What is a compliance tool?
Legal compliance is a challenge for any company and industry. It is an ongoing task, which cannot be done once and forgotten. The world advances, and with it, regulations and threats; so your company has to adapt to changes.
This is where compliance tools come into play. Let’s review this term.
Compliance tool: what does it mean?
Compliance tools are software programs that automate compliance with legal, regulatory, or security requirements. Among others, this type of computer program identifies and classifies legal risks, in addition to establishing prevention, management, control and reaction mechanisms.
The objective of compliance tools is to guarantee that organizations and companies legitimately and ethically adapt to current policies and regulations.
⚠️ Remember that compliance comprises a set of procedures based on compliance with certain regulations.
The importance of compliance tools in companies
Compliance tools help companies mitigate tax and legal risks, facilitating practices and processes, such as the establishment of policies, the detection of illegitimate practices, prevention, etc.
Betting on a compliance tool is important because it can avoid or prevent conflicts arising from financial activities, negligence, misconduct or lack of compliance with the law, among other problems. Therefore, a protection tool is a way to protect the company from:
- Economic fines
- Temporary prohibition of commercial activity
- Office closure
- Suspension of activity
- Dissolution of the legal entity
- Disqualification of subsidies and public aid
- Other penalties
Compliance tools protect companies, act as defense mechanisms.
Benefits of compliance tools
The reduction of risks in tax and legal matters offered by compliance tools translates into the following benefits:
- Fewer legal problems: one of the main advantages of investing in compliance is that it helps to operate and avoid lawsuits, sanctions and fines.
- Automation: today’s compliance tools automate repetitive and tedious, traditionally manual tasks, thereby reducing manual workload and simplifying day-to-day work.
- More efficient processes: one of the objectives of companies goes through growth. Through the internal and external audits that are carried out, points of improvement and possible inconsistencies can be located.
- Improves decision-making: the compliance tool also facilitates decision-making, since more information will be available and the right decisions can be made in legal and financial matters.
- Improves the company’s reputation: customers positively value companies that are committed to social and environmental issues. These fulfillments can be promoted and it is certainly a clear advantage over competitors.
- Better communication between the team: thanks to the use of a compliance tool, employees and senior managers are able to face risks and meet compliance requirements. Everything is perfectly centralized, with full communication between the different parts.
Types of compliance tools
Compliance tools are still a field with a lot of room for improvement and innovation. Broadly speaking, there are three large blocks:
- Multi-purpose compliance management platforms: these include generic tools, valid for any type of company or industry. And, therefore, with a low level of specialization.
- Industry-specific compliance management tools: tailored to the specific needs of different industries (eg. healthcare, manufacturing, finance, etc.). They involve specialization and ensure compliance with regulations, such as PCI DSS, HIPAA (Health Insurance Portability and Accountability Act), GDPR (General Data Protection Regulation) and ISO (International Organization for Standardization).
- GRC software: set of compliance management tools that facilitate risk management and allow compliance risk to be monitored.
How to know if my business needs a compliance tool
As we have mentioned in the benefits section, compliance tools allow you to reduce manual work, optimize implementation, simplify monitoring and generate reports faster and in real time. So, in addition to taking these benefits into account, we recommend that you do an audit of your context and current situation to find out if your business needs a tool of this type and how it can help you in your specific case.
To fully understand where you are coming from, you must identify and take note of all the risks to which your company is exposed (past, present and future risks).
From there, you will have to analyze them one by one and it would be convenient:
- Create a contingency plan tailored to the risks identified
- Dissemination of the standards, policies and protocols established to ensure that all company personnel are aware of their compliance
- Monitoring and prevention (to detect possible failures and successes)
Keep in mind that every business has a different IT infrastructure and different implementation needs. So it will be very important to surround yourself with a team that understands your business well and specializes in the type of fulfillment you need.
If you need a compliance tool to carry out your KYC processes, we can advise you.