- A SYSTEM SOLUTION TO YOUR ORGANISATION WIDE COMPLIANCE ISSUES
By: Jayant Dwivedy, CEO, Empronc Solutions
Compliance means conforming to a rule, such as a specification, policy, standard or law. Due to the increasing number of regulations and need for operational transparency, organizations are increasingly adopting consolidated and harmonized sets of compliance controls. This approach is used to ensure that all necessary governance requirements can be met without the unnecessary duplication of effort. In large and progressive organizations it becomes absolutely necessary that such controls are electronically driven and are manageable at any point of time.
Business process compliance management is a field of study involving the co-ordination of business process management and compliance systems. A compliance system is an organization wide tool that links legislative and business rules to organization policies and processes. For the sheer magnitude and complexity of the task, can this be achieved without integration and electronic control? The objective of such a system is to promote a self sustaining level of operations that minimizes the losses caused to the business through breaches of laws or internal misappropriations. Are the CFOs and CEOs geared for the same and confident?
We view a compliance system in a similar fashion to that of an accounting system where each process is treated as a transaction. The top of the order policy creation as well as down the line transactional processes must be visible to obtain a complete picture of existing operations.
All matured and visibly compliant organizations began the process by confronting the brutal facts of their real situation- not the internally reported status. Once the brutal facts emerge, it becomes easy for people to be heard and to create a true compliance culture. This may seem like adversity in the initial phase but recognizing, planning, resourcing and working on the issue leads to the organisation emerging even stronger.
The compliance and ethical compass on actions and transactions:
- Is it legal and ethical?
- Is consistent with the company policy and code of conduct
- Can I explain it to my peers, auditors, family and friends?
- Would I be comfortable if it appears in the press?
- Will my current system make an issue visible? When?
The article below is on spend management and control, often the largest area for compliance issues! The suggested road map is through "Compliance By Design”
Initiate a stir:
Yes, there has to be a CXO level stir in the organisation to kick-start the process. This is to get everyone listening (not hearing). A clear leader or sponsor of the project needs to emerge at this stage. Communication channels that went over a period of time need to be revived so as to deliver a high level of efficiency in communications.
Finalize scope, gather facts and data
This is another area where many companies falter. Often the agreed scope does not reflect the true picture. Compliance requirements are beyond the four walls of a company. Does the current scope and computerization cover all employees (up to the grass root level include field level staff), contract manufacturers, regions and branches, clearing and forwarding agents, warehouses etc?
Does it cover spend on core processes (e.g. agent fees, production materials) and also spend on non-inventory/ service contracts (e.g. field level reimbursements, maintenance contracts and rentals in warehouses, office or plant consumables, media contracts, promotional spend, capital goods)? Are these spends visible and is data available in one go!? Is the company within the budget norms? How long does the middle management team take to provide this information- a few days or a few hours? Should this be available to me through a click of a button?
The other good question to ask is whether the company has an on-line spend category management system. Does the company for example see their IT spend as that on sub-categories: hardware, software and licenses, networking and communication, consumables, data storage/ back-up infrastructure, disaster recovery spend, annual maintenance contracts for hardware, facilities, software development charges, computer stationery, IT temporary/ outsourced staff, IT consultancy and implementation fee, IT training, web designing and hosting etc. If one notices these are 16 sub-categories, we have still not accounted for the permanent staff cost and their operational cost (e.g. travel, telephones).
Does the current system provide the ease with which spend categories can be managed and controlled in absolute terms? Large to medium organizations can have 850-100 categories and subcategories of spend. If such categorized data is not visible and there is no accountability and on-line linkages to policy matters and corporate contracts the likelihood of the organisation being compliant is medium to low.
Determine Strategy and re-visit policies
Having understood the scope and the requirements the company needs to determine its Corporate Governance strategy. This requires top management time and sign-off. The policies around spend management need to be re-visited and scripted in line with the business requirements and also the umbrella Corporate Governance strategy.
Generate Options / Determine combination of Tools
A computerized system goes a long way in ‘tying’ up the loose ends with great speed. These systems should be widely acceptable and should also bring in the best practice processes. The user friendliness of the system also determines compliance levels and should be an important design criterion.
This phase becomes important as 6S techniques for organizing the work places should be applied (seiri-sorting, seiton-simplifying, seiso-sweeping, seiketsu-standardising, shitsuke-sustaining, safety).
Once the clutter is removed the organisation should focus on enhancements and options available to build and sustain compliance on transactions. Various work flows and tool options should be examined. Unwanted heritage systems should be dismantled.
The final selection of the tools in today’s world could be a combination of intranet and internet based systems. It could be a combination of ERP and Spend Management and Control tools.
Resource and implement
The funding and resourcing of the following becomes paramount:
- Corporate governance policies
- Clean-up and integration of existing systems
- Integration of grass root employees-all doing activities/ transactions
- Spend Control and Management Solutions-make spend visible
- Reporting an control framework-make compliance visible
- Communication and training
The payback for such activities considering cost savings, productivity enhancement and savings is often less than one year. In other words Compliance contributes to the bottom line.
Keep watch on visible controls
Are month end summaries and reports control in the real sense- Yes, but only to a certain extent. With millions of transactions happening in an organisation it is important that the system doubles as a whistle blower and throws up alerts on-line. These alerts should determine spot corrective action.
Continuous Improvement
Investments in Spend Management and Compliance systems pay for themselves in less than one year. The benefits come in the form of cost savings, productivity improvement, reduction in audit costs, knowledge management benefits etc.
Specialist modules should be added from time to time to manage various aspects of the business. The core implementation team should change their focus from implementation to training, awareness, reports, communication, excellence sharing and lean sigma principles as the solution matures.
In summary, Corporate Governance does not mean Corporate Office Complaint! An organisation can make itself compliant by linking its Corporate Governance philosophy with its operating systems, people and transactions. Each transaction is important and determines the compliance level of the organisation. Transactions must be visible to all who need to see it or in other words to all to whom it can be shown! The larger organisation is equally responsible for determining the overall compliance status. An early start with well calculated steps does not leave compliance to chance! "Compliance by Design” is essential. Have you given it a thought?
Jayant Dwivedy, CEO, Empronc Solutions
Jayant Dwivedy has with him a vast experience of 22 years and is a top notch professional with extensive expertise in I.T. systems deployment, cost optimization and strategic sourcing. He joined Empronc Solutions in 2010 and is currently focused on making the company a leader in the Spend Process Management space. This will be largely driven by the company’s flagship software product BAZ®.
Jayant has been a Member of the Executive Committee of the Board, of the GlaxoSmithKline Pharmaceuticals Ltd. (GSK) from 2003-2007. During the period he also served as a member of GSK’s International Procurement Leadership Team, with responsibilities for South Asia.
Subsequently, he held the position of President-Global Supply Chain, with Piramal Healthcare Ltd. (PHL) from 2007-2009. He had functional responsibilities across India, China, Canada, USA and U.K.
Jayant has been a part of many business turnaround teams. He has been responsible for a number of geographic and business expansions and has spearheaded integrations post acquisition. He has a number of papers and publications to his credit and has travelled across five continents in his various capacities. He is an International speaker on IT implementations and Supply Chain Management.
He is an M. Tech. in Industrial Engineering and Operations Research from I.I.T., Kharagpur.
