Information flows ensures transparency in the processes and systems designed and developed by the management. Enterprise risk management requires a continual process of obtaining and sharing necessary information from internal and external resources, which flows up, down, and across the organization. Information flows refer to the flow of compliance and regulatory information from top to bottom and bottom to top.
The compliance function receives the regulatory announcements, and the chief compliance officer is responsible for disseminating the announcements to relevant departmental heads and stakeholders. Compliance information flow is necessary to maintain the compliance risk appetite of the organization. If the compliance information is not shared with stakeholders, the risk of non-compliance increases, which may lead to reputational, operational, and financial losses.
Information Flows
The flow of compliance requirements highlights the roles and responsibilities of different organizational stakeholders. These stakeholders are answerable to the compliance committee and management if they do not comply with the compliance information received from the compliance function or compliance team.
The flow of information from top to bottom emphasizes the importance of the management and the board’s commitment to compliance risk management. Employees feel committed when the flow of information from top to bottom is transparent and regular. Board and management set the tone by disseminating the information down the line. Employees become answerable to the management for their respective corporate compliances and breaches. For example, the account opening team is responsible to the management and compliance committee for non-compliance with the anti money laundering/know your client or AML/KYC regulatory requirements.
Similarly, the management disseminated the investment requirements-related information to the treasury team. The treasury team is then responsible for abiding by the rules of the investments defined and implemented by the board and management of the organization. The Treasury team must invest the organization’s funds only in those avenues or assets approved and allowed by the regulator and the management. In case of non-compliance with investment requirements, the treasury team shall be held accountable for the non-compliance of the information disseminated from top to bottom.
Information also flows from the bottom to the top, such as reporting the harassment cases through the organization’s whistle-blowing program. These are regulatory requirements, where the management sets standards and processes where the information flows from middle management to the top management.
Similarly, fraud incidents are reported to the top management by the fraud identifier, who may be the lower-level management staff. This flow of information is bottom to up, which alerts the management to apply the relevant controls and investigative procedures to avoid or minimize operational, reputational, and financial losses.
In organizations where defined processes are implemented related to cross-departmental, top to bottom, and bottom to the top flow of information, the possibility of regulatory non compliances are minimized. It is because the timely information flow enables the employees across the organization to identify, understand and implement the regulatory requirements to avoid potential operational, regulatory, and financial losses.
A constructive and cooperative working relationship and information flow between the compliance functions and business departments are implemented in the organization to facilitate the overall identification and management of compliance risks. This collaboration helps departments and functions to maintain the corporate image and compliance status.
Final Thoughts
The exchange of information between people, processes, and systems within an organization is referred to as information flow. It can be difficult to keep employees on the same page when they are working in different locations, devices, and departments.
