Regulatory Compliance is a Treasure Trove of Value

Regulatory Compliance (RC) is a treasure trove of value.  From better business intelligence to improved security, the benefits of RC abound.  The key is to understand the payback and how to get it.  It is a mistake to view costs of RC as greatly outweighing the benefits.  Aside from the overarching societal benefits from corporate accountability there are abundant economic and business benefits for those companies who choose to harvest such fruit.

Let’s take a look at one aspect of business value and how RC might promote it.   Of enormous value to a company is the identification of that company’s optimal economic denominator.  Author Jim Collins, in his book “Good To Great”, has posited the question this way: “What is the economic denominator that best drives your economic engine (profit or cash flow per ‘x’)?” Companies who have answered this question correctly have had great success. Ask yourself: “Is what best drives my company profit per customer interaction? Is it profit per customer, per customer visit, per employee, per product, per store, or per any one of hundreds of other possible denominators?” This is a hugely important question that is not easy to answer. Collins points out that in some of the best companies there is healthy vigorous debate about the correct economic denominator.

Now image that you had in front of you a set of charts that plotted profit per a hundred different denominators over the life of your company. Wouldn’t the decision about which economic denominator be easier to answer? Wouldn’t it be interesting to see which denominators produced optimal results during those times at which the company was doing the best? Think of a time when your company was doing very well. Do you know for certain which denominator was out-performing all others at that time?

At this point you might ask, “What does this have to do with regulatory compliance?” It has everything to do with RC. RC efforts do not have to be, and should not be, a knee jerk reaction to another regulation. Truly authentic solutions to RC challenges will be built on a solid groundwork that includes the selection of a robust and extensible platform, and a framework that can easily integrate with current mechanisms, but also easily meet change requirements, in a manner that is repeatable and sustainable over the long term. Such a platform and framework not only make regulatory compliance much easier in the long run, but provide the basis for discovering and mining other business value. Providing short-term reactionary answers to the demands of one regulation will not solve the RC problem, nor will it provide anywhere near the long term benefit available for the taking. RC is an opportunity for a company to build a software infrastructure and control framework that not only “does RC”, but also lays the underpinning to provide much better answers for questions like “What is our best economic denominator?” RC is the aegis for accountability, but accountability is not a one-way window through which only auditors can see. If a company is true to itself, to its own mission, it can turn that accountability inward and reuse the same infrastructure to answer serious economic questions that might never have been answered before. Perhaps a company has not documented its processes, or it doesn’t keep good track of its employees, or doesn’t know very much about its customers. The actions that such a company takes to become compliant can help it better document processes, track employees and understand customers, and at that same time take a substantial step toward answering questions like “What is our optimal economic denominator?” This is what makes Regulatory Compliance (RC) a treasure trove of value.

Joe Scalone