World-Class Compliance Assurance Program Part 5: Maintaining a Compliance Assurance Program
June 22, 2017 - Kestrel Management
This is the fifth in a series of five articles on developing and maintaining a world-class compliance assurance program.
A well-designed and well-executed compliance assurance program provides an essential tool for improving and verifying business performance and limiting compliance risks. Ultimately, however, a compliance program’s effectiveness comes down to whether it is merely a “paper program” or whether it is being integrated into the organization and used in practice on a daily basis.
The following can show evidence of a living, breathing program:
- Comprehensiveness of the program
- Dedicated staff and resources
- Employee knowledge and engagement
- Management commitment and employee perception
- Internal operational inspections, “walk-abouts” by management
- Independent insider, plus third-party audits
- Program tailoring to greatest risks
- Consistency and timeliness of exception (noncompliance/nonconformance) disclosures
- Tracking of timely and adequate corrective/preventive action completion
- Progress and performance monitoring
To achieve a compliance assurance program on par with world-class organizations, there are a number of best practices that companies should employ:
Know the requirements. This means maintaining an inventory of regulatory compliance requirements for each compliance program, as well as of state/local/contractual binding agreements applying to operations. It is vital that the organization keep abreast of current/upcoming requirements (federal, state, local).
Plan and develop the processes to comply. Identify and assess compliance risks, and then set objectives and targets for performance improvement based on top priorities. From here, it becomes possible to then define program improvement initiatives, assign and document responsibilities for compliance (who must do what and when), develop procedures and tools, and then allocate resources to get it done.
Assure compliance in operations. The organization needs to establish routine checks and inspections within departments to evaluate conformance with sub-process procedures. Process audits should be designed and implemented to cut across operations and sub-processes in order to evaluate conformance with company policies and procedures. Regulatory compliance audits should further be conducted to address program requirements (e.g., environmental, safety, mine safety, security). Audit performance must be measured and reported, and then expectations set for operating managers to take responsibility for compliance.
Take action on issues and problems. Capture, log, and categorize noncompliance issues, process nonconformances, and near misses. Implement a corrective/preventive action process based on importance of issues. Be disciplined in timely completion, close-out, and documentation of all corrective/preventive actions.
Employ management of change (MOC) process. Robust MOC processes help ensure that changes affecting compliance (to facility, operations, personnel, infrastructure, materials, etc.) are reviewed for their impacts on compliance. Compliance should be assured before the changes are made. Failure to do so is one of the most common root causes of noncompliance.
Ensure management involvement and leadership. Set the tone at the top. The Board of Directors and senior executives must set policy, culture, values, expectations, and goals. It is just as important that these individuals are the ones to communicate across the organization, to demonstrate their commitment and leadership, to define an appropriate incentive/disincentive system, and to provide ongoing organizational feedback.
Maintaining Ongoing World-Class Compliance Assurance Program
The compliance assurance program must be a living, breathing program. As risks change, the program must be refreshed, refined, and redeployed. A Management System framework can help ensure operational sustainability. A Management System drives the auditing process and helps companies say what they will do, do what they say and, importantly, verify it.
Together, there is real value at the intersection of a compliance assurance program and Management Systems. Management Systems define the internal controls that are in place to reduce risks, prevent losses, and sustain and improve performance over time through the Plan-Do-Check-Act (PDCA) cycle of continual improvement.
Testing and Monitoring
Testing, monitoring, and measuring are crucial elements of this cycle. Without them, it is difficult to understand what is working and what needs improvement. Robust testing and monitoring programs can serve as early warning systems for identifying potential compliance risks before they become enforcement issues.
Compliance should be tested and monitored throughout each level of the organization. A strong testing program will evaluate the results of the compliance risk assessment and assign compliance risks to the business units and processes where they are most likely to occur, creating clear lines of responsibility and accountability. Key risks and the related controls should be tested periodically using statistically valid sampling methodologies, and monitoring activities should be performed on an ongoing basis. Doing so produces trend data that provides the rationale needed for making changes to underlying business processes, as well as emerging risks.
Ongoing compliance excellence relies on top management, operations managers, EHS personnel, and individual employees throughout the organization working together to build and sustain an organizational culture that places compliance on par with business performance. Senior management must focus on the overall culture of the company in terms of taking the necessary steps to reduce risk and make prevention part of daily operations. While it may be impossible to eliminate all risk exposure, a solid risk framework, assessment methodology, and compliance assurance program can help to prioritize risks for active management, sustained compliance, and positive business impacts.
Read the other articles in this series:
- Part 1: Enterprise and Compliance Risk Management
- Part 2: Management Systems and their Importance to Compliance Assurance
- Part 3: Compliance Risks and Compliance Program Assessment
- Part 4: Audit Program Best Practices
Submitted by: Tom Kunes