As businesses strive for cost optimization amidst a financially turbulent atmosphere, some feel secure in targeting their compliance budgets for cuts, primarily due to the trending automation and digitization of compliance processes. But behind this seemingly safe façade lies a host of hidden risks that may not be immediately evident.
The digital revolution has steadily made its way into various business sectors, permeating even the domain of regulatory compliance. Rapid modernization and automation have led several firms to believe that they can handle compliance more effectively with fewer resources. This perceived efficiency has encouraged many to lean towards slimmer compliance budgets, a move that on the surface, seems quite reasonable.
However, recent studies suggest that this may bury organizational risks that are far harder to manage than those posed by previous, less technological eras. The problem lies not with automation or digital applications per se, but more with over-reliance on them, according to a recent report by the Gartner Group.
Compliance software can undoubtedly help automate routine checks and processes, freeing up human resources to focus on more pressing matters. Still, it can’t fully replace the qualitative analysis, judgement calls, and nuanced decision-making that experienced compliance teams provide. As we transition to more digital compliance solutions, we must not undervalue the unique human abilities that new technology never will replace, cautions Gartner’s report.
Precisely digital regulatory compliance is also leading compliance officers into uncharted territory. There’s an array of new, often complex, laws around data protection and privacy (like the General Data Protection Regulation in Europe, or the California Consumer Privacy Act—CCPA—in the United States) coming into force.
These modern regulations, involving data protection at their core, have a large emphasis on how corporations handle personal data and digital transactions, a key component of any online business. To meet these newer requirements, companies need well-resourced compliance departments equipped to manage both digital and traditional compliance challenges. In other words, while technology can help, companies shouldn’t rely solely on it as they navigate their way through increasingly complex digital compliance landscapes.
Challenges have also mounted due to COVID-19. The dislocation of workforces and adjustments to remote working have generated a breeding ground for potential compliance risks. Financial uncertainty and turbulent markets can tempt individuals in businesses to cut corners on compliance, warns a recent Deloitte survey.
Budget cuts to compliance departments during such critical times could increase the likelihood of organizations falling foul of regulations, leading to significant penalties from regulatory bodies. The financial repercussions from these penalties could be far higher than the savings initially gained from slashing the compliance budget.
Furthermore, the web of regulations is set to tighten, with the tightening driven by public demand. Amidst numerous news items surrounding data breaches and misuse, consumers have become increasingly aware of how companies manage their data. The annual Edelman Trust Barometer shows a clear trend of growing public concern around data privacy issues, leading to more stringent regulations being enforced to protect consumer data.
In conclusion, compliance is not an area where businesses can afford to trim costs greedily. While seeming attractive in the short term, compliance budget cuts, coupled with an over-reliance on digitization, have real potential for expensive, long-term damage. A robust, well-resourced compliance team remains an essential operational feature – a guard against increasing complexities and dangers in this increasingly digital business world.
Original Source: https://hrexecutive.com/why-compliance-budget-cuts-feel-safe-right-now-and-why-theyre-not/
