What is Compliance Monitoring & Why is it Important?

Posted by

Samantha Martin-Woodgate

on 12 Jan 2024

Learn what compliance monitoring means and why it's important for your firm to have a compliance monitoring plan.

Compliance monitoring

Along with regular compliance audits, continual compliance monitoring is important to businesses of all sizes. Compliance monitoring promotes a culture of accountability and reduces the risk of crippling fines and reputational damage by ensuring regulations, standards and policies are adhered to.

We explain what compliance monitoring and compliance policies are, why they're of paramount importance to businesses of all sizes, and offer advice on creating your own compliance monitoring plan.

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Compliance monitoring: The definition

Compliance monitoring is the process of ensuring that regulatory standards and corporate policies are adhered to.

This crucial business function involves day-to-day surveillance, review and analysis of organisational performance against key policies and regulations.

It includes conducting regular risk assessments and proposing strategies to take corrective action against potentially costly violations.

What is a compliance policy?

A compliance policy is a company's set of internal guidelines and procedures, holding all employees accountable when it comes to compliance with laws, rules and regulations. Having these compliance policies as a standard enforces adherence throughout the company and mitigates the risk of breaches.

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Why is compliance monitoring important?

Whether you work as part of a team in a large business or as a small business owner, compliance rules and regulations apply to everyone. And, with complex, ever-changing compliance laws and rules to adhere to, it has never been more important to monitor your business to protect against potential compliance fines.

Key reasons why compliance monitoring is important

  • As a regulatory requirement: First and foremost, ongoing compliance monitoring ensures that companies act lawfully and protects them against regulatory consequences.
  • To protect firms from fines: Similarly, compliance monitoring significantly reduces the potential financial consequences of non-compliance by averting legal action and avoiding fines and other penalties linked to violations.
  • To build trust: From key stakeholders and investors to customers and suppliers, compliance monitoring ensures a heightened level of trust in your business, enhancing your reputation.
  • To create a positive culture: Compliance monitoring encourages a culture of accountability, responsibility and ethical behaviour, promoting a positive working environment. It also lessens the need for whistleblowing.
  • To identify compliance risks early: When potential compliance issues are identified early, prompt corrective action can occur way before violations occur, minimising the impact on the business.
  • To facilitate stable business growth: Due to the above reasons, ongoing compliance monitoring facilitates growth, creating a stable and conducive environment for expansion and investment.

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Who is responsible for compliance monitoring?

Confusing regulations often lead to compliance issues rather than intentional breaches. This is why many businesses hire a Compliance Officer to oversee the process.

While not every business legally requires a dedicated Compliance Officer, there is sometimes a statutory requirement for a nominated Compliance Officer accountable to Company Boards and regulators. Equally, those with complex compliance needs or in highly regulated industries would benefit greatly.

Compliance Officers ensure businesses comply with internal and external regulations and policies in a constantly evolving landscape.

But the position involves far more than understanding laws and procedures: modern-day Compliance Officers must be agile, adaptable advisors who can leverage technological solutions.

Businesses without a Compliance Officer

Whether your business is in the process of hiring a Compliance Officer or lacks the financial resources to do so, compliance monitoring should still be up there on your business agenda.

Off and online compliance training courses are available to help you educate your staff whilst also acting as a reminder that compliance is not only a company-wide obligation but also an individual responsibility.

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Creating a compliance monitoring plan

Establishing a robust compliance monitoring plan is key to success in this area. No matter how large or small-scale your business is, make sure to consider the following when creating your compliance monitoring plan:

  • Keep up to date with regulatory changes: Compliance laws are constantly changing, so it is important to stay up to date. You can sign up for newsletters, attend training sessions and webinars or read up directly via official forums.
  • Communicate changes effectively: Ensure the compliance team understands any policy updates and that every employee fully understands the update and what it means to their role. This is particularly important regarding employee monitoring; transparency regarding the specific type of monitoring your staff undergo will eliminate any grievances later.
  • Identify actionable steps: Determine the specific laws, regulations and industry standards relevant to your business. Propose actionable steps to correct non-compliance and have regular check-ins on progress.
  • Define compliance KPI: Establish measurable KPIs that reflect compliance goals, inform the whole team of these, and allow time for effective monitoring.
  • Regularly conduct compliance audits: Regular audits ensure compliance is being adhered to, identifying areas for improvement and communicating this with key stakeholders. A traffic light system is a simple way to spot the key areas at risk at a glance.
  • Record compliance monitoring activities: Maintain dated documentation of all compliance monitoring activities, findings and corrective actions taken to ensure that you are covered for external audits and protection against non-compliance penalties.
  • Seek external support: Consider seeking external expertise or legal advice, particularly if you don't have a Compliance Monitoring Officer within the business, to ensure that your compliance monitoring plan aligns with the latest legal and regulatory requirements.

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Looking for more compliance insights?

We have created a series of comprehensive roadmaps to help you navigate the compliance landscape, supported by e-learning in our Essentials Library.

We also have 100+ free compliance training aids, including assessments, best practice guides, checklists, desk aids, eBooks, games, posters, training presentations and even e-learning modules!

Finally, the SkillcastConnect community provides a unique opportunity to network with other compliance professionals in a vendor-free environment, priority access to our free online learning portal and other exclusive benefits.

Compliance Audit Checklist

Compliance audits systematically examine organisations' activities to determine whether they meet all applicable legal requirements and corporate policies.

Here, we explain the key steps to completing a compliance audit to identify any gaps in compliance and suggest corrective actions.

Compliance Audit Checklist