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To prepare for the future of compliance automation, leadership practices should be put in place

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By Sandeep Agrawal Director and Co-founder Teamlease Regtech

Within 75 years of Independence, India has displaced its former colonizers to become 5th largest economy in the world. The 7% growth rate of the economy puts the country well on track to reach the $10 trillion mark by the end of the decade. This growth will be supported by a $1 trillion+ digital economy and a business-conducive environment that is centred around ease of doing business. As such, ensuring compliance is essential for businesses to operate and grow. This makes compliance management a critical business process. An adequate compliance management framework helps a business in maintaining transparency and cultivate the trust of the market in its capabilities.

Technology is transforming key business processes by making them faster, easier and cheaper. In this age of automation, organisations need to actively pursue digitisation as a key component of their compliance goals. Today, the digitisation of compliance processes is restricted to tracking and management of regulatory obligations. Introducing automation will allow enterprises to reduce the cost of compliance as well as the cost of poor compliance.

Corporate compliance monitoring methods have matured with the introduction of regulatory technologies. Yet, preparing returns, registers, and challans, among other sorts of compliance, remains time-consuming and costly. Automation is required for organisations to lower the cost of compliance and achieve timely, accurate, and transparent compliance.

Automating generation of compliance documents

There are significant developments being made in automating the generation of compliance documents for multiple regulators such as Labour Laws (Registers & Returns), SEBI requirements (PDF Intimations / XBRL Filings), MCA Laws (Meeting related documentation and E-Forms / other Filings), and so on. These automation layers will digitise the whole compliance process, reducing the need for manual intervention and resulting in improved accuracy and a significant decrease in compliance costs.

Straight Through Filings will enable end-to-end digitalization of compliance procedures for both corporations and regulators. The implementation of GST by the Finance Ministry allowed API-based filings and let private operators integrate their systems with regulatory platforms to promote automated filings. Other ministries must follow suit and imitate the model in order to stimulate private sector investment in such technologies. PPPs (Public Private Partnerships) between regulators and RegTech companies can build a compliance ecosystem enabling paperless, cashless, and presence-less compliance, as well as simplify compliance administration for regulators.

Other innovations that can contribute towards the creation of automated compliance management processes include Enterprise DigiLocker, Unique Enterprise Number (UEN), National Portal for Compliance, and the National Open Compliance Grid among others. An Enterprise DigiLocker will allow businesses to store authentic documents (licenses, registrations, permissions, consent orders, NOCs among others) in digital format. This will obviate the need for physical documents by acting as a digital document wallet to store documents. Government departments will be able to consign authentic documents directly into the enterprises’ DigiLocker and verify them when required. A Unique Enterprise Number (UEN) on the lines of Aadhaar will streamline the process of establishing corporate identities. It will ensure the visibility of the enterprise’s history and can be used for assigning risk scores to enterprises.

Compliance automation will create a base for businesses to efficiently manage their compliance obligations. This tech-led foundation can then be used to establish a culture of compliance and accountability in business compliance processes.

Inculcating a culture of compliance

Inculcating a culture of compliance across the organisation is instrumental in the effectiveness of compliance management. With increasing regulatory scrutiny on every aspect of a business, from finance and secretarial to labour and environment, safety and health, compliance is no longer the sole responsibility of the compliance department. More often than not, the responsibility for ensuring compliance with regulatory obligations rests on a few individuals. This makes monitoring and reviewing compliance requirements a hassle and increases the chances of poor compliance. Efforts should be focused on establishing collective responsibility through the decentralisation of compliance-related tasks. All stakeholders should be made aware of their respective roles and coordination among them must be ensured through robust compliance processes at all levels and departments.

Here, the key managerial personnel (KMP) become responsible for establishing and assigning clear compliance roles and responsibilities across all levels. Enforcing internal processes for inter-level and inter-department coordination also adds to the effectiveness of compliance management systems. Furthermore, measures such as period assessments, risk evaluations, and corrective interventions among others should become an integral part of the compliance agenda. Embracing these compliance solutions can ensure that enterprises are equipped with the right tools to tackle India’s complex regulatory environment.

A culture of compliance has to be promoted in the organization by the top management. There has to be a proactive approach towards compliance with a positive tone being set around it. Organizations can incentivize compliance-positive behaviour in their employees with the top management being invested and involved in the compliance process. This culture is manifested from the values of the organization, nurtured by the personnel, and effectively implemented by the use of technology. The emphasis on compliance has to be made clear from the day an employee joins the organization with scheduled compliance training to help the employees realize the value of compliance.

By integrating the culture of compliance into the fabric of the organization’s work culture, management can introduce clarity and accountability in compliance practices. Imbibing transparency goes a long way in ensuring the timely completion of compliance procedures.

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