Compliance Management System

A Compliance Management System (CMS), reduces or eliminates risk from lawsuits, sanctions, noncompliance to government regulations, unfair lending practices, and other forms of litigation. Businesses need a good CMS to be successful in today’s marketplace. However, businesses did not always see compliance with applicable laws as a benefit.
Compliance regulation is a result of public outcry against unethical business practices. Upton Sinclair’s 1906 book, The Jungle, exposed the dangers of the meat packing industry. The Food and Drug Administration (now the Bureau of Chemistry) was then charged with enforcing and preserving the Pure Food and Drugs Act in order to reduce public dissatisfaction and protect consumers.
This was not the only controversy that led to legal changes. After investigations revealed that more than 400 U.S. businesses had made questionable payments to foreign governments, the Foreign Corrupt Practices Act (FPA) was created in 1977. After outrage over the purchase of toilet seats by the Navy for $600, the government established guidelines for ethical conduct for contractors. These and many other examples were the catalyst for many of the robust CMS programs that are used today in many businesses.
What is a Compliance Management System?
A CMS is a repository that stores processes, procedures, policies, and other information that ensures that a business is operating in compliance with government regulations. A CMS program integrates relevant documentation, controls and tools into a business to comply with legal requirements. This ensures that consumers and employees are protected.
A good compliance management system should have four components that eliminate or minimize infractions.
4 Components of a Compliance Management System PoliciesSet by management and followed by employeesProcessesDocumented and comply with established regulationsTrainingImplemented during the hiring process and refreshed as standards changeMonitoringRecursively checking for compliance in business transactionsImplementing a CMS
In today’s social media-conscious world, CMS programs are essential to a business’ success. Compliance management can lead to fines of millions of dollars and a boycott of a business on social media. This can have irreparable consequences for a company’s brand and market share. A company’s CMS must not only be compliant but also implemented and supported at all levels of the organization, including the board of directors and the executives. Leadership must have a clear mission statement regarding compliance that is communicated to employees as well as third-party providers.
Senior management personnel play a crucial role in ensuring that adequate manpower is available and that financial resources are allocated to compliance and ethics initiatives. Senior management is also responsible for ensuring that all employees are familiar with the CMS and that the best practices are implemented. This level of management strives to continuously improve upon best practices and procedures. The goal for management is to be in compliance with all business products and transactions.
A good CMS program includes a compliance officer, who reports directly to its board. The compliance officer ensures that the business meets all legal and regulatory requirements. They also inspect the internal business processes and practices. The officer strives for compliance.
Read more: DACI Top Decison-Making Framework
Are All Businesses Require a CMS?
Businesses without a compliance management system are at risk of multiple problems. In order to achieve compliance, a business must have the appropriate CMS policies and procedures in place. There are many ways to be noncompliant depending on what services or products a business offers. Lucidchart lis