Asset management compliance is a must-have for companies that want to manage assets following the industry and state standards.
Those who refuse to comply with those standards risk fines, penalties, and even closure.
To avoid such risks, you should understand the main challenges that such compliance poses.
This article will explain the importance of asset management compliance and possible issues for companies while providing tips on being more successful at compliance.
In this article...
What Is Asset Management Compliance
Asset management compliance ensures that your company follows the industry laws, regulations, and policies of your state that apply to your assets.
Every company should strive to achieve regulatory compliance as this implies they are not taking any risks and are doing things “by the book.”
Compliance rules and regulations exist for a company to take the industry standards into account and work on achieving them.
The relevant authorities can organize audits or inspections to verify if a company is following the set guidelines. If such assessments determine that a business is in breach of certain regulations, the business can be fined or closed.
These standards also help you understand how well you are doing when it comes to compliance and where you need to improve.
Paying asset taxes on time is one example of regulatory compliance.
The state regulates the rules, conditions, and deadlines, and the company needs to abide by them. If the company doesn’t pay taxes regularly, the authorities can shut it down.
Failure to comply with asset management policies can also lead to expensive fines, as well as a loss of credibility in the industry.
This makes prioritizing compliance incredibly important for any serious business.
Types of Compliance
The asset management compliance rules can be internal or external, depending on the source.
Companies usually have many compliance regulations to follow—some they set for themselves, and the industry or a legal institution sets others.
The rules your company sets in place for employees, teams, and departments are internal compliance rules.
Usually, it’s the management that comes up with rules that all employees should follow when performing their duties.
Internal compliance aims to guarantee that nothing will decrease the performance or quality of an asset or service.
For example, a company can demand that departments keep records of operational changes, guaranteeing transparency.
External compliance is often called regulatory compliance.
It refers to any regulations set by external authorities or organizations that your company has to follow. However, these rules don’t apply only to one company, but to all businesses in the same industry.
Such compliance helps set industry or state standards, ensuring that each company follows the same guidelines and provides quality products or services following the law.
Some examples of external compliance include safety measures meant to protect employees, or various record-keeping obligations.
Both internal and external compliance are essential for a company, and each is obligatory to follow if you want your company to function well.
Why Asset Management Compliance Matters
First, compliance ensures that your records are in order and that you do well on audits.
Achieved transparency guarantees that you won’t have to close your business or pay expensive fines to the state or harm your integrity among investors.
Secondly, being assured that your products and services are up to standard and of acceptable quality helps you guarantee exceptional service to your customers.
After all, if you follow the rules, the government will have no reason to interfere with your business. As a result, your brand reputation will benefit, increasing the trust of your target audience.
Each deviation from the set standard is a compliance risk, and it can seriously damage your business in a financial, reputational, or organizational way.
Since asset management compliance includes health and safety measures, complying with such regulations means you are taking care of your employees and doing everything in your power to remove any threats to their wellbeing.
In sum, asset management compliance ensures that your company’s finances, reputation, or organization flourish.
What Are the Main Asset Management Compliance Challenges
It’s not always easy to ensure that you comply with all asset management rules and regulations due to their abundance.
Some challenges are more common than others, and some carry a lot more risks than most. We will explain the most important ones.
Ever-Changing Compliance Standards
Keeping up with asset management compliance is challenging when the standards are constantly being updated.
Compliance standards often change as the authorities and organizations do reviews to ensure everything is at the highest possible level, and up to date.
Companies need to keep up with all the upcoming changes and implement them as soon as possible, which means that management has to be aware of them.
Managers also have to keep in mind the employees to which new rules apply, which is additionally challenging.
A significant risk stemming from the frequent changes refers to unexpected fines and penalties you might face for failing to comply with a particular rule or regulation, even if you were not even aware of it.
Our advice is to stay on track with novelties and implement them as soon as possible to minimize avoidable risks.
Ensuring Compliance Quality
Is an employee applying only 80% of the mandated rule? If so, you are not completely in compliance, and you need to work on it.
