How Modern Technology is Disrupting Compliance

In today's complex and ever-changing regulatory ecosystem, employers face a multitude of compliance challenges that demand expertise, prompt action, and effective coordination. Traditionally, compliance functions have relied on ad-hoc, manual, and paper-based processes, leaving room for errors, delays, and lapses. Sandeep Agrawal, Director, and Co-founder, of Teamlease Regtech, shared his thoughts on the advent of modern technology that has revolutionized the way organizations approach compliance.

How is modern technology changing the game and causing disruption?

The regulatory ecosystem in India is complex and ever-changing. Employers are confronted with an intricate web of compliances that require deep expertise, timely action and effective coordination. For decades now, compliance functions have been reliant on ad-hoc, manual and paper-based processes. When the entire compliance lifecycle in an organisation is people-dependent, there is a significant margin for defaults, lapses and delays. The cost of poor compliance is simply too high as governments push for greater corporate accountability through stringent oversight and hefty penalties.

However, over the past few years, technology has transformed the way employers tackle compliance. Digital compliance management solutions pack the power of the web, mobile, cloud and analytics, providing employers with smart, efficient and productive methods to address their individual compliance needs. They also enable organisations to make a seamless shift from ‘reactive’ compliance to ‘dynamic’ compliance that is in tune with the evolving regulatory landscape. Resultantly, more and more organisations across the country are now aggressively digitising their compliance processes.

What made you think that the business sector lacked automated compliance management solutions?

A typical mid-sized company deals with a few thousand compliances in a year. There are at least 50-100 people in different departments (human resources, finance and taxation, company secretarial, administration, environment, health and safety, warehouse, research and development among others) directly involved in day-to-day compliance functions.

Unfortunately, while compliance is a key binding constraint in an organisation's growth, a number of Indian organisations are yet to adopt technology platforms for transparent and accountable compliance programs. The compliance officers often use spreadsheets to track status manually. As a result, there are several instances where there are inadvertent misses, delays, lapses, defaults, expired licenses and missed legal updates. Therefore, it is not uncommon to see them firefighting and highly stressed during regulatory audits.

The Companies Act, 2013 requires the issue of compliance certificates to the Board. Since the organization is low on technology-based tracking systems, the compliance officer has no other choice but to prepare the statutory compliance certificates manually. These certificates often miss key information such as the specific data on an instance of non-compliance, delayed filing and the residual risk of poor compliance. In such instances, the board is often flying blind since they do not have a framework to establish the level of compliance in the company.

How is product automation a crucial factor in determining whether a company is compliant?

The new technology-backed compliance management solutions provide end-to-end automation, including tracking and management, data processing, statutory filing preparation, digital record maintenance, and automatic flagging of potential non-compliance. These technologies enable companies to digitise their complete data and process flow. They can detect defaults and delays automatically.

Furthermore, these solutions include regulatory updates to assure fast and precise compliance. In accordance with the appropriate norms and regulations, they provide centralised document upload, document production, approval, and preservation capabilities.

Not only does it enable better visibility and control over compliance functions but makes it increasingly possible for entrepreneurs to stay ahead of the curve. With unique features such as customised checklists, real-time regulatory updates, automated alerts and reminders, and periodic analytics, digital compliance software is fast replacing traditional ad-hoc and manual processes. Going digital allows an entrepreneur to ensure compliance without any lapses, delays and defaults.

Smart and automated compliance management can enable enterprises to constantly stay alert, aware, and ahead of the curve. Businesses need to adopt smart and automated compliance solutions that provide enhanced control and visibility of compliance functions.

What industries are regulating technologies influencing?

The implementation of regulatory technologies has been on the rise with an increasing number of industries adopting these solutions. This adoption has been the most visible in the manufacturing and service industries. MSMEs and large corporations in the Automotive sector, Chemicals sector, Pharmaceuticals sector, Engineering sector, and Food Processing sector are at the forefront of integrating RegTech services into their compliance processes. On the other hand, service sectors such as NBFCs, Retail Chains, and Healthcare among others are also taking advantage of these solutions to meet their compliance needs and stay on the right side of the law.

What difficulties do Indian companies have with compliance?

There are constant changes in compliance requirements, which compounds business uncertainty. In 2022, there were 4,880 regulatory changes, amounting to an average of 13 regulatory changes per day. The regulatory updates relate to important changes in dates, procedures, penalties and calculations, among others, and are published on 2,233 government websites. Often, these changes are applicable immediately, thus requiring time-sensitive implementation. There is no effective manual way for an employer to stay updated on these regulatory changes.

The complexity of the compliance ecosystem lies not only in the number of compliance requirements but also in the ongoing nature of compliances. The business compliance framework is riddled with ‘regulatory cholesterol’ that has hindered the flow of innovation and entrepreneurship. To illustrate, an enterprise with just a single manufacturing unit faces about 50 display requirements which it must comply with on a continual basis. In addition, more than 40 registers have to be maintained which should be up-to-date at any given point in time. On average, an MSME or start-up is required to obtain at least 30 different licences, registrations and approvals from various authorities. Ad-hoc, paper-based, and people-dependent manual compliance processes fail to scale to meet an organization's compliance requirements.