Blog Details

Author - Associate Megha Motwani

The compliance cost is the expenditure of time, money and confirming with government requirements such as legislation or regulation. For example, people or organizations for Goods and Service tax have the extra burden of having to keep a detailed report of all input tax and output tax to facilitate the completion of GST returns. This may necessitate them having to employ someone skilled in this field which will be regarded as a compliance cost. 

Compliance costs normally include all costs associated with obeying the law including planning and administration in addition to the direct time and money spent filing paperwork. The ninth annual Cost of Compliance survey report provides that the cost of compliance has gone up from 60% in 2017 to 66% in 2018.

Biggest challenges for compliance officers and the board

Some of the biggest challenges for compliance officers and the board are:

a). Data security

For 2018, the biggest challenge around is of the global ramifications of the implementation of the European General Data Protection Regulation (GDPR) data privacy and the whole interplay between the data owner, the data processor and the data controller. It’s really very difficult in the modern world to identify who is the data owner, the data processor and the data controller. It’s not very obvious and then to make sure that through this chain the ownership of the data continues to be with data owner while the data is flowing through different enterprises, different networks, and different applications and so on. 

The other big challenge here is that most enterprise data security and privacy policies tend to be enterprise focus but enterprise data today which might belong to customers, employees or to different entities could be or is typically going outside of the enterprise through business partners data service providers, vendors, customers, lawyers, auditors, and so on and then in this new world of almost borderless collaborations ensuring compliance to data security and privacy which is originating from particular geographic unit which is European Union, in this case, is very difficult. 

b). Constantly evolving technology

Technology is having a major impact on compliance. As we have a lot of technological advancements which can certainly provide benefits but if it’s regulated. If not regulated than they must start to be regulated and people need to get their heads around in order to have an easement at compliance. The compliance officer needs to understand the technology and need to understand the regulations and see how both of them can interact together and that is one of the key things. The compliance officer must make sure that they bridge the gap between the technology and the line of business and bring those both together.

c). Increasing accountability

Personal liability continues to be a key concern for compliance professionals. For instance, if an employee accepts a bribe than there is a clear case to be made that an economic crime has been committed. But do you know that you can also be held responsible for the illegal behavior of your business partners, this is particularly common when expanding into new markets. If legal breaches by a partner are known, the border management of your company may be threatened with the consequences of criminal prosecution, you may even be liable with your private assets. The company is itself threatened with a significant financial loss not to mention ending up on a blacklist which often means lost contracts and cancel business. Therefore it is necessary to decide compliance roles and implement individual accountability regime, as well as the compliance functions as is required by the legal, compliance, audit and business departments

d). Increased regulatory liaison

The majority of firms are expecting to spend more time liaising and communicating with regulators and exchanges thereby, expecting significantly more contact. The reason is, because the stakes have gone up so much, we see a lot of press about a lot of fines that are being levied on companies and also in connection with that we see a greater and greater level of information sharing by the regulators.  

If we see a decade and a half ago the justice department might share bank records or few others pieces of information with other colleagues around the world, other enforcement agencies and vice versa they would receive limited bits. Now it is very commonplace to see fairly massive not only information sharing but also coordination among regulatory agencies and this is causing or cause a lot of our respondents to indicate that they’re very concerned about these risks with a top-line being regulation. This, in part, reflects the need for continued personal relationship management and dialogue on regulatory expectations.