On October 16th, TeamLease RegTech gathered senior compliance professionals at the Sheraton Grand in Pune for a thought-provoking roundtable discussion on India's rapidly evolving compliance landscape. The session explored critical regulatory challenges, technology's transformative potential, and compliance's vital role in modern businesses.
The Complexity of Compliance and Key Challenges
One of the major themes of discussion was the complexity of India’s current regulatory environment. Professionals highlighted the burden of adhering to numerous statutory notifications, many of which involve severe penal and criminal penalties. It was deduced that this complexity, combined with stringent deadlines and a lack of digital resources, poses significant challenges for compliance teams across industries.
A recurring concern was the limited documentation and inadequate departmental ownership of compliance. Often, non-compliance responsibilities are unfairly tagged to the compliance team, leading to a heavier workload. Promoter-driven companies, particularly family-run businesses, were contrasted with multinational corporations (MNCs). As they are professionally managed, MNCs tend to emphasise compliance more, given their need to protect their global image and reputation, especially on social media.
Technology and Transformation in Compliance
The conversation underscored the crucial role of technology in transforming compliance management. However, adopting digital tools remains slow, with many companies lacking a proper document repository or automated processes. While using advanced tools was cited as the need of the hour, professionals also expressed concern over the potential risks of relying too heavily on digital systems.
A key example of technology-driven compliance failure involves CTOs selling data on the black market, illustrating how easily compliance can be undermined, was also discussed. This underscores the need for strong compliance frameworks that exceed mere superficial checks.
The Jan Viswas Bill, which promises to reduce the criminalization of compliance by 90% and overlapping regulations by 70%, was viewed as a much-needed reform. It represents a shift towards simplifying compliance in India. Yet, the participants also noted that transitioning to modern technologies like machine learning (ML), artificial intelligence (AI), and blockchain for compliance needs a more coordinated approach, particularly with government agencies.
Coordination Between Compliance Teams and Management
The lack of coordination between management and compliance teams emerged as another pressing issue. Often, compliance professionals are not informed about major changes within the company, which leads to reactive and fragmented compliance management. There was a call for more anticipatory solutions, emphasizing that compliance needs to be part of the company’s overall strategy, not just an afterthought.
A common sentiment was that management tends to prioritize commercial laws, often overlooking department-specific compliance. This, coupled with the challenge of managing people-dependent processes, makes scaling compliance difficult. Mapping compliance tasks to employee Key Result Areas (KRAs) and rewarding compliance champions by linking their efforts to HR records were suggested as solutions.
Shifting Mindsets and Increased Awareness
The discussion revealed a noticeable shift in mindsets. Compliance is increasingly seen as essential in financial management, with boardrooms placing governance on par with profit and revenue. Indian directors now recognize the importance of keeping foreign directors informed about compliance matters, not just financial performance.
There was also a shift in how investors perceive internal compliance teams versus external audits. External auditors, such as the Big Four, often lack an in-depth understanding of the company, and management’s over-reliance on their reports can overlook critical compliance gaps. Companies should focus on building strong internal compliance teams rather than outsourcing the responsibility entirely.
Future of Compliance: A Compliance Score System
Looking to the future, the idea of a Compliance Score similar to a credit score was proposed. Such a system would allow companies to track and improve their compliance performance over time, offering incentives for good compliance and penalties for lapses. This would help create a more standardized compliance environment across industries, particularly for small and medium-sized enterprises (SMEs).
Other suggestions included introducing a Unique Identification Number for companies, which could streamline inspections and reduce bureaucratic overlap. Dematerialization for private companies was also discussed as a potential way to simplify procedural compliance.
Building a Better Compliance Landscape
The roundtable discussion made it clear that while India’s compliance landscape is becoming more complex, it also offers opportunities for transformation. Technological integration, the push for better coordination between management and compliance teams, and the increasing importance of compliance governance in boardrooms are all steps in the right direction.
However, the journey is far from over. Organizations must proactively adopt anticipative compliance strategies, invest in the right tools, and foster a culture of compliance across all levels. Only then can they effectively navigate India’s evolving regulatory environment and remain on the right side of the law.