’t be complete without them.
Have you done your due diligence on your customers and suppliers?
Internal controls help you spot risks early
New cool movies, a cake fresh out of the oven, life-changing new tech... can you really think of that many things you want to be last to know about? Keeping internal controls in your compliance program means you’ll be the first to know when something changes. When you’re regularly monitoring customers and suppliers, you can take an instant snapshot of your company’s compliance status and risk. Spotting issues early means you can take action as soon as possible, which should lower your risk of heavy fines and other damages.
More controls and training mean you will have less compliance violations
In a lot of ways, your business is at the mercy of lawmakers: if they decide that a particular country or area is off-limits to work with, for example, your business needs to react to that. You could be perfectly compliant one day, but if a new regulation is put into place without you realizing, it could topple your entire compliance program. Staying up to date with quickly changing regulations can be difficult, but it’s also the heart of compliance. To put it simply, if you aren’t following the letter of the law, you’re non-compliant. The internal controls you put in place as part of your compliance policy are there to make sure you’re following regulations at every level of your supply chain and business.
You can keep your leadership team in the loop about issues
When things go wrong in the world of compliance, you need to be able to take action quickly. If your leadership team is up to date on all of the compliance risks that your business faces, they’ll already understand what the problem is when the time to act arrives. Your compliance software should be easy for everyone to understand and use, so that if your leadership team wants to explore for themselves, it’s easy to do so. That way, they can stay on top of any risks, violations and other compliance areas that need their attention without taking time away from the rest of the team.
You won't be caught off guard during compliance audits
When you’re looking for compliance software, you should be looking for something that helps you with the “before” and “after” of compliance. Of course you need a software that’s easy to use and tells you about compliance risks customers and suppliers pose to your business. That’s the before. But your compliance software should also help you “after,” with a clear audit trail proving your company has done its due diligence. When it comes time for your company to be audited, you’ll have all the proof you need readily available, which means audits will go much more smoothly.
Automating processes will lead to improved operational efficiencies
You know the saying “many hands make light work”? It means that when people work together, tasks are easier to complete. While that’s true, in the world of compliance many hands can also create gaps in your compliance program. Think about it: if you don’t have internal controls that shape the way people interact with compliance in your company, everyone could have a different personal system. If everyone assumes that someone else is checking a business, for example, then that business could be in violation for months without your team picking up on it.
Automating your processes and controls, like with an automated decision-making software, gives all of your teams a single data source. Combining that with the internal controls you set out as part of your compliance policy makes for a streamlined, low-risk process.
Having established processes means less risk of reputational damage
Now more than ever, people want the businesses they interact with to “walk the walk.” Look at businesses like H&M, who’ve been accused of “green-washing” their marketing by claiming to be environmentally conscious without backing it up. In our research study The Murky Waters of Overseas Manufacturing, 28% of respondents said that reputational damage would be the worst consequence of working with a sanctioned or unethical supplier.
Reputation is everything – especially in the age of cancel culture. Anything you can do to avoid the reputational damage compliance violations can bring to your business is a step in the right direction. Continuously monitoring your customers and suppliers will help you make sure that you aren’t accidentally working with someone who could damage your reputation.
You can minimize the extent of financial losses
Being non-compliant is an expensive business. If your compliance program fails, your business could find itself losing money in several different areas. You know as well as I do that your cash flow is the lifeblood of any business, which means you want to avoid losses wherever you can. Compliance violations can cost you in any of the following ways:
- Regulatory fines: If you violate a compliance regulation, your business will face fines. And we’re not talking chump change here, either. The biggest compliance fines companies have faced have gone into the billions of dollars. Yes, that’s billions with a B.
- Lost customers: No one wants to stay on board a sinking ship. If your customers believe that your business could negatively impact their own supply chains, they might not think working with you is worth the risk. Losing customers means losing the regular payments they make to you – lose enough of them and you could find that your business is starting to struggle with cash flow.
- Lost sales: Our research study The Sales vs. Credit Control Battle found that 47% of salespeople have more than 10 deals shut down by finance teams each month. While it’s a frustrating reality, the finance team usually backs themselves up with financial and compliance data. When both teams are working with the same data, there are fewer mix-ups and fewer lost sales.
Compliance can feel overwhelming. And when you think about how many regulations you need to understand alongside the potential consequences for breaking compliance, it’s easy to see why it’s stressful! But with the right internal controls in place, your teams will know exactly what to do no matter what the scenario.
Streamline your compliance policy from end-to-end
About the Author
Bill James, Director, Enterprise Sales, Creditsafe
With over 15 years of experience in finance, risk management and data analytics, Bill James understands exactly what enterprise businesses should be thinking about as they build their corporate growth and risk strategies. Prior to joining Creditsafe in 2021, he spent six years at Dun & Bradstreet as Area Vice President of Finance Solutions and Third-Party Risk & Compliance.