Compliance

Addressing the Struggles of Compliance Programs: A Call to Action

Today, perhaps more than ever before, compliance programs stand as crucial pillars for organizations, offering a roadmap to navigate through an ever-evolving landscape of regulations and risks. 

For publicly traded companies, compliance upholds stringent regulatory standards to ensure transparency and market integrity, bolstering investor confidence and access to capital. Private companies, too, can leverage compliance insights to inform strategic decisions and operational efficiency, enhancing resilience and fueling sustainable growth. 

At their core, compliance programs are tasked with identifying and mitigating risks that could cripple organizations, from financial irregularities to data breaches. By fostering a culture of compliance and implementing robust controls, these programs safeguard organizational integrity, protect stakeholders’ interests, and fortify businesses for long-term success. While these regulations are driven by the ideal best state for compliance, and even though they might not apply, there are lessons for all companies within them.

However, despite their significance, compliance programs often face many challenges and pressures that can undermine their effectiveness and, ultimately, the success of the businesses they support.

Introduction: The Perils of Compliance Programs

Organizations across various sectors, including finance, government, and enterprise, are grappling with mounting challenges regarding compliance initiatives. The demand for robust compliance frameworks has never been higher, driven by a combination of industry-specific requirements, regulatory changes, and the escalating risk landscape.

One common pitfall is the reliance on manual processes or fragmented technology solutions for managing compliance efforts. This approach introduces inefficiencies and jeopardizes compliance integrity and visibility, posing significant risks to overall business performance.

Exploring the Challenges

Let’s delve into some of the key challenges faced by compliance programs:

1. Large Upfront Costs: Implementing compliance programs is expensive, with organizations spending an average of $2.4 million annually, according to FloQast’s survey. Simply put: streamlining and automating manual processes would reduce the complexity, burden, and, oh yeah, risk associated with running compliance programs. What makes me say that, you ask? 65% of respondents in a 2023 Thomas Reuters’ report highlighted that streamlining and automating manual processes would help reduce the complexity and cost of risk and compliance. 

2. Organizational Chaos: Compliance documents managed in spreadsheets often lead to version control issues and synchronization challenges, hindering effective control implementation and audit processes. Do you have faith that Order to Cash Process Narrative + V6_FINAL_FINAL is realllllllly the final version? Did I send v5 or v6 to the auditor??? If you’re even asking yourself that, there’s a good chance it isn’t.

3. The Accountability Challenge: Ensuring clear instructions and responsibilities for control execution is vital, especially when dealing with control owners outside the accounting department, to mitigate business risks and maintain compliance integrity. Throw in the version control issue and you can — and many do — have a serious issue on your hands.

4. Reactive Risk Assessment Processes: Good reaction times can make you a lot of money. But we’re finance and accounting professionals, and professional sports was likely never a real option. Just the same, being able to react to challenges is a true asset in the business sense, but creating and operating in an environment where reaction is more normal than proactivity, you’ve got problems. Manual processes hinder proactive risk management, leaving organizations reactive to emerging threats and increasing the likelihood of compliance failures.

5. Inability to Capture Centralized Evidence: How often do you find yourself hunting through email threads, Slack/Teams conversations, or even meeting notes to find the supporting evidence you’re looking for? Turns out, you’re not alone. Companies struggle to efficiently capture evidence of control execution, relying on disparate solutions that contribute to a fragmented environment and hinder audit processes.

6. Lack of Centralized Collaboration: Collaborative control execution involves multiple stakeholders from multiple departments — with multiple ways of working, hours, and a bevy of other multiples you’re probably thinking right now. Despite the semi-formalized and predictability of these interactions, the absence of a centralized collaboration platform leads to inefficiencies and costly audit processes.

7. Lack of Control Visibility: Real-time visibility into control execution status is often lacking, leaving organizations scrambling to monitor control execution and risking compliance failures. I feel like I’m hitting a lot on version control and general disorganization, but until those things no longer pose a serious threat, I’m going to keep bringing it up.

8. Audit Pain and Expense: I hear you. “Audits in general are a pain.” I know, I know. I’ve been there before. Just give me a minute to explain: Inadequate preparation for audits results in prolonged processes, while staffing shortages at audit firms further exacerbate the challenges and pressure on accounting and compliance teams. Long story short: What if everything needed for the audit was being tracked and organized over the course of the year, instead of having to go back looking for supporting documents?

9. Audit Report Deficiency: Inadequate audit reports compromise data integrity and operational efficiency, making it challenging to demonstrate compliance to external auditors. That’s pretty much as bad as it gets and I don’t want to think about it anymore.

10. Inefficient Internal Audit Processes: Fragmented support documentation requests and manual data compilation hinder internal audit efficiency, preventing teams from fulfilling their strategic role in risk management. At the end of the day, this results in more stress, more work, and, worse yet, is entirely avoidable. 

11. Inability to Manage Different Compliance Frameworks: Rigid compliance solutions limit adaptability, forcing organizations into inefficient workflows and hindering their ability to navigate diverse compliance requirements effectively. So if you’re the type of person who thinks “Could this meeting have been an email or a Slack/Teams message?” You’re probably seething reading the above (I know I am).

Conclusion: A Call to Action

The challenges outlined above underscore the urgent need for organizations to address the pressures facing their compliance programs. Failure to do so not only exposes businesses to heightened risks but also undermines their long-term sustainability and growth.

Investing in modernized, integrated strategies and technologies is imperative to streamline compliance processes, enhance visibility, and adapt to regulatory changes effectively. By empowering compliance teams with the tools and resources they need, organizations can bolster their resilience, safeguard their reputations, and thrive in today’s dynamic business landscape.

In short, compliance programs are not just a regulatory necessity; they are a strategic imperative for organizational success and can be so regardless of the size or scope of the business. It’s time for companies to prioritize addressing the challenges facing their compliance efforts and embark on a journey towards a more resilient and compliant future.

Jaysen Dyal

Jaysen Dyal is a Product Marketing Manager at FloQast. Prior to joining the team, Jaysen spent 6+ years as an auditor at Lindquist and, later, Armanino, making the switch and moving to LA-based tech company Jam City as a Technical Accounting and Reporting Manager, where he first became acquainted with FloQast. Jaysen recently celebrated his two-year anniversary at FloQast. He resides in Los Angeles with his wife.