23 Jun

What is a Compliance Management System ?

In recent times, the use of one term has become rather frequent. That term is ” Compliance Management System “. Abbreviated as ‘CMS’ this phrase has been causing some confusion among users despite its regular use. ‘CMS’ refers to the process of attaining and maintaining compliance with various laws and regulations.The inception of ‘CMS’ was brought about by Consumer Financial Protection Bureau (CFPB) and it. The scope of ‘CMS’ is much wider than perceived and is not just restricted to a software program that generates compliance reports, notifications and adverse action letters.

Legal framework of a Compliance Management System

In India, the Companies Act 2013, places the onus on the Board of Directors to device a proper and effective system to ensure compliance with the provisions of all applicable laws. Technology helps the company in doing it in a faster and organized manner. Therefore, a ‘Compliance Management System’ or ‘CMS’ is an effective tool to ensure that a company is kept up to date with changes in the law thereby staying relevant in the market.

The Board can maintain a commitment to a Compliance Management System by Firstly, demonstrating clear and unequivocal expectations about compliance not only within the institution but also to third party providers. Secondly, by adopting clear policy statements and appointing a compliance officer with authority and accountability. Thirdly, by allocating resources to compliance functions commensurate with the level and complexity of the institution’s operations and lastly by conducting periodic compliance audits and by providing recurrent reports by the compliance officer to the Board.

 A Compliance Management System is an amalgamation of a number of components combined together to form one product.

It comprises of Three components mainly:-

Board and management oversight

Mobile Tool

Compliance audits and corrective action

A Compliance Management System is necessary for a number of reasons. Firstly, it enables effective compliance with necessary laws that would otherwise attract litigation, monetary penalties, and other legal actions. Also, it ultimately aids the generation of reports that can be updated through the use of a user id and password. Further, it aids the customer in managing risks and generating awareness with regard to new legislation.

Therefore an effective CMS tool ensures compliances with applicable laws, regulations, and guidelines while also detecting instances of non-compliances and. facilities taking corrective measures.

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Comments (1)

Scott Adams
July 12, 2017 Reply

It's interesting that a CMS system helps you complies with laws. I had heard about compliance services, but I was confused about what they were. I can see how it would be a good idea to have a system in place, that protects you from penalties.

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