What is compliance monitoring?
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What is compliance monitoring?

Compliance monitoring is the act of continuously assessing whether an organization is adhering to regulatory requirements, including internal policies and specific industry standards. Its goal is to help organizations achieve consistent regulatory compliance and avoid areas of non-compliance.

Compliance monitoring is often considered an important part of an organization’s compliance management system and overall cybersecurity posture. This is because failure to comply with compliance requirements can result in severe consequences, including fines, business disruptions and even an increased risk of data breaches

Most regulators in the US and UK also now require some form of compliance monitoring. For example, the UK Financial Conduct Authority (link resides outside ibm.com) insists on having a compliance monitoring plan before approving a company in the financial market.

As of today, there are no set standards for compliance monitoring, making each organization responsible for instituting its own compliance monitoring program. Some organizations perform internal monitoring, which means they are responsible for monitoring compliance risks by using their own internal policies and tools, while others outsource the process to third-party providers. 

Many find that these managed security solutions and platforms, which use dashboards, compliance software and a high degree of automation, can help streamline the compliance management process and offer more oversight, alongside faster remediation.

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The importance of compliance monitoring

To understand the importance of compliance monitoring, consider today's regulatory landscape. Around the world, governments, trade authorities, industry standards organizations and even individual companies have created a web of compliance requirements that apply to any business operating in their jurisdiction or industry, regardless of where that business is based.

Failure to comply with compliance requirements can often bring heavy fines and legal troubles. For instance, in May 2023, Ireland's data protection authority imposed a fine of USD 1.3 billion on the California-based Meta for GDPR violations (link resides outside ibm.com). 

Also, senior management and other individuals bear their own regulatory responsibilities. For example, the Sarbanes-Oxley Act (SOX Act), a US regulatory law that aims to prevent corporate fraud, stipulates that executives can face up to a USD 1 million fine and ten years in prison for certifying an inaccurate financial report. 

Simply put, compliance is complex, and this complexity can lead to businesses inadvertently violating compliance rules in their day-to-day operations. They might not fully grasp the nuances of compliance requirements when expanding to a new region, or they might overlook updates to data protection laws that mandate the disclosure of data privacy policies to customers.

Compliance monitoring helps organizations manage these risks and stay on top of the shifting regulatory landscape. It saves them time and money, allowing them to catch violations in real-time before they become bigger issues. It also creates greater organizational efficiency, streamlining the complex regulatory reporting process.

From a security standpoint, compliance monitoring also fosters better risk management and organizational transparency, advantages that have become increasingly critical as customers become more concerned about data privacy and the potential for data breaches. By maintaining regulatory compliance, organizations not only protect themselves but also build trust and confidence with their stakeholders.

 

How to make a compliance monitoring plan

Effective compliance monitoring requires a comprehensive approach that involves a range of stakeholders, policies and business processes.

Here are some common steps to consider when making a compliance monitoring plan:

Perform a compliance risk assessment

Compliance risk assessments can help organizations identify potential areas of non-compliance and assess the risks associated with each.

Businesses can then prioritize these risks and allocate resources to the areas that pose the most significant threat. For instance, specific industries have their own standards, such as HIPAA for healthcare or PCI for financial services.

Develop a compliance policy

Once compliance risks or issues have been identified, the next step is to establish a compliance policy. This policy should provide clear compliance procedures and be adequately communicated to all members of the company.

Keep in mind that a compliance policy is critical for effective compliance monitoring. It lays down an organization’s rules for compliant and lawful behavior, while compliance monitoring checks that these rules are being consistently followed.

Train employees

It's important to remember that compliance isn’t solely the responsibility of the compliance team. Effective compliance monitoring involves various departments and individuals throughout the organization.

Employee training helps every employee understand their role in maintaining an organization’s compliance. Training should be conducted regularly and include all relevant employees, including senior management, as they are ultimately responsible for setting the tone and fostering a culture of regulatory compliance across the organization.

Establish monitoring and testing strategies

Organizations should conduct regular testing to help ensure that their compliance monitoring program is effective at spotting vulnerabilities and providing quick remediation. 

Technology-enabled solutions, such as compliance management software like SIEM, can help automate this testing process by using continuous monitoring, in which SIEM continually collects and analyzes data in real time for areas of non-compliance.

