Phodiso B. Malope
Head Compliance, Risk, Legal & Fraud
Compliance as a discipline is an ever-evolving area, that transcends to more than just a business partner. This is particularly true as the cost of compliance continues to grow, largely influenced by changing operating environments, market conditions and the regulatory landscape. These dynamics are not an exception to the Botswana environment.
In particular the regulatory landscape is continuously evolving. As evident, locally, the last 12 months alone, the following changes and trends have surfaced, which have both a primary and secondary impact on the operating environment of entities across different sectors;
▪ Data Protection Act, 2024
▪ Financial Intelligence Amendment Act
▪ Companies Amendment Act
▪ Prudential Rules and Guidelines
▪ Companies Amendment Act
▪ Cybersecurity Bill
▪ Digital Services Bill
▪ Employment Bill
▪ Prudential Rules
The culmination of these developments carry with them both direct and indirect costs, which may be provided as follows;
Direct Costs
▪ Litigation costs- in the event of non-compliances as a result of cause of actions
▪ Regulatory fines, in line with prescribed penalties from statutes
▪ Technological investments- purchase of solutions, software and technologies to meet requirements. This is particularly the case with the need to invest in regulatory technology (Regtech) and as advanced by developments in the artificial intelligence space
▪ Regulatory fees (Levies, Licenses)
▪ Employee Training (through subject matter experts, acquisition of e-learning platforms)
▪ Human Capital (designated and distinct roles i.e. AMLCO; Principal Officer; DPO; Actuary) and as a result of continuous development programmes
▪ Audit Costs to ensure and safeguard environments, particularly with the adoption of various models that include lines of defence at various stages of an enterprise
▪ Personal liability (for key persons and controllers), which are prescribed in law
Indirect Costs
▪ Reputational Damage- resulting in loss of trust and business
▪ Operational Disruptions- due to changes to processes, systems and workflows as a result of change management activities
▪ Opportunity Cost (Time)- Time spent on reactive compliance related fixes may detract from revenue generating activities
▪ Increase audit risk- Non-compliance may lead to more frequent audits and regulatory inspections
Ultimately the real cost of compliance reflects the financial burden and operational impact posed by non-adherence to regulations (external environment) and in-effective, unfit for purposes processes, policies and procedures (internal environment).
Steps to Manage Cost of Compliance
It would be unjust to speak to compliance associated costs, without exploring possible strategies to manage these within acceptable risk appetite and tolerance levels. The following present approaches to aid in building an effective and robust compliance environment that promotes manageable costs;
o Embedding Compliance into operations
▪ Process Engineering and integration
▪ Promotion of synergies across the business
o Build and Adopt Risk Management Frameworks
▪ Appreciation and prioritization of compliance risks
▪ Efficient resource allocation
▪ Performance of monitoring exercises
o Leveraging Technology
▪ Leads to streamlining of workflows
▪ Automation of tasks
▪ Increased efficiencies and optimization of efforts
▪ Identification of trends
o Investing in Human Capital
▪ Comprehensive training and development of colleagues
o Leveraging off External Expertise
▪ Engage subject matter experts
▪ Exchange of ideas and knowledge (independent views combined with institutional knowledge
o Public Private Partnerships
▪ Enhancing collective collaboration efforts between the private and public sectors, including Government, Regulators and Industry Bodies
Whereas, there is no generic approach, these measures can lead to and assist in mitigating compliance associated costs which would serve well in ensuring businesses continue to operate optimally, within parameters of both external and internal compliance requirements and henceforth ensuring sustainability and longevity of their operations.
