By Dr. Frank Gozzo
Sept. 29, 2011
While most companies already have resources devoted to the management of risk, quality, safety, environmental and related topics, bundling those resources in a robust compliance management system is a relatively new trend that is quickly becoming a necessity. Organizations are now discovering that compliance management systems are extremely useful tools that provide evidence of compliance to regulators and also greatly improve their operational efficiency.
Several contributing factors are driving this new trend:
Regulated Environments Are Increasing In Number And Tightening Their Grip. All industries have regulatory constraints. Whether they are governed by common Department of Labor requirements or more complex FDA-driven standards, the number of businesses that are regulated continues to increase. In addition, there is an “inflation” associated with regulatory climates caused by two primary factors. First, agencies tend to increase regulatory scrutiny on their own (typically after an incident). Second, there is a natural competitive force driven by diverse state, federal or international standards that tends to raise the bar, i.e., everyone needs to meet the most stringent requirement. These two effects result in a definite increase in the regulatory climate - and that regulatory grip is only getting tighter.
Fewer Inspectors With Greater Oversight. While regulatory environments are increasing, most government agencies lack the funding and/or staffing to provide appropriate oversight of their regulated entities. This trend toward insufficient staffing is only getting worse. Fewer inspectors are now required to keep track of an increasing number of companies in more complex regulated environments. In many industries, in fact, it is not uncommon for new businesses to suffer major start-up delays due to an insufficient number of qualified inspectors.
Robust Compliance Management Systems Will Be Required. The increasing regulatory trend and reduced staffing has accelerated the need for robust compliance management systems. While some regulators and trade associations have recommended compliance management systems as a voluntary best practice, others have actually imposed these systems upon their members. In addition, a growing number of regulatory agencies are also insisting on sufficient remote access so that inspections can be conducted without the added travel expense. It is clear that robust compliance management systems are now gaining traction and will soon become the norm.
Benefits Of Compliance Management Systems
While there is an understandable reluctance to launch a compliance management system - let alone one that can be monitored remotely by government regulators - the benefits are generally significant and fall under two main categories: reduced cost of compliance and increased sales.
Reduced cost of compliance can result in annual savings of greater than 30 percent. Savings are easily measured and typically focused on reduced overhead associated with administration, oversight, reporting, auditing and other routine compliance management functions. Reduced cost of non-compliance is actually more difficult to measure or predict, but the savings tend to be orders of magnitude greater. A company charged with a serious non-compliance finding can plunge into an uncontrollable downward spiral. Robust compliance management systems not only prevent entities from non-compliance (or at least from being blind-sided to non-compliance), but they demonstrate a genuine intent to do the right thing, which is typically an important factor when regulators are determining follow-up actions and fines.
Perhaps the newest and most important trend enabled by compliance management systems is when they are used as a competitive discriminator to drive new sales. In addition to providing clear positive differentiators against your competition, a solid compliance management system can also give buyers some welcome peace of mind.
How To Prepare For New Compliance Management Trends
When preparing for this new compliance management trend, corporations should become aware of compliance management systems by working with recognized leaders who can help facilitate the process and proactively launch a government-approved system.
Solutions may be client-hosted or cloud-based. An example is Albemarle, an organization which performs manufacturing, custom/contract services, such as chemical route selection, process development, small scale production, laboratory testing and more. Albemarle develops, manufactures and markets complex chemicals and services, from polymer solutions to catalysts to fine chemistry, in more than 100 countries all over the world, and utilizes both Web-hosted and non-Web-based compliance management implementations at its various facilities.
Corporate leaders should also help their executives understand the two sides of compliance - the carrot and the stick. Most think of compliance management solely as the necessary evil (“stick”), but you can stand out by helping your senior team understand how they can utilize a compliance management system as a differentiator in driving new sales and attracting/retaining key employees.
Dr. Frank Gozzo is the president and CEO of Noverant, a global leader providing web-based information, training and compliance management services and custom solutions that conform to regulatory agency requirements for public, private, profit and nonprofit organizations. For more information visit www.noverant.com.