If KPIs can help your product and marketing teams get executives on their side, your compliance function can (and should) do the same. RiskOptics’ Meghan Maneval tells you where to start.
In the modern data-centric world, ensuring that a company abides by all pertinent laws, guidelines and ethical standards — corporate compliance in a nutshell — is paramount. But how can compliance officers effectively gauge their company’s adherence to these standards? The answer lies in key performance indicators (KPIs). By identifying and monitoring these KPIs, organizations can not only delve deeper into their compliance stance but also highlight the strengths and areas of improvement to stakeholders.
But which metrics truly capture the essence of a robust compliance program?
What are compliance metrics?
Compliance metrics, often intertwined with key performance indicators (KPIs) and key risk indicators (KRIs), are essential tools to gauge a company’s adherence to both internal protocols and external regulations. These metrics offer insights into the effectiveness of an organization’s compliance program, shedding light on areas of strength and those in need of attention.
This data can give you a clear picture of how well your organization is meeting its compliance objectives, as well as serving as an early-warning system for compliance anomalies, allowing companies to quickly implement solutions to ensure regulatory controls.
Essential compliance KPIs
Your mileage may vary, as every organization has unique needs and there’s no one-size-fits-all metric, but some universal compliance KPIs can serve as a foundation for your compliance program.
Understanding the costs associated with compliance reveals which controls are more resource-intensive and why. Evaluating the time and resources needed for compliance initiatives can inform better strategies, like automation for due diligence or a workflow tool to streamline audits.
Mean time to issue discovery (MTTD)
- The efficiency of your compliance program in identifying issues.
- The effectiveness of your organizational speak-up culture.
- Your data monitoring capabilities for incident identification.
For accurate MTTD, pinpoint when the issue first arose and when it was detected by the compliance team.
Mean time to issue resolution (MTTR)
MTTR evaluates the speed at which compliance challenges are addressed and can signal:
- Resource constraints.
- Technological deficiencies.
- Redundant manual processes ripe for automation.
For accurate MTTR, be sure to consider issue types. Monitor each issue type’s MTTR separately and assess the interval between risk identification and mitigation implementation.
Other insightful metrics include:
- Law and regulation violations: Analyze the underlying causes of past violations to prevent future ones.
- Compliance audits: Keep a record of internal audits, their outcomes and any subsequent actions.
- Risk reductions: Track any reduction in risks due to enhanced internal controls.
- Employee retention and loyalty: Assess how compliance affects employee satisfaction.
- Company culture survey: This offers a snapshot of how employees and the public view the organization, accompanied by actionable recommendations.
Tapping into these metrics equips your compliance officer with the tools to better understand and address organizational risks and maintain regulatory alignment.
Setting organizational objectives
It’s crucial to have a clear set of baseline goals. Addressing the following questions can guide you in pinpointing these objectives:
- What are the overarching objectives across the enterprise?
- How can risk mitigation strategies boost business performance and fortify profits?
- Are there unforeseen events that could hamper operational efficiency?
- Which risks might pose a threat to present or anticipated revenue streams?
- How probable are the occurrences of these unforeseen risks?
Remember, setting the right compliance KPIs means contemplating both present-day challenges and anticipating future risks. Different industries come with unique objectives, which, in turn, necessitate distinct KPIs.
Navigating compliance risk waters
To tailor the perfect set of compliance KPIs for your enterprise, an in-depth risk assessment is paramount. This essentially means evaluating the likelihood of falling short in meeting regulatory obligations. Dive into these questions to steer your assessment:
- Which compliance obligations, if unmet, could lead to the most significant enforcement repercussions?
- Given our current modus operandi, which compliance mandates are we most likely to miss? (Note: The risks you’re most likely to face might not always be the gravest ones.)
- Which existing processes fortify our quest to achieve compliance goals?
- What data-backed methodologies can we deploy to gauge if these processes are hitting the mark?
In our rapidly evolving, data-driven landscape, compliance is not just about checking boxes or meeting the bare minimum. It’s about nurturing a culture of integrity, transparency and foresight. Through the careful selection and analysis of KPIs, organizations can transform compliance from a mere obligation to a strategic tool that guides decision-making, bolsters reputation and ensures long-term success.
By harnessing the power of these metrics, compliance officers can proactively navigate the tricky waters of risk and regulation, ensuring their organization not only remains compliant but thrives in an era of accountability. In the end, mastering the craft of compliance KPIs is less about avoiding pitfalls and more about charting a course toward a more ethical and prosperous future.