The number of Acts regulating South Africa’s banking sector has grown from 106 in 1990 to 232 today, writes Jean Moncrieff, CEO of Emerge Africa. And it’s not just banks that are affected: from retailers to telephone operators and from the National Credit Act to FICA and RICA, thousands of businesses have a long list of new compliance needs to meet.
Most of this new regulation is serving good ends: few would argue with the need to curb money-laundering or put the brakes on unaffordable credit. But compliance can come at a high cost. Businesses incur large expenses and consumers face multiple inconveniences, as the thousands who’ve been called to present FICA credentials to the same institution for the third or fourth time can confirm.
At a recent meeting of top local banks compliance ranked as the highest challenge facing the industry. They estimated that the National Credit Act alone will cost banks around R1.5 billion to implement and enforce.
The same story is told around the globe: just a few months ago local media giant Naspers announced it would move its secondary listing from Nasdaq to the London Stock Exchange, citing the high costs of complying with US laws including the Sarbanes-Oxley Act of 2002.
But it doesn’t have to be this way: a survey released last month by Financial Executives International showed that for many firms, the costs of compliance with Sarbanes-Oxley are easing as better processes and automated controls bring internal costs down.
Sanjay Anand of the Sarbanes-Oxley Institute was quoted in Computer Weekly as saying that compliance had forced many companies to really understand and document their business processes: “As you gain more visibility into processes you can actually streamline them, compress them, make them more efficient. Once you start to make business processes more efficient from a controls standpoint, you eliminate errors and fraud. You're automatically making businesses run better.”
In other words, organisations that integrate compliance with business process management (BPM) strategies stand to realise significant efficiency gains – which can translate into better customer service and higher profits.
The common demand of all compliance mandates is transparency and the proactive control of processes and their content. Instead of auditing what has already happened, businesses need to detect and prevent violations before they happen. If all the right information is already being captured as part of a BPM strategy, red flags can be raised in areas of compliance risk and dealt with immediately.
Traditional ERP systems, which are silo oriented, can deliver the kind of information that is needed. Processes spread across many systems and many organisational silos: so to get an end to end view, the organisation needs a technology platform that can monitor the entire process and provide meaningful information.
Once that platform is in place, there are many benefits. Mainly, it becomes possible to improve the efficiency of the whole process. That means faster turnaround times, better customer service, better use of resources and an end to bottlenecks and information breakdowns.
From a compliance point of view, it means the process of creating the numerous reports demanded by regulatory authorities can be completely automated – and sent directly to the relevant authority from within the system. With compliance templates already set up for many requirements, BPM vendors can also help companies benefit from the experience of many others: why reinvent the wheel when others have done all the hard work before you?
Beyond ticking the boxes of reports, however, BPM really comes into its own by enabling active, pre-emptive management. If any of the regulations are not being met in a trading environment, for example, the transaction reporting will not meet the service level required and managers will get a warning. If a broker has overridden the process to complete a trade, alert mechanisms within the platform can notify the relevant manager or compliance officer.
It’s true that compliance is costly. But by focussing only on the costs, many organisations will miss invaluable opportunities to improve their processes, increase efficiencies and become more competitive. Using compliance to drive improvements throughout the business can bear valuable fruit.