In a legally governed system, compliance with laws and regulations, is crucial to the survival of any organisation. Compliance generally implies conformity to a set of defined laws, rules and parameters as set by Governments and regulatory bodies. The Indian context being no different, the Central and State governments (and to a limited extent the various municipalities) legislate enactments, regulations, rules, policies, circulars, orders, etc. that require compliance by corporate entities. Often, even the local regulatory authorities such as District Magistrates, Municipal Councils and Nagar Panchayats issue directions for compliance. This system makes the legislative framework so vast that compliance management in India has become particularly cumbersome. As an example, a business typically requires around 6 to 10 basic licenses to operate. Additionally There are over 9000 laws in India and on an average over 50 generic laws apply to any industry and additional industry specific laws get triggered depending on operations.
Further, with an increasingly fast-evolving economic and technological environment, regulatory bodies are compelled to modify the existing laws and regulations frequently and in-depth, making it even more important for such organisations to keep pace with such changes. The last quarter, for example, saw around 600 legal updates/amendments being issued across the country by the various regulators.
Needless to mention, it is difficult to expect organisations to be able to collate and compile such complex aspects of legal compliance, and in most cases, they do not have the resources required to manage the large volume of applicable compliances.
The fledgling legal tech sector promises to deliver software driven solutions for helping organisations better manage their compliance risk. Compliance management in India through software driven solutions, has evolved into a niche legal services delivery model in itself and aids organisations in a massive way to manage their compliance portfolio.
In this blog post we will discuss some of the benefits organisations can derive by implementing a compliance management software / tool.
Risk management and mitigation
The prime benefit of a compliance management tool is that it helps mitigate the compliance risks for the organisation. Non-compliance with applicable legal norms may attract severe risk which can be financially taxing for the business and reputationally damaging. For instance, penalties under the FEMA Regulations and the SEBI Act can run into lakhs and crores. Under the Companies Act, 2013 the directors and officers of the company may also be subject to imprisonment for certain non-compliances. One cannot omit the risk arising from social/reputation loss, frequent scrutiny and may even extend to loss of faith in the organisation. Having a dedicated compliance management software allows organisations to mitigate such risks to their business. The compliance management tools provide real time status, the risk rating of individual compliances, and a efficient workflow comprised of notifications and alerts indicating the non-compliances and reminders for completing compliances, which help better manage the compliance requirements and thus reduce the risk. Most compliance management software in India also provide quick charts and reports of the compliance status of the organisation giving an overview of where the organisation stands in terms of the compliance benchmark. These reports help highlight the pain points and areas in need of attention and assist organisations in planning out the steps to be taken to avoid any future risk.
Automation
Compliance management software provides an automated workflow for managing the parts of the compliance management procedure such as the compliance reporting process, thereby doing away with the manual or non-automated process of management, that organisations typically adopt. It decreases the effort put in managing compliances and eases the procedure to a great extent by ensuring alerts for compliance tasks are directly sent to the concerned persons from the tool, non-compliances are escalated, and reports are easily generated to have an overview of the status. Uploading of proof documents in the compliance management tool also ensure that proofs are documented while completing compliance tasks. Some compliance management software in India are even customisable allowing organisations to alter the workflows to better suit their needs. The automated process eliminates the requirement of a repetitive processes of collecting and communicating data, removes opportunities for errors, saves time and consequently money.
Increased efficiency
Increased operational efficiency is a direct fallout of automation as the time, money and resources dedicated by an organisation for compliance management decreases once an automated compliance management tool is implemented. The manual systems of checks are no longer needed as the alerts and escalations for non-compliance are automatically generated from the compliance management tool. The latest changes in law and other regulatory updates are also indicated in relevant compliances on the tool and thus sparing organisations the need to be on the lookout for such amendments. Since reports can be generated on the click of a button, hours spent on creating and customising such reports are also saved. On an average, organisations end up saving 25 to 40 hours of work per month. As a result, the skilled resources, money and time of the organisation can be put to better use for increasing its productivity and focussing on business growth instead.
Timely compliance
An automated compliance management tool ensures that the organisations receive the prompt for a compliance at the correct time. The defined timelines make sure that the organisations never miss a deadline and are always aware of the compliances that are upcoming in the near future without having to keep a tab on their calendar. All regular business processes as well as statutory requirements get completed on a timely basis.
Reduced cost
The above benefits resulting from the implementation of a compliance management software helps reduce costs for the organisation. No legal experts or a dedicated legal team is required to be appointed by the organisation. Further, all documentation is saved online on the compliance management software itself and organisations need not have an exclusive person managing the same through filing cabinets etc. Better visibility of upcoming compliance risk also goes a long way in reducing fines and dispute related expenses and the time saving of employees also contributes to reducing costs.
Enhanced reputation
Complete and efficient compliance boosts the reputation of an organisation. Companies following the laws of the land effectively are easier to trust and attract customers. Having a compliance management software to monitor compliance activity also makes conducting legal audits easier and generates favourable audit reports. All of this helps build a good reputation in the market.
While the benefits of having a compliance management software in India are high, there is no one-size-fits-all model. Therefore, it is equally important that organisations assess their exact requirements, available resources and budget and only then make a decision to choose a compliance management tool to implement. Assessment must be done of law modules required, workflow designs, reporting hierarchy, IT infrastructure, SLA’s, support and more. It is essential that all pros and cons are weighed, and the credibility of the compliance management software and the company providing it, are checked to ensure that the best compliance management software is implemented. For more information on compliance management solutions or to learn how it can help at your organisation, please click here or drop us a line at inquiries@lexplosion.in.
Written by: Mehreen Bushra Shafi
Edited by: Agnishwar Banerjee
Disclaimer
All material included in this blog is for informational purposes only and does not purport to be or constitute legal or other advice. The Blog should not be used as a substitute for specific legal advice. Professional legal advice should be obtained before taking or refraining from an action as a result of the contents of this blog. We exclude any liability (including without limitation that for negligence or for any damages of any kind) for the content of this blog. The views and opinions expressed in this blog are those of the author/(s) alone and do not necessarily reflect the official position of Lexplosion. We make no representations, warranties or undertakings about any of the information, content or materials provided in this blog (including, without limitation, any as to quality, accuracy, completeness or reliability). All the contents of this blog, including the design, text, graphics, their selection and arrangement, are Copyright 2018, Lexplosion Solutions Private Limited or its licensors.
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