What is Compliance Management System (CMS) and Its Importance in Businesses
Basically, Compliance Management System is an overall compliance strategy that strongly suggested to be effectively used by an organization. According to Federal Deposit Insurance Corporation (FDIC), Compliance Management System or CMS for short, to an organization is all about:
- Learning all the compliance responsibilities
- Make certain that their employees recognise the responsibilities
- Ensures that the requirements will be integrated to business processes
- Analyzing vital operations to assure that responsibilities are performed and requirements are completed
- Makes remedial move and updates materials as fundamental
Importance of Compliance Management System
Compliance Management System plays an important role in the structure of every organization. A strong and effective compliance management system will help control the risks relevant to an organization in administering several regulatory requirements. When correctly implemented and managed, problems and issues within the organization that affect consumers will be efficiently fixed.
3 Components of Effective Compliance Management System
- Board and management oversight
The Board of Directors are the ones who are responsible for improving and managing a CMS that assure complete compliance with federal consumer protection laws and regulations.
They will be expected to demonstrate legible and detailed explanations about compliance to an organization and other third party providers. They will also provide compliance officers that will do the technical duties in compliance requirements. Overall, the board will be responsible in making vital actions to ensure that an organization will have an effective Compliance Management System.
- Compliance Program
Every organization should have an organised and well-planned program to aimely focus on an organization’s compliance activities. A written program will be provided as an important source document that will serve as a reference guide for the employees. A well managed and implemented compliance program will help avert and minimise possible regulatory violations that might come up. A well-organised program should have the complete set of legal policies and procedures, effective trainings, proper monitoring and correctly handled customer complaints.
- Compliance Audit
A compliance audit is a legit assessment of an organization’s compliance requirements with consumer protection laws and regulations and attachment to internal policies and procedures. The audit will help the organization assure proceeding compliance and will help determine the current compliance state. It will also help recognise the possible compliance risks that may occur. The board will be the ones who should determine the range of an audit, and the rate of occurrence where audits are being performed.
To be simple, Compliance Management System or CMS, is a complete compliance program. A CMS is a combined system consists of all the important documents, functions, processes, controls and tools that help an organization comply with legal requirements.