How can finance leaders navigate financial compliance challenges in 2024?

What is compliance in finance and accounting?

Financial compliance refers to ensuring that the company complies with rules and regulations whether they be external laws or internally developed policies and procedures.

With the ever-evolving regulatory landscape, staying up-to-date on compliance requirements will be crucial and for smaller companies without a dedicated compliance function, the responsibility often falls on finance professionals.

For financial services companies, the FCA has already released its new regulatory initiatives grid. Most of the themes relate to financial sector-specific issues such as Basel 3.1, many of the headings could easily relate to any business or not-for-profit.

Typically, businesses will need to be much more aware of issues around consumer duty of care, ESG reporting, regulation of ‘buy now, pay later’ products and greenwashing.

Although it is important to ensure that companies stay on the right side of the law, it is also true to say that businesses must also be certain that they are morally ‘doing the right thing’ or they may find that they end up facing retrospective action or at the very least reputational damage.

While compliance isn’t at the top of most people’s list of enjoyable tasks, every business has to take it seriously. Your company must have a clear view of who is responsible for what otherwise some important aspects may fall through the cracks.

Keeping a watch on professional publications such as AccountingWeb will help as well as subscribing to sector specific journals.

Challenges of ensuring compliance

Financial compliance is actually less about rules and more about people. The simple fact is that, if we want to ensure that our systems and processes are developed with compliance in mind and then managed correctly, we need to start with a compliance mindset.

Compliance in finance can only be improved if:

1.People understand why they are being asked to do things a certain way;

2. what the benefits of financial compliance are.

Finding workarounds and shortcuts can undo the good work of everyone else — which is why financial compliance should be at the cornerstone of any organisation.

It should also be borne in mind that with rapidly developing technology it can be easy to implement a new app only to realise later that it doesn’t comply with company policy.

With so many systems being delivered on a SaaS (Software as a Service) basis, it is also possible that vendors may bring forward ‘improvements’ that actually weaken compliance rather than maintain or strengthen it.

How to efficiently manage compliance in Finance?

Good compliance practice starts at the top so the first thing to do is to make sure that the directors and managers of the business understand how important it is to lead by example. After all, if the senior manager is using the expenses system incorrectly then why should their direct reports follow the rules?

1. Master communication and team collaboration

Communication is vital for improving compliance in finance. Providing your team with clear and concise what, why, where and how comms will help. It’s also valuable to identify a compliance lead so that everyone knows who is in charge and who to speak to.

Naturally, your compliance approach has to be properly documented from a risk perspective but also from a mitigation standpoint.

2. Overcome outdated tools and processes

Outdated systems and processes put your business at risk. For larger companies, it is always worth investing in software-based compliance systems that help colleagues to identify and control risk and when allied with an AI approach this can be incredibly powerful.

It is also important to ensure that mitigation measures are appropriate and commensurate with the level of risk and likelihood identified otherwise you’ll see people trying to circumnavigate your controls.

3. Focus on consistency and sustainability

It is also really important to understand that compliance isn’t a one-time thing. You must have an effective review schedule and methods of assessing new operational developments as they appear.

Besides technology and tools, make sure your team members have access to personalised and up-to-date training and development programs to keep them on top of financial compliance — your efforts will pay off in the long run!