COMPLIANCE MANAGEMENT - ICSI · compliance management s.sudhakar vice-president (corporate...
Transcript of COMPLIANCE MANAGEMENT - ICSI · compliance management s.sudhakar vice-president (corporate...
COMPLIANCE MANAGEMENT
S.SUDHAKAR
VICE-PRESIDENT (CORPORATE SECRETARIAL)
RELIANCE INDUSTRIES LIMITED
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“REGULATORY COMPLIANCE, AUDIT AND DILIGENCE”
NIRC - ICSI17.9.2016
S.SUDHAKAR VICE-PRESIDENT (CORPORATE SECRETARIAL) RELIANCE INDUSTRIES LIMITED
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S.SUDHAKAR VICE-PRESIDENT (CORPORATE SECRETARIAL) RELIANCE INDUSTRIES LIMITED
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Disclaimer
VIEWS EXPRESSED ARE OF MY OWN AS A PROFESSIONAL AND NOT OF THE
ORGANISATION IN WHICH I AM EMPLOYED
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Session Objectives
4. Creating compliance environment
1. Compliance and its evolution
2. Regulatory reporting on compliance
5. Compliance Management Tool
3. Challenges in Compliance Management
6. Compliance cost
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COMPLIANCE AND ITS EVOLUTION
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Adherence to all applicable Laws, Rules and Regulations
What is Compliance?
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‘Compliance’ is just a subset of ‘Governance’ and not the other way around
Compliance vs Governance
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Evolution of Compliance
License & Permit raj(prior to 1990)
Nacent
New millennium 2000 till date
Dynamic
LPG era of 1990-2000
Evolving
Future of compliance
Mature
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Compliance during Nascent stage
During this phase art of managing government relationships was most critical to business success
Regime of complete control and Government monopoly.
(Nationalisation of large insurance business and Banks, MRTP Act was introduced)
Compliance mechanism was reduced to inspection and audit by Government officials
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Compliance during Evolving stage
Focus changed from closed economy to Liberalisation, Privatisation and Globalisation (LPG)
Indian economy was opened up for the first time and integration with the world economy process was initiated
During this phase compliance mechanism evolved with the establishment of Regulatory bodies like SEBI, TRAI, IRDA and FIPB, with increased focus on investor and customer protection
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Compliance during the Dynamic stage
This stage is witnessing crystallisation of compliances in every fabric of an organisation
Evolution of Company and Securities Laws taken place
It has moved from compliances of all applicable laws to its effect and impact on Society at large
CSR was introduced for the first time
Thus the focus from art of managing Government relations has been shifted to compliance ownership and societal impact
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REGULATORY REPORTING ON COMPLIANCE
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The Companies Act, 2013
Section 134 (5) (f) prescribes that in the “Directors Responsibility Statement” the Directors have to state whether
“they had devised proper systems to ensure compliance with the provisions of all applicable lawsand that such systems were adequate and operating effectively”
DIRECTOR’S RESPONSIBILITY STATEMENT
Section 204(1) prescribes a “Secretarial Audit Report” in which the Secretarial Auditor shall state whether
“there are adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines”
SECRETERIAL AUDITOR’S RESPONSIBILITY
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The Listing Regulations
Regulation 4 (1) (g) prescribes that Listed companies shall abide by all the provisions of the applicable laws including the
Securities laws and other guidelines issued by SEBI
Regulation 17 (3) prescribes that the Board of Directors shall periodically review compliances pertaining to all laws
applicable, as well as steps taken by the listed entity to rectify instances of non-compliances
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CHALLENGES IN COMPLIANCE MANAGEMENT
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Challenges in managing compliances
Complex legal environment and multiplicity of laws and Regulators
Uncertainty and confusion in laws
Ambiguity and Interpretational issues
Amendments by way of Circulars, Notifications, Orders and FAQs
Stringent regulators view and stricter penal provisions
Complex business environment
Multiple regulators and varied compliances for the same activity
Geographically spread operations
CREATING COMPLIANCE ENVIRONMENT
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Creation of compliance environment
Setting the tone at the top, Management and Board have to understand the importance of compliance with
applicable laws
Board has to demonstrate in clear and unequivocal terms, its expectations about compliances and has to adopt clear
policy statements
High level company personnel i.e. Compliance Officer has to be appointed and has to be entrusted with the
responsibility for compliances
Defined Compliance management organization, roles and responsibilities
The compliance officer has to be empowered with sufficient authority and direct accountability to the Board
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Creation of compliance environment
Written policies and procedures;
Well-defined disciplinary guidelines
Training and education
Establish lines of communication
Internal compliance monitoring and ensure that compliance audits were conducted and the audit and action
taken reports were placed before the Board from time to time
Reporting on detected offenses and corrective action plans
Periodic Board review of Compliance Management System
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Role of a Compliance Officer
Develop a compliance manual
Devise compliance policies and procedures
Devise a robust and effective Compliance Management System
Ensure that proper training has been imparted to all concerned
Define the role and responsibilities of functional units
Ensure constant updation of the manual, policies and the system
Ensure requisite compliance audits
Review of audit reports and ensure corrective actions
Reporting system to the Board
Compliance certificate to the Board
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Who should be a Compliance Officer?
