A company’s supply chain risk profile is almost as unique as a fingerprint, impacted by dozens of variables such as regions of operation, substances used in manufacturing, and product types. However, the obligation to meet compliance requirements is universal — as are the best practices for efficiently meeting those requirements and mitigating the risk of fines, penalties, reputational damage, and more. The road to compliance begins with the budgetary steps taken in the boardroom.
Dr. Tina Armstrong is a Vice President and Principal Scientist at Arcadis, an engineering and management consulting company. In her 20 years of industry and consulting experience, she has identified common threads in compliance budgeting.
She shared these insights in the Budgeting for Compliance in 2021 ebook, alongside other industry experts offering guidance for companies heading into one of the most transformative regulatory years in recent memory. In the following excerpt, Dr. Armstrong shares key factors to consider when budgeting, common mistakes companies make, and the cost savings that can be achieved through continual improvement in compliance processes.
Q: What factors should be considered when budgeting for compliance?
TA: Understanding and planning for the level of regulation applicable to a company is key when establishing a budget for compliance. More heavily regulated industries will need a much higher compliance budget than those that are regulated less. Once you understand the level of compliance that must be supported, then a company needs to look at its resources — people and tools — to determine how efficient they are at maintaining compliance, and establish a budget accordingly.
Q: What are some common mistakes companies make when budgeting for the year ahead?
TA: People can be overly optimistic about the ease with which they can obtain the data necessary to support compliance. They don’t take into account the person-hours it takes to coordinate among multiple functional groups and departments, or across business lines and divisions, nor do they usually account for the time it takes to scrub data to get it into a format suitable for demonstrating compliance. Furthermore, people aren’t always able to predict and account for the timeline for regulatory feedback and responses. If regulatory responses are delayed or provided in an iterative fashion, this prolongs the compliance timeline and increases costs.
Q: How does budgeting change as compliance programs mature?
TA: Starting up a new compliance program, or initiating compliance activities for a new regulation, generally requires a smaller exploratory budget to define the requirements for the new program or activity. Once requirements are defined, companies will require a larger implementation budget that covers establishing the standard operating procedures or work instructions necessary to maintain compliance.
Companies will also require resources to undertake compliance activities. Typically, budgets for compliance activities start small, then grow over time. Strategically improving or transforming a program that has grown organically can significantly reduce overall costs. Often, compliance programs that are more ad hoc in nature are incredibly inefficient and leave the company open to greater risk when compared to programs that have been deliberately constructed to build in efficiency and monitor their effectiveness.
This year’s eBook, Budgeting for Compliance in 2021, provides expert insights into the present compliance landscape. In addition to Dr. Armstrong, featured experts include:
- Michael Littenberg, partner at Ropes & Gray LLC.
- Maria Simplson, purchasing manager at Kaba Ilco.
- Danny Cassidy, Vice President of Growth at Compliance & Risks.
Download the ebook to receive unbiased third-party analysis and guidance to prepare your compliance programs for substantial changes coming in 2021.
Assent Compliance is the global leader in supply chain data management, providing supply chain transparency, traceability, and superior risk identification through the Assent Compliance Platform. To learn more, contact our experts.