compliance management - icsi · compliance management s.sudhakar vice-president (corporate...

COMPLIANCE MANAGEMENT

S.SUDHAKAR

VICE-PRESIDENT (CORPORATE SECRETARIAL)

RELIANCE INDUSTRIES LIMITED

1S.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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Disclaimer

VIEWS EXPRESSED ARE OF MY OWN AS A PROFESSIONAL AND NOT OF THE

ORGANISATION IN WHICH I AM EMPLOYED

16-09-2016S.SUDHAKAR VICE-PRESIDENT (CORPORATE SECRETARIAL)

RELIANCE INDUSTRIES LIMITED4

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



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



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



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


18S.SUDHAKAR VICE-PRESIDENT (CORPORATE SECRETARIAL)


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




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




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




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)




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




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!

compliance management - icsi · compliance management s.sudhakar vice-president (corporate...

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