Compliance
Compliance Overview
Compliance ensures that an organisation adheres to laws, regulations, and internal policies. In the GIA Cert Governance Practice exam, you must understand the compliance function's role: to identify regulatory requirements, monitor adherence, and report on compliance risks. Key concepts include regulatory risk, compliance culture, and whistleblowing. You should know the difference between compliance and internal audit: compliance is a second-line function that advises and monitors; internal audit is third-line and provides independent assurance.
Key Concepts and Traps
A common trap is assuming compliance is only about external laws; it also covers internal policies and ethical standards. Another trap is confusing compliance with legal counsel; while legal interprets laws, compliance ensures operational adherence. Questions may ask about the role of the compliance officer and their independence. Ideally, the compliance function should have a direct reporting line to the board or a board committee.
Worked Example
A firm discovers that a new regulation requires additional customer due diligence. The compliance function should update policies, train staff, and monitor implementation. If the firm fails to comply, it could face fines and reputational damage. Rule of thumb: compliance should be proactive, not reactive.
Exam Focus
Expect questions on compliance frameworks, the compliance function's responsibilities, and the relationship between compliance and governance. Also, know the importance of a speak-up culture and whistleblower protection.