Should have thorough knowledge and understanding of applicable laws
Should have overall knowledge of the organisation and of the operations
Should be fairly a senior person in a commanding position
Should be able to spend sufficient time
A Company Secretary should be the right person
COMPLIANCE MANAGEMENT TOOL (CMT)
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Benefits of CMT
One platform for all legal compliances required by the company
Increased awareness about laws and compliances amongst employees leading to improved compliance conscious
organization
Assigns ownership, accountability and transparency
Centralized view of compliance adherence and monitoring
Provide a mechanism to report on completion of compliance through a real time sign-off process
Trigger escalation and alerts for missed timelines and remediation measures
Provide real time online dashboards on the status of compliance
Store returns and proofs of compliance on an online repository
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Benefits of CMT
Built in escalation matrix to ensure critical compliances are met
Control over compliance gaps and monitoring remedy
Reduce regulatory and statutory violations and non-compliances
Avoid litigations, penalties, imprisonments and other enforcement actions
Self assessment of internal controls of compliances
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Diagnose Design Implement Sustain
Key steps of setting up CMT
• Understand business and its complexities through interdepartmental meetings
• Obtain a listing of regulations and laws identified by company
• Assess the current process of compliances adherence and reporting
• Identifying process gaps and reporting
• Identifying the compliance governance organization structure
• Defining roles and responsibility and accountability
• Identifying and preparing key policies and procedures
• Prepare listing of regulations applicable to the company
• Prepare detailed compliance checklists for regulations
• Identify Compliance management tool with requisite features
• Install the Compliance management tool with IT support
• Upload and configure the checklists, submission timelines, compliance calendar and other rule sets as required by law
• Assign roles and responsibilities in CMT
• Provide user training• Run reports and
dashboards as per the requirement
• Periodic update of laws and regulations in CMT
• Periodic revision in roles as per change in organization structure
• Ensure ongoing adherence to compliance updates
• Periodic audits of compliance reporting and implementation of remedial action plans
Compliance officer shall use various reports and dashboards developed as basis, to compliance adherence in tool to report to the board on periodic basis
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Our structure - RCMS
Regulatory changes have certainly increased the cost of compliance
In comparison to cost of non-compliance, the cost of compliance is very less
Cost of compliance is to be taken as capital investment for the culture and image building of the
organisation
When Sarbanes Oxley Act, 2002 was introduced there were lot of complaints on increase in cost of
compliances
Now the corporates in US say they are able to see the returns on their investment, in identifying the
problems much earlier,
Cost of compliance
Non-compliance leads to penal consequences
It effects / damage the image of the organisation
Compliance is to be the cornerstone of the Company’s existence
Compliance should be an integral part of the corporate mission of the company
There should not be any compromise on compliance with applicable Laws
Compliance violations / non-compliances should result in strict disciplinary action
Cost of non-compliance
Top Management has to set the tone for compliance
Compliance should be the cornerstone of the Company’s existence
Compliance should be an integral part of the corporate mission of the company
There should not be any compromise on compliance with applicable Laws
Compliance violations / non-compliances should result in strict disciplinary action
Concluding Remarks
Questions&
Answers
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Thank You!