The Three-Stage Preparation to Meet Compliance Requirements (2023)

The Three-Stage Preparation to Meet Compliance Requirements (2)

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Today, the world is online and while this is great in making communication easier and data access open, it also comes with a set of risks. As a result, governments all over the globe have made security and compliance requirements stringent. While these requirements pose a challenge to companies across the world, there are, fortunately, solutions that can help.

Before we dive into the solution aspect of security and compliance, let us take a look at what you need to do and the three stages of preparation. As per AICPA, the Segregation of Duties or SOD is the basic building block of sustainable risk management and internal controls of a business. The principle of SOD is based on shared responsibilities of a critical process that disperses the critical functions of that process to more than one person or department. Without this separation in critical processes, fraud and error risks are far less manageable.

The primary purpose to apply segregation of duties is to prevent the instances and opportunities for committing and concealment of fraud and/or error in the normal course of an organization’s activities, since having more than one person to perform a task minimizes the opportunity of wrongdoing and increases the chances to detect it, as well as to detect unintentional errors.

The three stages of this process include:

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  • Define and list down organization risks
  • Continuous audit and compliance
  • Best practices to Implement SOD

The stage one, we will look at the process to define and list down organization risks:

Define and list risks: Even if your organization is not pursuing a specific regulatory compliance objective like SOX, ISO, or GDPR, we recommend that you create a list of applicable SoD conflicts that are vulnerable to fraud or cause significant security or financial risks. You can achieve this by revisiting the organization's GRC objectives along with the organization structure. The final result in this phase is to determine potential risky ERP transactions and categorize them as either high, medium or low severity.

Finetune the SoD rules: Your solution can help you arrive at the final set of SOD based on a set of rules, internal key controls, and risks identified and mark them as ‘severity,’ ‘risks,’ and ‘mitigation’ for each record. The head of finance, internal and external auditors, and the head of IT should be a part of the team that puts together this list.

Analyze risks: In this stage, you need to analyze the threats against the rule set to identify conflicts. You should highlight conflicts and escalate the same with recommendations to the appropriate department, such as internal controls or finance. You may need to further interact with the business to identify a suitable solution to eliminate risk.

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Use the role-based access control to finalize security roles: You will need to review the security model to implement the necessary changes to either a conflicting role or role assignment. Risk assessment can help you redefine and recreate many standard security roles. Your solution can also help create new, modify, or merge multiple functions as required by the organization structure. You can also identify ways to segregate duties in a business process within various functional areas and departments.

Mitigate security risks: It may not always be possible to strictly go by the SoD rule set due to business setup, low employee count, and other organizational constraints; then, the best practice is to have in place an appropriate control to mitigate the risk. You need to look for a solution that can provide you a predefined list of ‘SOD’ ruleset designed to exclude transactions to same role that can cause fraud. These are also of great help for organizations pursuing specific compliance requirements like SOX.

As you can see, security and compliance is an essential requirement for your company’s reputation and continued growth. At To-Increase, we understand your needs in this aspect and have a solution ‘Security and Compliance Studio’ that can help you with all related aspects.

In the next blog, we will be elaborating on the second stage, which is 'Continuous Audit and Compliance.'

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What are the stages in the compliance process? ›

4 Phases of a Compliance Management System (CMS)
  • Phase 1: Plan. This is where you establish the system's intent and goals. ...
  • Phase 2: Do. The implementation and operation of a Compliance Management System take place during the “Do” phase. ...
  • Phase 3: Check. ...
  • Phase 4: Act.
Jul 23, 2015

What are the three components of compliance risk management? ›

The following are the critical elements of an effective compliance program: Establish and adopt written policies, procedures, and standards of conduct. Create a programming oversight. Provide staff training and education.

What is the first step in compliance? ›

Measuring against best practice and reviewing your own approach in response is an essential first step in any effective compliance program. Assess your risk, measure how well you're performing against current obligations and identify any gaps. This way you will create an action plan with clear priority areas for focus.

What are the 3 phases of compliance? ›

The Three-Stage Preparation to Meet Compliance Requirements
  • Define and list down organization risks.
  • Continuous audit and compliance.
  • Best practices to Implement SOD.
Nov 14, 2019

What are the three types of compliance? ›

Let's take a look at what they are and what they mean.
  • Regulatory compliance. Regulatory compliance is when a business follows the local and international laws and regulations that are relevant to its operations. ...
  • HR compliance. ...
  • Data compliance. ...
  • Health and safety compliance.
May 18, 2022

What is compliance requirements? ›

In a general sense, compliance means abiding by a set of rules. For your business to function legally, it needs to comply with specific industry standards, laws, regulations, and ethical conduct standards that apply to your business.

What are examples of compliance requirements? ›

In most states, for example, you are required to file an annual report so the state can monitor the activity of your company. Another external compliance requirement is the franchise tax, which is a state tax you pay for the right to operate your business in that particular state.

What does it mean to meet compliance? ›

Compliance is the act of complying with a command, desire, wish, order, or rule. It can also mean adhering to requirements, standards, or regulations.

What is step 3 in the risk management cycle? ›

Step 3: Evaluate the Risk or Risk Assessment

Risks need to be ranked and prioritized. Most risk management solutions have different categories of risks, depending on the severity of the risk. A risk that may cause some inconvenience is rated lowly, risks that can result in catastrophic loss are rated the highest.

What are the three 3 steps in risks assessment? ›

A risk assessment is a written document that records a three-step process: 1 Identifying the hazards in the workplace(s) under your control. 2 Assessing the risks presented by these hazards. 3 Putting control measures in place to reduce the risk of these hazards causing harm.

What are the 3 risk management strategies? ›

There are five basic techniques of risk management:
  • Avoidance.
  • Retention.
  • Spreading.
  • Loss Prevention and Reduction.
  • Transfer (through Insurance and Contracts)
Jun 22, 2022

What are the 7 elements of compliance? ›

However, 7 key elements exist in virtually all legally effective compliance programs:
  • Policies & Procedures.
  • Chief Compliance Officer/Compliance Committee.
  • Education & Training.
  • Reporting.
  • Monitoring & Auditing.
  • Enforcement.
  • Responding To Issues.

What are the 4 components of the compliance framework? ›

Compliance Management Framework – 4 Necessary Elements
  • Compliance program. For a business to comply with all the rules and regulations set, there must be a compliance program to follow. ...
  • Commitment from the Board of Directors. ...
  • Consumer Complaint Program. ...
  • An Audit from an Independent Body.

What five 5 factors must a compliance plan include? ›

The five elements are:
  • Leadership.
  • Risk Assessment.
  • Standards and Controls.
  • Training and Communications.
  • Oversight.
Dec 1, 2019


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