Keeping track of compliance quality can be rather tricky as you have to follow many rules, and numerous employees and departments play a factor.
Nevertheless, you need to perform quality checks to ensure that your company isn’t in breach of any management rules or external compliance regulations.
Without this assurance, you’re taking many risks that can cost you profit, employees, and the success of the entire company. Perform quality checks regularly and work on your weak spots.
Having all the updates in the same place and available to all employees will help them stay on track with updates and use them in practice, ensuring total compliance.
Even if difficult, it’s necessary to inspect and ensure your company’s compliance quality.
Having Unreliable Systems
Companies sometimes use systems they cannot wholly control, risking data breaches, information loss, and monetary or reputational expenses—impacting their compliance as well.
A significant part of compliance is keeping detailed records that allow you to pass audits with ease. Such documents can include customer information, sales information, and other company data.
While confidential data needs to stay secure and private, there are still many ways businesses can be attacked and sensitive information compromised.
Such predicaments can cost companies a lot more than expected. The average data breach costs $3.86 million a year, while the US average is a staggering $8.64 million.
Cyberattacks can not only cost you risking non-compliance but also losing customers.
Suppose your audience is aware that your system was hacked or attacked and that their or other customers’ private information was compromised.
In that case, they will probably switch to another company that seems like a safer option.
Systems that aren’t as secure as they should be pose a considerable risk, so make the use of only secure business systems on top of your priorities, both for the sake of compliance and your overall success.
Ensuring you comply with regulations can be expensive.
Most companies invest in a specialized team that helps them monitor and improve compliance using IT infrastructure.
Still, many companies hire more people than they would have to if they opted for automated systems and different training methods.
Compliance can also induce costs through extensive training, preparing and sharing necessary materials, as well as constantly updating information regarding compliance rules.
But these costs are eligible because employees who are not informed of changes and new rules pose a compliance risk.
If your company fails an audit, inspection, or review, you will have to pay a fine or a penalty, and your bottom line might take a hit.
You need to be informed and select the best strategy for compliance to avoid unnecessary costs.
Baseline Process Inconsistency
Your company has to have baseline processes and compliance documentation standards in place to meet rules and regulations.
Without them, you cannot successfully determine your improvement and growth, as you have no standard to measure against and no process rules to follow.
The baseline information consists of indicators you can measure consistently to understand whether you’ve improved or deteriorated. This is helpful for anyone who is invested in compliance and wants to achieve the best results possible.
This data can also include various documents needed to prove compliance with laws and regulations.
You need to step up baseline processes early on and have them consistent throughout to ensure compliance.
Because if your processes are inconsistent across the company, they can become too much to handle, create unnecessary risks, and make you spend more time and money on them than necessary.
How to Achieve Asset Management Compliance
Here are some best practices to make sure your company is always compliant with all relevant rules and legislation.
Know Laws and Regulations
You just have to first understand what the laws entail before creating a whole set of procedures and rules for your team to follow in order to comply with said laws.
If you fail to do that, you will set up guidelines that might not have a basis in existing state regulations, risking non-compliance while wasting the time and energy of the entire company implementing them.
However, since we mentioned that rules are always changing, know that reading through laws and regulations just once is not enough.
You constantly have to check whether there were any updates or changes to said regulations, as they will likely prompt changes in company procedures.
The regulations determined by law have to be the basis for all your compliance-related activities, assuring you that they’re helping you reach your goal.
Keeping up with laws and regulations helps you understand whether your procedures are still valid.
Have a Team of Specialists
If you’re serious about compliance, you need to have a team designated to set up rules, monitor performance, analyze risks, and keep up with changes.
Smaller companies rarely have such teams as they believe they can manage it all on their own. Therefore, related tasks are assigned to current managers, team leaders, HR specialists, and the like.
Precisely because of that, smaller companies often unknowingly find themselves in breach of regulations, exposing themselves to a high risk of fines and penalties.
