How to take a proactive approach to compliance


Proactive compliance is becoming an industry-standard approach. It’s only natural, considering regulations and laws seem more complex yearly. If organizations want to improve their security and minimize legal risks, this strategy is one of their best options.

What Is Proactive Compliance?

Proactive compliance is anticipating and adjusting to regulatory changes in advance. Companies commit to making continuous improvements in small increments, so they’re ready before the updates go into effect.

This practice is the opposite of reactive compliance, where agencies only take steps to comply with regulations after they experience a security incident. Instead of waiting until after an intrusion or data breach to take action, they work ahead of time to follow all relevant laws and orders.

This practice is entirely self-motivated, meaning professionals take the initiative to prepare themselves for future issues. Realistically, they could continue to operate under the radar and accept the risk of non-compliance because it means they avoid the extra effort and costs it takes to be proactive.

Typically, proactive efforts aim to improve defenses against future issues and minimize non-compliance risks. Most professionals implement this approach — which involves training programs, accountability monitoring, record-keeping, and routine audits — because it saves them time, stress, and money. Of course, the specifics differ depending on what industry standards and regulations people must conform to.

How to Make Compliance Efforts More Proactive

A proactive approach to compliance can be a very involved process. If professionals want to implement it, they must know the best methods.

1. Prioritize Regulations

According to a Reuters survey, 62% of firms expect to spend more time and money on misconduct and non-compliance-related issues within the next year. After all, the number of major regulatory changes made each year continues to increase.

Since proactive compliance involves a lot of effort and operational adjustments, it can get expensive. Fortunately, professionals can use prioritization to soften the financial impact. If they determine which new regulation is most important, they can direct spending appropriately.

2. Assess Risks

Technology is advancing at a dizzying speed, leaving regulators playing catch-up. As a result, they’ve had to roll out countless changes to protect data, consumers, and online privacy from these sudden developments. While they used to wait a considerable amount of time between each update, they now propose multiple new regulations yearly.

Keeping up with the intricacies and subtle differences of every new rule or law can be overwhelming for organizations, which is why risk assessments are so crucial. Once they know which ones to prioritize, they’ll have a much easier time distributing their resources accordingly.

3. Monitor Compliance

Monitoring is a substantial part of proactive approaches because it catches potential instances of non-compliance and brings them to the right person’s attention. If professionals identify surveillance gaps and integrate the right technology before new regulation goes into effect, they’ll be much better prepared for any issues.

What’s more, it lets them respond swiftly, helping them get ahead of any regulatory trouble. They can address whatever issue in real-time instead of waiting for a data breach or a significant cybersecurity incident to wreak havoc.

4. Investigate Non-Compliance

A proactive strategy is only as good as its supporting procedures. Firms can only ensure they remain compliant after all their upfront effort with a comprehensive investigation process. They need to be able to respond swiftly, whether someone witnesses non-compliance in person or monitoring technology flags an employee’s behavior.

An adequate accountability system is secure, thorough, and allows for immediate action. Senior managers should be able to step in quickly and investigate why non-compliance occurred to ensure it doesn’t happen again.

5. Outsource Efforts

Many professionals in charge of compliance have experienced scope creep as the proposal rate of new regulations has increased. Naturally, they can only keep up with so many responsibilities while maintaining their speed and quality of work — and they can only be proactive if they can maintain their pace.

In response, it may be a good idea for organizations to use a specialized third-party service provider to stay on schedule. Already, over one-third of them outsource some or all of their compliance procedures because they need help handling the workload. This fact isn’t surprising, considering proactive efforts can be so tedious.

6. Leverage Technology

Naturally, there’s more to compliance than updating a few internal processes. It requires a more significant labor commitment, an in-depth understanding of legal speak, and ongoing auditing efforts. While people try to stay on top of everything, some things fall through the cracks — this is where digitalization comes into play.

Regulatory technology has plenty of real-world use cases. For example, AI-powered surveillance cameras can use facial recognition to determine whether someone is accessing areas they’re not supposed to. Alternatively, a natural-language processing model can decipher and simplify legal text to make compliance-related updates more straightforward.

7. Involve Management

Being proactive can be incredibly time-consuming. In 2020, nearly 30% of compliance teams needed four to seven weeks to overhaul their procedures — almost two months spent on updates. Considering the number of annual regulations is increasing, the time it takes will likely only grow.

A large part of any proactive effort is scheduling and approvals, so senior professionals play a substantial role in the process. Agencies need genuine buy-in from middle and top-level management to keep a reasonable pace and prevent compliance teams from getting overwhelmed.

8. Allow Reporting

Even the best regulatory technology will have gaps. For example, an AI monitoring access logs won’t be able to catch someone physically mishandling documents. Organizations should establish clear communication channels to defend against these situations.

For starters, employees should know exactly who to go to if they witness non-compliance. Professionals should have a strict procedure for these situations, whether a specific person or a digital drop box. Of course, people must feel comfortable enough to make a report, meaning they don’t fear backlash.

The Benefits of Proactive vs. Reactive Compliance

Although proactive compliance can initially be time-consuming and expensive, the extra effort and funding pay off. After all, this business strategy minimizes financial damage, increases productivity, mitigates legal issues, and boosts morale. Moreover, it also improves the workplace’s understanding of regulations, ensuring they’re more likely to follow proper procedures in the future.

Sometimes, people take the reactive approach, which has its upsides. For instance, it’s a lot less expensive and doesn’t require nearly as much effort. Also, employees spend more time addressing pressing existing issues than potential ones.

Waiting until after a breach to respond to compliance gaps has substantial consequences. For starters, almost all regulatory agencies hand out hefty penalties. For example, the European Union issues fines of up to $21.4 million for each instance of non-compliance with the General Data Protection Regulation. The overall costs are often much higher because they involve reputation damage, incident response expenses, and downtime-related losses.

Moreover, reactive approaches can put a substantial strain on staff. If a data breach occurs, they face intense pressure to act quickly and identify the incident’s root cause. Since they have less time to respond, their work quality suffers — their decision-making is often inefficient or uncoordinated.

While some professionals still choose to use a reactive approach even after they learn the downsides, a proactive strategy is still far more popular. It helps them navigate potential risks and becomes far more affordable in the long run.

The Commitment Requirements of Proactive Compliance

Proactive compliance has become the industry standard approach to the rotating door of regulatory updates. Still, even though it’s the go-to strategy for most, there’s no specific playbook on how to implement it. Finding procedures aligning with a firm’s interests and operations may take a while.

Either way, compliance is a workplace-wide effort — everyone from senior management to interns should get involved. While it usually requires a significant time commitment and draws on resources, collaboration will speed up the process and keep everyone on the same page.