Employee workload, risk management, sales, data analytics, materiality disclosures, and board of director reporting — these are important things to keep in mind when considering how much budget to earmark for compliance programs year over year.

Companies that have not adapted their programs and dedicated the appropriate resources to handle their increasing requirements may need to drastically reallocate resources in the future to catch up. In contrast, companies that prepare for compliance in 2021 will have the flexibility to respond to regulatory pressures, mitigate business continuity risk, and maintain market access.

After years advising hundreds of companies on their compliance programs, Assent’s team of experts — including Travis Miller, General Counsel — have noticed some common elements successful companies consider before they start budgeting. Travis shares his learnings below.

1. Compliance budget doesn’t need to live in one department.

Since compliance lives across multiple departments, it’s common for budget to be allocated across multiple departments or business units. For example, if a new technology tool will support the engineering, procurement, and supply chain departments, you may consider distributing the budget proportionally across these departments. Ask your solution provider to issue separate invoices for each department, if it better supports your case for budget allocation.

2. Determine what is material to your company and board of directors so you can align resources effectively.

Investors and boards of directors will want to see that budget spend is aligned with material issues for your company. If supply chain risk is a material issue for your company, then there should be an aligned investment in the associated processes and ongoing risk management, including a method to properly collect and report on supply chain data.

3. You must consider supplier geography and customer expectations when managing requirements.

Supply chain geography and customer expectations will dictate when companies must have their own compliance data ready to share. When a company is not prepared to respond to new regulations or customer data requests, it puts its relationships with customers at risk, along with its short- and long-term revenue.

Most companies are located in the middle of the supply chain, where they face customer pressure to disclose and must acquire data from their own suppliers in order to properly reply. Programs must be established well in advance to enable a timely response — particularly if you are contractually obliged to provide this data.

4. Be proactive, not reactive.

Regulatory changes are a constant. Companies must keep track of emerging regulations and updates to existing regulations, such as the bi-annual introduction of new entries to restricted substances lists. For example, in 2021 alone:

  • The new EU Medical Device Regulation will come into effect.
  • New substances of very high concern (SVHCs) will be added to the EU REACH Regulation.
  • New Toxic Substances Control Act (TSCA) requirements will be enforced.
  • The publicly accessible SCIP database is slated for release.

All of these requirements call for investment in a baseline program that integrates bill of materials (BOM) data (often retrieved from a product lifecycle management system), and an initial campaign and education phase to train suppliers how to create declarations. Once this investment has been made, the data will support compliance for new products and compliance with new regulations.

A lack of a clear and reliable supplier outreach strategy can result in expensive and time-consuming process duplication, and continuous roll-outs of training programs for suppliers. This is often linked to supplier frustration and response delay. The additional cost of ineffective processes must be considered when developing a budget and allocating resources toward the necessary programs. Companies that do not consider these often find that their top line revenue is impacted.

5. The most successful companies build contingency for regulatory change into their budgets.

Regulatory changes can be expected on an annual basis. The most successful companies understand their baseline requirements and the resources needed to meet them. However, they also have an effective regulatory scanning program that warns of potential changes to regulatory requirements as early as possible.

This allows the organization to plan ahead for those requirements, building contingency into their budgets during their regular budgeting cycle so that new requirements can be comfortably addressed as they unfold. This approach saves considerable internal resources, who would otherwise be called upon to build business cases and make presentations to obtain budgets in reaction to unexpected issues.

6. The same move toward automation that has been financially effective in other areas can also be applied to compliance.

Automation and digital transformation have been major themes for business over the past several years, and compliance is no exception. Many compliance directors being hired today are evaluated on their experience with third-party technology and the ability to automate processes for greater efficiency. Processes that have worked in other departments or across a company’s business units can often be applied to compliance programs for similar results.

To learn more about how Assent can maximize your 2022 compliance budget, or to get quote now, contact us today.

Travis Miller
General Counsel

Travis is an international trade and compliance attorney who specializes in ITAR/EAR/sanctions, global anti-corruption and anti-slavery, codes of conduct, environmental health and safety, product stewardship,  Read More

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