A Culture of Compliance is the key to Compliance Automation

In the 75 years since gaining independence, India has transformed into the world’s fifth-largest economy, surpassing its former colonizers. The country's impressive 7% growth rate is set to propel it toward a $10 trillion economy by the end of the decade. This robust growth is supported by a thriving $1 trillion digital economy. Coupled with a business-friendly environment, it prioritizes ease of doing business. In this dynamic landscape, ensuring compliance has become essential for businesses to operate effectively and sustain growth, making compliance management a critical business process.

The revolution in technology is redefining business processes, making them faster, simpler, and more cost-effective. As automation takes center stage, businesses must integrate digitization into their compliance strategies. Currently, digitization primarily involves tracking and managing regulatory obligations. However, the incorporation of automation can significantly reduce compliance costs and mitigate expenses associated with non-compliance.

The advent of regulatory technologies has transformed corporate compliance monitoring. Despite these advancements, tasks such as preparing returns, registers, and challans remain labor-intensive and time-consuming. Automation plays a crucial role in reducing these costs, ensuring timely and accurate compliance while enhancing transparency.

Recent advancements in automating compliance document generation have already transformed Labour Law registers and returns, SEBI requirements (PDF Intimations/XBRL Filings), and MCA Laws (meeting-related documentation and E-Forms/other filings). These innovations aim to digitize compliance processes, minimizing manual intervention, improving accuracy, and reducing costs.

Straight Through Filings (STFs) further exemplify comprehensive digitization of compliance procedures for both corporations and regulators. The Finance Ministry’s implementation of GST enabled API-based filings, allowing private operators to integrate their systems with regulatory platforms for automated submissions. This model should be adopted by other ministries to foster investment in private sector technologies. Public-Private Partnerships (PPPs) between regulators and RegTech companies can establish a streamlined compliance ecosystem that is paperless, cashless, and presence-less, simplifying administration for regulators.

Other notable innovations include Enterprise DigiLocker, Unique Enterprise Number (UEN), National Portal for Compliance, and the National Open Compliance Grid. An Enterprise DigiLocker would allow businesses to store authentic documents digitally, eliminating the need for physical copies. Government departments could directly upload documents to DigiLocker for verification. Similarly, a UEN would streamline corporate identity, providing insight into an enterprise’s history and aiding in risk assessment.

Automation in compliance management establishes a foundation for efficient management of compliance obligations. This technology-driven approach supports a culture of compliance and accountability across business processes. Promoting this culture is vital, as compliance is increasingly scrutinized across various business aspects, including finance, secretarial, labor, environmental, safety, and health. Ensuring effective compliance often falls on a few individuals, complicating monitoring and increasing the risk of non-compliance. Therefore, collective responsibility and decentralization of compliance tasks are essential. All stakeholders must be aware of their roles, with coordination ensured through robust compliance processes at all levels.

Key managerial personnel (KMP) play a crucial role in defining clear compliance roles and responsibilities across the organization. Internal processes for inter-departmental and inter-level coordination enhance the effectiveness of compliance management systems. Regular assessments, risk evaluations, and corrective actions should be integral to the compliance strategy. Implementing these solutions equips enterprises with the tools necessary to navigate India’s complex regulatory environment.

Top management must lead by example, championing a culture of compliance. A proactive approach and positive attitude towards compliance are critical. By involving top management in the compliance process and setting a positive tone, organizations can foster a culture rooted in their values. Regular training sessions and early emphasis on compliance for new employees help instill its importance.

Integrating a compliance culture into the organizational environment promotes clarity and accountability, ensuring timely completion of compliance procedures and building a trust-based culture within the business.