Importance of Compliance

Compliance is an act of following the established laws, rules, regulations or specifications. Statutory compliance is an act of conducting the business by following the laws, rules & regulations.

Every Country, State/Province/County has its own set of Laws, Rules & Regulations that have to be complied by the businesses. Some of them could be specific to the businesses like Pollution related, those dealing with Chemicals, Pharmaceuticals etc., while others like Taxation (Income Tax, GST, VAT etc.) are applicable all businesses. It’s something that businesses need to adhere to in order to ensure they can run smoothly in the territory.

Effective Compliance has 3 pillars

1. People

2. Processes

3. Technology

People

Compliance function starts with people, it is they who ensure the effectiveness or the lack of it. A business organisation should create internal policies and practices that reflect the best in business. People have to be trained and organisations have to ensure that the awareness runs through and not limited to some levels as this will ensure proper responsibility and accountability.

Processes

A business process is a set of activities that accomplish a specific goal/result in an organisation. It is the process that defines the roles, identity and access to people while fixing proper responsibility and accountability. A well defined process ensures the organisation is methodical in its approach so as to ensure the compliance requirements are fulfilled.

Technology

In today’s world Technology plays a vital role in Compliance, while People and Processes still have a big role in compliance it is the Technology that ensures smooth compliance to various requirements. A workflow is a system of managing repetitive processes and tasks which occur in a particular order. These workflows could be automated that ensures the tasks are effectively accomplished.

Businesses may think of Cost of Compliance when they take some decisions, however in cases the cost in terms of fines/penalties for non compliance could be very high. It could lead to loss of Reputation also as happened in case of BYJU's. Their Auditors refused to sign off the Accounts for FY 21 due to revenue recognition practices https://rb.gy/hcq9, the auditor made some searing commentary while signing off company’s financials.

Taxes like TDS, GST, Employee related regulations like ESI, PF etc. are some of the compliances that are common for all businesses. Tools are available to automate capturing data and processing to ensure these are effectively complied.