ERP systems have become essential systems for managing business data and processes, including HR, operations, finance, supply chain, manufacturing, and customer relationships. Some of these areas, depending on the industry, are under strict control of the government, continuously issuing new regulations. The detrimental impact of noncompliance can’t be overstated, as fines can easily accumulate to millions of dollars and reputational damages can be catastrophic to the business. This is exactly why more companies allocate resources to consistently monitor changing regulations and ensure compliance.
Many of them have discovered that a comprehensive ERP system can facilitate their compliance management processes, making them less resource-intensive and risk-prone. However, given that each industry has its own set of regulations and unique reporting requirements, organizations often opt to customize platform ERP solutions to enable compliance management. Let’s see how custom ERP development can help businesses streamline compliance.
Every business has to comply with regulations
The absolute majority of regulatory bodies are governmental agencies imposing strict regulations that companies in the given industry have to comply with by law. While regulations like GDPR, HIPAA, Sarbanes-Oxley Act, and OSHA Standards are generally well-known due to their extensive media coverage, there are thousands of other industry-specific regulations.
Depending on the industry, new regulations can be released almost weekly, putting compliance teams under significant pressure to stay up to date with the ever-evolving regulatory landscape.
5 ways ERP helps ensure regulatory compliance
There are several ways how ERP can help companies streamline compliance management:
Keeps a data audit trail
ERP systems don’t have features for compliance management by default, but they can significantly enhance the traceability and security of your organization’s data. A well-integrated ERP system efficiently organizes a wide range of data, including invoices, employee records, client interactions, financial transactions, and data about customer support interactions. All this trail data is stored in a centralized repository, allowing companies to automate information cross-referencing and analysis against compliance requirements.
Ensures data integrity
Accuracy is another benefit of using an ERP system for storing, managing, and analyzing data. By automating data entry and implementing robust data standards, an organization’s compliance department can be confident that the data is reliable.
Regardless, ERP doesn’t facilitate data governance by itself, so organizations still need to ensure that the data they gather is clean, reliable, and can be uploaded into the ERP system.
Enhances data security
In the past decade, the importance of data privacy and security has skyrocketed, which has been reflected by regulations like GDPR, CCPA, and PIPEDA gaining more power over the years.
Companies can improve data security by equipping ERP with strict access controls, data encryption, and recovery mechanisms. For example, by implementing security controls in line with NIST 800-53 R5 and ISO/IEC 27001 standards in ERP systems, companies ensure compliance with regulations like PIPEDA in Canada.
Regulatory adaptation
Data management processes in ERP systems can be adapted to varying regulatory requirements. This is particularly beneficial for industries facing frequent regulatory updates like manufacturing. ERP systems help companies in such industries stay up-to-date with these changes, thus avoiding the risks associated with noncompliance.
For example, during the pandemic, as highlighted in a paper published by the Australian Journal of Business and Management Research, companies faced many new reporting requirements. Organizations quickly adapted their reporting processes to meet these new demands by customizing their ERPs with real-time data management and reporting modules, creating a single source of information for compliance managers to use. This allowed companies to maintain compliance even under rapidly changing conditions.
Real-time compliance data monitoring
Finely-tuned ERP systems enable real-time monitoring of compliance requirements. Software providers can help companies configure ERP systems to integrate instant insights from regulatory updates for compliance departments.
For example, alterations in environmental standards may influence the supply chain and manufacturing processes, while a new financial reporting standard could potentially bear implications for the finance department. By integrating specialized compliance management modules into their ERP systems, companies can automatically receive updates on regulatory standards, allowing them to always stay on top of the changing legal landscape.
Moreover, advanced ERP systems provide real-time dashboards that can be customized to highlight key metrics related to compliance, such as changes in the factory’s emission levels and how these changes impact compliance with regulations.
In conclusion
ERP systems can’t determine what regulations an organization needs to comply with, but they can significantly simplify compliance processes by consolidating all relevant data from departments like HR, finance, and supply chain in one place, helping compliance departments to monitor and manage data relevant to compliance more easily.
ERP implementation has a long-term effect on the company’s compliance since the system requires considerable data standardization which, in turn, helps compliance officers streamline report generation and audit processes from governmental agencies that establish regulations. Moreover, properly tuned ERPs can facilitate quicker insight-to-action time as compliance departments can oversee changing regulatory compliance in near-real-time and understand how these changes impact their operations.
