Compliance systems have improved substantially in recent years, thanks to advances in legal-tech and SaaS-based platforms that enable ease of collaboration and tracking of compliance tasks. The common features of these systems are that they deliver an accurate dataset of compliance tasks, distribute them to pre-defined owners and track and report on progress.  This works perfectly in the case of routine compliances such as periodic filings, where the system-generated reminders can be customised with the addition of pre-populated forms and explainer documents, but what about those compliance tasks that are triggered by an event?  In this blog, we’ll explore how technology plays a pivotal role in handling event-based compliances efficiently and effectively.

Understanding Event-Based Compliances

Event-based compliances refer to regulatory obligations triggered by specific events or changes in circumstances. These events can vary widely, from financial transactions exceeding a certain threshold to changes in environmental conditions. Examples include:

• Financial Transactions: Anti-money laundering (AML) regulations require financial institutions to monitor transactions for suspicious activity. When a large or unusual transaction occurs, the system must flag it for further investigation.
• Healthcare Events: In the healthcare sector, compliance might involve notifying authorities when a patient experiences an adverse drug reaction or when a disease outbreak occurs.
• Environmental Conditions: Industries dealing with hazardous materials must comply with environmental regulations. Eg; if a chemical spill occurs, immediate reporting is necessary.

Technology Solutions for Event-Based Compliances

To address these challenges, legal-tech and compliance platforms are steadily improving. Here are some examples:

Intelligent Event Detection:

• • Machine learning algorithms analyze data streams (transaction logs, sensor data, news feeds) to detect triggering events.
  • Alerts are generated when specific conditions are met (e.g., sudden stock price fluctuations, safety incidents, regulatory changes).

Workflow Automation:

• • When an event occurs, predefined workflows kick in.
  • These workflows guide compliance officers through necessary steps, ensuring consistency and timely action.
  • For example, if a safety incident occurs at a manufacturing plant, the system triggers incident reporting and an investigation.

Dynamic Task Assignment:

• • Compliance systems dynamically assign tasks based on the event type and context.
  • The right stakeholders (legal, finance, operations) receive notifications and responsibilities.
  • Examples of this are where a tax-related event triggers tasks for the finance team, or where a data breach triggers a response from legal and IT teams.

Document Management:

• • Systems maintain a repository of compliance-related documents (forms, regulatory filings, proofs of performance etc.)
  • When an event occurs, relevant documents are retrieved to guide the compliance response.
  • For instance, during a product recall, the system provides recall procedures and communication templates (because the company has prepared for it!).

Audit Trails and Reporting:

• • The foundational requirement of any compliance platform is to aggregate proofs and securely store them to create a readily accessible audit trail and, as these systems improve, blockchain technologies will evolve to create immutable audit trails.
  • Auditors can be given specific access roles to verify compliance proofs   directly from the platform.  In many audits, 70% of the work is in gathering documents.  Platforms rewrite this blueprint by automating the collection and organisation of data- leaving the auditor more time to focus on what really matters, namely analysis of what actually happened.

A Perfect System for Event-Based Compliances?

We would love to tell you we have it all nailed, but the truth is, much of this is still work in progress as our industry focusses on the integration of data analytics with the compliance workflows that responds to the data.  As the technology evolves, we’ll see even more adaptive compliance systems that integrate:

• Predictive Analytics: Anticipating events based on historical data.
• Natural Language Processing (NLP): Chatbots guiding users through compliance processes.
• Interoperability: Seamless integration with other enterprise systems (ERP, CRM).

But at the end of the day, event-based compliances require agility, collaboration, and smart tools and unless these pieces coalesce, the outcome will always be sub-optimal.  However, on a more positive note we have many pieces of the puzzle up and running. In particular, most events trigger a generic response;

• Notify stakeholders and/or regulators
• Initiate response team
• Establish root cause
• Report to management, who approves a response
• Remediate, test and improve.

We know what these steps are, so it is not difficult to have default workflows ready to implement and they can easily be tweaked to accommodate different fact patterns. If companies are agile, their ability to handle event-based compliances will inevitably get stronger!