To prevent this, think ahead even if you’re a smaller company, and wisely invest in a specialized compliance team to ensure that you’re on the right track.
A compliance officer can keep track of employees and detect whether the company complies with set rules to a tee.
At the same time, a risk manager can determine the company’s risk and develop strategies to decrease or eliminate risks.
To manage compliance and determine company risks, it’s best to rely on a team of professionals.
Audit Your Assets
Asset audits help you determine how successful you are at asset management compliance.
Hiring an independent auditor to come and inspect your records will give you an unbiased insight into your books.
With this knowledge, you can improve your current asset management policies and get the numbers back to normal levels.
Such audits can also assist you in preparing for external audits that can happen at any time, as they let you know whether you’d pass or fail a regular one.
Here’s a video on how to audit your assets with GoCodes’ Audit Mode feature:
If you failed, you’d get a fine or penalty, which could cost you a lot more than investing in an audit would.
You can also invest in regular audits performed by internal auditors to get a clear picture of your asset books and compliance records.
Let’s say you are required by law to have 10 “backup” personal protective items in store. But you are not aware that you don’t have them, and that you are in fact, in breach. Well, asset audits can help you uncover such potentially costly mistakes and be on top of what’s needed.
When performing such checks, auditors can notice procedures that set you back or prove to be ineffective and help you determine how efficient your compliance efforts are.
Digitalize Your Processes
Specialized apps and software can speed up your compliance processes and make them more efficient.
You can use different applications or software solutions to automate a specific part of your company’s processes.
When implementing a digital solution, just ensure that it is doing more good than harm and that it performs those actions that would usually take a lot of time on manual work.
That way, you’re getting the best out of the tool.
To start, you will need to have a central database of all your assets, preferably with the option of tracking your equipment around and having access to all relevant data such as warranties, user manuals, and financial data.
Such solutions can help you determine how on track you are with compliance and what your weaknesses are.
Whatever software you choose, you’re decreasing the risk of human error, avoiding manual labor, and having some of the work done for you.
Regularly Monitor Compliance
Simply setting up rules and telling people to follow them won’t give you the results you need.
Instead, monitor adherence to any external or internal compliance rules to understand whether your employees are following them.
This activity is even more important if you keep track of all changes to laws and regulations and update your policies accordingly.
To successfully monitor compliance, you ensure that your employees keep the necessary records and have access to all the relevant information.
There are many aspects of your business to scrutinize, so you should focus on the processes that help you achieve your goals and those directly related to state laws and regulations.
Organize frequent reviews or quality checks, implement compliance checklists, review transaction data, and any other information that can tell you whether you are on the right track.
If you are not, monitoring compliance will let you know what needs to change.
Prepare for the Worst
Always have a plan in case the worst happens—it will help you overcome any issues.
If you don’t plan for the worst, you might become one of the 40-60% of businesses that never reopen after being affected by an unfavorable event.
Disaster planning consists of:
- Recovery phases
Preparing for a disaster enables you to fix problems before they arise, and deal with them more readily if they do.
The first two phases are the planning stages—you have to prevent emergencies from happening, yet prepare for them regardless.
These phases are essential since they let you focus on a possible issue before it happens and allow you to come up with the best course of action.
In certain situations, you can act to prevent the problem, eliminating the risk.
For asset management, these steps include actions like scheduled maintenance and spare parts management.
The response phase includes your company’s reaction after the disaster happens, which should go according to the plans from the first two phases.
During recovery, your company focuses on dealing with the aftermath of the disaster.
With efficient and quality planning, you can eliminate most risks and be more ready for unfortunate events.
Your company should invest in asset management compliance as it helps you understand whether you’re abiding by the law and following state and company regulations.
There are particular challenges of ensuring such compliance, including the fact that the industry standards and laws often change, and that systems can often be unreliable and expensive, among others.
However, if you keep up with the laws, inform your employees of changes, and have a team of specialists who can monitor compliance and plan for problems and disasters, this type of compliance will get easier.
Frequent audits and digitalization can further assist you in getting more efficient.