STRIKING the right balance between risk mitigation and the commercial demands of the business is an essential skill, which must be adapted according to the nature of your industry and the size, culture and risk appetite of your organisation. This role needs to have clear ownership at senior management level.
Companies need to take a systematic and proactive approach to risk mitigation if they are to be better prepared to satisfy evolving legal and regulatory requirements, manage the costs of compliance and realise competitive advantage.
Achieving and maintaining policy compliance becomes more difficult to sustain as organisations grow, become more geographically dispersed and more highly regulated. But it doesn't have to be this way.
The purpose of policies and procedures
Policies and procedures establish guidelines to behaviour and business processes in accordance with an organisation's strategic objectives. While typically developed in response to legal and regulatory requirements, their primary purpose should be to convey accumulated wisdom on how best to get things done in a risk-free, efficient and compliant way.
Some of the most common grounds for policy non-compliance are poorly worded or badly structured policies, inadequately communicated or unenforced policies, or policies that are out of date or lack management scrutiny. So, what is the secret for effective policy management?
Step 1 – create/review
It is important to understand, when creating policies, that those created purely to satisfy auditors and regulatory bodies are unlikely to improve business performance or bring about policy compliance, as they rarely change employee behaviour appropriately. While satisfying legal departments, and looking impressive to auditors and regulators, busy employees will instantly be turned off by lengthy policy documents full of technical and legal jargon.
External factors that affect policies are evolving all the time; for example, technology advances may lead to information security policies and procedures becoming obsolete. Additionally, changes in the law or industry regulations require operational policies to be frequently adjusted. Some policies, such as Payment Card Industry DSS compliance, have to be presented and signed up to on an annual basis.
Typically, most policy documents are lengthy, onerous and largely unreadable – many are written using complex jargon and most contain extraneous content that would be better classed as procedures, standards, guidelines and forms. Such documents should be associated with the policy.
Documents must be written using language that is appropriate for the target audience and should spell out the consequences of non-compliance. Smaller, more manageable documents are easier for an organisation to review and update, whilst also being more palatable for the intended recipients. Inadequate version control and high production costs can be reduced by automating the entire process using an electronic system.
Step 2 – distribute
A key step in the policy management lifecycle is to ensure staff are aware of relevant policies and procedures. Organisations need to effectively distribute policies, both new and updated, in a timely and efficient manner. These need to be consistently enforced across an organisation. After all, what is the point of expending considerable effort and cost to write and approve policies if they are not effectively distributed and read?
Step 3 – achieve consent
In many cases, regulatory requirements call for evidence of policy acceptance, demanding a more proactive and thorough approach to the policy management lifecycle.
A process needs to be implemented that monitors users' response to policies. Policy distribution should be prioritised, ensuring that higher risk policies are signed off earlier by users than other lower risk documents. For example, an organisation may want to ensure a user signs up to their Information Governance policy on the first day they start employment, while having up to two weeks to sign up to the Travel and Expense Policy. Systems need to be in place to grant a user two weeks to process a particular document, after which the system should automatically force the user to process it.
Step 4 – understanding
To monitor and measure staff comprehension and effectiveness of policies and associated documentation, organisations should test all, or perhaps a subset of, users. Any areas that show weaknesses can be identified and corrected accordingly. Additional training or guidance may be necessary or, if it's the policy that is causing confusion, it can be reworded or simplified.
Step 5 – auditability
In many cases, regulatory requirements call for evidence of policy acceptance, which demands a more proactive and thorough approach to the policy management lifecycle. The full revision history of all documents needs to be maintained, as well as who has read what, when and, if possible, how long it took, plus who declined a policy and why. This record should be stored for future reference and may be stored in conjunction with test results.
Step 6 – reporting
To affect change and improve compliance it helps if key performance indicators relating to policy uptake are clearly visible across all levels of an enterprise. Dashboard visibility of policy uptake compliance by geographical or functional business units helps to consolidate information and highlights exceptions.
Being able to drill down for specific details in areas of poor policy compliance dramatically improves management's ability to understand and address underlying issues.
Bringing it all together
To check the level of policy compliance that exists within your organisation you need to periodically answer the following questions:
• Where are your current policies? Are they accessible to staff?
• Who has seen your current policies?
• Who has read your current policies?
• Do your staff understand them?
• Are your policies being followed by everyone?
• Are your policies effectively managed?
• Are your policies up to date?
• Can you prove this to the auditors?
Those organisations that are serious about staff reading, understanding and signing up to policies should consider adopting automated policy management software. This raises standards of policy compliance and provides managers with practical tools to improve policy uptake and adherence.
Ultimately, policy compliance is about getting people to do the right thing, in the right way, every time. Ensuring everyone understands what is expected of them and how they are required to carry out their jobs according to corporate policies and procedures is not a new practice. Embedding an automated policy management solution into an organisation is really the only viable way to create and sustain a culture of compliance, where people understand their responsibilities and the importance of adhering to corporate standards.
Doing so empowers people to do their jobs within an acceptable governance framework rather than constrained by a rigid set of unenforceable rules. By effectively handling the policy management lifecycle you can create a firm foundation for effective risk mitigation and governance.
Automation helps the board, line managers and the general workforce get to grips with policy compliance and put forward a cost-efficient approach for achieving policy excellence.
Dominic Saunders is senior vice president at Cryptzone
Sign up for Financial Director email alerts
Please enter your email below to receive your profile link
Search by job title, salary, or location - we only list senior financial roles
One of the UK's most well-respected bosses talks about retail, governance, reputation, tax, his career - and that of CFOs – in a wide-ranging interview...
Send to a friend