It’s the rare person that looks forward to a regulatory compliance exam. Still, we all know that the only thing worse than going into a compliance exam is going into a compliance exam unprepared. To learn the three things that compliance officers should to do prepare for an exam, read on.
At Ncontracts, we know that preparing for an examination is daunting, but we can provide some guidance. Here are three key actions that the most efficient compliance pros take and six basic steps to help you prepare for that exam.
Evaluate. Delegate. Communicate.
Those are the three key actions that the best compliance pros take when they prepare for an exam. Like all best practice strategies, these three actions are elegant, intuitive, and effective.
1. The best compliance officers evaluate. Start by evaluating your institution’s history, real regulatory risk, and compliance training programs. As you investigate these three areas, look for flags the regulators might review. When you find a trouble area, take steps to minimize that risk before the exam actually occurs. I’ll go into more detail about how to evaluate those three items later, when we cover the six basic exam prep steps.
2. The best compliance officers delegate. No one is an expert in everything, and managing regulatory risk is a team effort — the best compliance pros understand this. When you find a red flag in a specific department or area of expertise, you should work with the professionals in that field to help minimize the risk. This process also helps instill a culture of compliance across the departments. We’ll dig into the idea of delegation more in the next section.
3. The best compliance officers communicate. It’s very important that compliance officers communicate program changes and updates to their institution’s employees and leadership. It’s also important to communicate actively with regulators. Both of these actions indicate a real, active commitment to compliance.
Related: What Are Examiners Looking for in 2023?
6 Steps to Prepare for an Exam
Now that you know the three key actions of the best compliance officers, here is some more detail about how to prepare for a compliance exam. These 6 steps will provide a framework for compliance exam prep:
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Assess your risk: As a compliance pro, one of the items you evaluate is your institution’s risk areas. This is the first step of preparing for a compliance exam. Conducting a compliance risk assessment is the most efficient way to gain a thorough understanding of your regulatory risk. It will also highlight your risk tolerance and controls and show potential weak areas. There are a couple of different risk assessment tools available. Alternately, you could choose to hire a consultant. In addition to preparing you for the exam, conducting a risk assessment may also indicate to the regulators that you are actively working to improve your compliance program.
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Select a point person: In preparation for the exam, the best compliance officers delegate one person on their team to communicate with the regulators. Often, this is the compliance officer or manager, though as a compliance pro, you must decide what is best for your organization.
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Review compliance history: As you prepare for the exam, it’s critical that you evaluate the compliance history. This means reviewing past exams, compliance audit reports, and communication from regulators. You should review policy changes and corrective measures taken in response to historical compliance weak areas to review your implementation and efficacy. Any repeat violations can lead to regulatory penalties. -
Identify key experts: It’s likely that examiners will want to meet with various personnel to discuss aspects of the compliance program. You should communicate with those colleagues to prepare them for meetings with the examiners. In this preparatory meeting, make sure to remind colleagues that 1) they can request that you (the compliance pro) joins the meeting, and 2) not to be defensive in their communication with the examiners.
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Check compliance training and monitoring: As you review your regulatory compliance program and risk management training, you need to also evaluate the monitoring policies. Is attendance at training modules kept, and are checks in place to ensure that training was successful? These are just a few questions you should be asking. Examiners are looking closely at the entire compliance process. Regulators want to see more than the existence of the compliance program. They want to see its efficacy.
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Inform leadership: It’s critical that you communicate with your institution’s leadership to involve them in the compliance risk management process. That means keeping the Board of Directors and other leaders up-to-date on compliance policy changes, potential issues, and more. As we mentioned earlier, examiners will be evaluating the “culture of compliance” and internal compliance oversight.
Three things to consider: 1. Has your Board or governing body received regulatory compliance training? 2. Are they kept abreast of regulatory changes and compliance updates? 3. Do their reports reflect an awareness of compliance?
If you've got an exam on the horizon, these tips can help you effectively prepare.
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Ultimately, all of these tips boil down to one thing: proactivity.
Tell Your Story: These six steps prepare your institution to tell its story at exam time. Organizations that take a proactive approach to managing their compliance find that exams are easier, they have less compliance-related stress, and they expend fewer resources (time, energy and money) to manage their regulatory compliance programs and policies. As Ben Franklin said, and we have reiterated, an ounce of prevention is worth a pound of cure.
Remember: these are just guidelines. Your exam preparation plan will be a lot more detailed, but these guidelines an excellent starting point.
Looking for assistance with your compliance exam preparations? Talk to our experts about how Ncontracts can help.
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