Companies in highly regulated industries such as finance, banking, and insurance are required not only to comply with regulations, but also to report to the regulators to prove compliance. Depending on the regulatory body to which a company is bound, the details and process may vary slightly, and most companies have a compliance team in place who takes responsibility for regulatory reporting.
Why is Regulatory Reporting Important?
Regulations are put in place to protect companies and the clients they serve. The reporting process enables regulators to ensure that companies are complying with the regulations and it also helps them identify areas for improvement.
The most important reasons for regulatory reporting include the following:
- Trust – the regulations exist to protect the public and to ensure that companies in certain industries are not taking advantage or causing harm to their clients or the general public. Regulatory reporting is a way for companies to be transparent and show their commitment to compliance.
- Efficiency – employees will be able to work more efficiently and safely if they know exactly what the rules are that they are meant to be following. Having to report on compliance provides a layer of accountability for both management and other employees.
- Identifying Breaches – regulatory reports are a useful tool should there be a compliance breach or any illegal activity. The reports can contain information that will help uncover what may have led to the breach or who was responsible.
- Proving Innocence – if a company is wrongly accused of wrongdoing and has been diligent in their reporting, they can use their regulatory reports to prove their compliance with all regulations.
What are the Risks Involved in Regulatory Reporting?
Even with all the best intentions, there are risks involved when it comes to regulatory reporting, both in filling out the reports themselves as well as in how they are used.
Operational risk refers to challenges that may arise in a company due to failed processes or technology as well as human error. This type of risk could be anything from poor quality control to theft or natural disasters.
The regulatory reporting process is an operational process that, by definition, includes a certain level of risk. There is always the possibility that failures in the process could lead to inaccurate information being included in the reports. For example, if data for the report is collected manually there is a high risk of human error.
If certain employees are, in fact, violating laws and regulations, and this is revealed via the regulatory reporting, the company will be liable for fines or other legal consequences.
Managers make strategic business decisions every day, and those decisions are usually based on data and other information gathered through normal business operations and activities. Should the information included in regulatory reports be inaccurate or misleading, it can result in poor business decisions that put the business’ overall strategy at risk.
If a company fails to conduct their regulatory reporting in an appropriate way and word gets out that they are non-compliant, it can greatly impact the company’s reputation. A poor reputation can mean loss of clients, investors, and revenue.
What is the Best Way for Companies to Comply with Regulatory Reporting Requirements?
Companies need to be fully aware of the specific regulations that apply to them and then implement a foolproof system that will enable them to effectively report on their regulatory activities while accounting for any related risks.
While it is likely mid-level managers and their employees who will gather the information and complete the reporting, the process itself must have buy-in from upper level management as well. Everyone from the C-Suite down must be on the same page when it comes to compliance and regulatory issues, setting the tone and ensuring that every employee knows what is expected of them.
It is not enough to have informal policies and procedures, but rather there should be written guidelines detailing the exact process that should be followed when it comes to regulatory reporting. It must be clear who is responsible for each stage of preparing and filing reports, and there should be guidelines addressing issues ranging from data quality to the storage and sharing of information.
There should be regularly scheduled training sessions so that relevant employees will always have the most updated information and be fully aware of what is needed for accurate reporting.
The best way to ensure full accuracy and compliance is with an automated system. LeapXpert’s Business Communication Platform provides companies with all of the data and information required to accurately report on all communication-related issues.