Implement corrective action and remediation plans

When organizations identify areas of non-compliance, they should take immediate corrective action and implement remediation plans to fix the issue and prevent it from recurring.

Corrective actions can include revising internal policies, improving employee training, rethinking company workflows or investing in better compliance solutions. 

Compliance teams should also consider tracking and documenting corrective actions to help ensure that others implement them effectively and consistently in the future.

Stay current

Compliance policies and monitoring plans should be reviewed and updated regularly to reflect changes in regulations or business operations, along with technological advancements.

Compliance is a moving target, and a robust compliance monitoring program must be current and agile to respond to evolving compliance risks and regulatory requirements.

Internal audits

Some organizations choose to perform an internal audit in addition to a risk assessment. Unlike a compliance audit, which is frequently performed by a compliance officer or the compliance team, internal audits are usually conducted by an external firm or an organization's internal audit department, making them entirely independent.

Because of this independence, internal audits can provide organizations, especially larger ones, with more rigor and more checks and balances. They can also serve as a historical record for compliance activities and can even be shared with regulatory authorities to demonstrate accountability during a regulatory audit.

The challenges of compliance monitoring

Compliance monitoring is a dynamic process that uses both manual and automated systems and often involves audits and assessments. 

While there are many benefits, implementing an effective compliance monitoring system can have its challenges. 

Some of these include:

  • Lack of resources: Compliance monitoring requires significant financial, human and technical resources. Smaller businesses might struggle to allocate sufficient resources for compliance monitoring, making it challenging to maintain compliance with regulatory requirements.

  • Complexity of regulations: Keeping up with regulations can be confusing and overwhelming. Compliance monitoring often requires businesses to understand and adhere to complex requirements and standards across jurisdictions, especially multinational corporations operating across regulatory environments.

  • Manual processes: Compliance monitoring can be time-consuming. Traditional compliance management processes rely heavily on manual processes, leading to increased complexity, errors and inaccuracies, and down the line, missed compliance requirements, regulatory breaches and operational disruptions.

  • Lack of accountability: Compliance monitoring requires a high degree of accountability, both at the individual and organizational levels. Employees need to understand the importance of compliance and take responsibility for their actions, while leadership needs to prioritize compliance and continually reiterate their compliance policy.

  • Integration complexity: Implementing an effective compliance monitoring program requires combining data from multiple business systems, including compliance management software, data analytics software, reporting tools and data warehouses. It can be challenging to integrate these technologies fully, leading to issues with data accuracy, duplication and compliance gaps.

Comparing in-house, third-party and hybrid compliance solutions

The most common forms of compliance solutions are in-house, third-party and hybrid approaches.

In-house

In-house compliance monitoring or internal monitoring, provides organizations with a high degree of control and customization over their compliance initiatives. Companies can develop tailored systems that align with their business needs and have direct control over their data security.

While there are initial costs involved in setting up the compliance monitoring system, ongoing expenses can be lower once it's in place. Still, organizations must invest in building internal monitoring and expertise, which can be a significant resource commitment.

Third-party

Third-party compliance monitoring solutions bring specialized expertise to organizations. These providers stay current with evolving regulations and industry standards and frequently provide updated compliance reports. 

Third-party compliance solutions are also often more scalable, making them suitable for a range of company sizes. These providers often use dashboards and continuous monitoring to help organizations maintain a real-time view of their compliance status. This real-time visibility helps identify and address non-compliance promptly, enhancing the organization's ability to demonstrate accountability.

Also, outsourcing compliance monitoring can free up internal resources, allowing organizations to focus on their core activities.

Managed security information and event management (SIEM) services are a popular form of compliance management software. These services provide many of the benefits shared above and also frequently give businesses access to cybersecurity experts who specialize in monitoring, mitigating and responding to vulnerabilities and compliance risks. 

Hybrid

Some organizations might also opt for a hybrid approach, combining in-house expertise with third-party tools, like compliance software, to strike a balance that suits their needs.

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Resources Cost of a Data Breach Report 2023

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What is data compliance?

Data compliance is the act of handling and managing personal and sensitive data in a way that adheres to regulatory requirements, industry standards and internal policies involving data security and privacy.

What is SIEM?

Security information and event management, or SIEM, is a security solution that helps organizations recognize and address potential security threats and vulnerabilities before they have a chance to disrupt business operations.

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