Published October 21, 2019 • By Thea Garcia

A compliance management system (CMS) consists of an integrated system of written documents, processes, tools, controls, and functions to make it easier for organizations to comply with legal requirements. A CMS also minimizes harm to consumers because of a violation of the law.

A CMS helps organizations better address risk management by ensuring that their policies and procedures adhere to the requirements of applicable laws and regulations, as well as address training, communication, and monitoring. 

A CMS allows an organization to learn about its compliance responsibilities. Specifically, a CMS helps a company make certain that its employees understand these responsibilities, and ensures that it incorporates the applicable requirements into its business processes. In addition, an enterprise can use a CMS to review how it operates, check that employees are meeting their responsibilities, and take any necessary corrective action.

An effective CMS system is made up of three components: a board of directors and management oversight, compliance program, and compliance audit.

  • Board of directors and management oversight: For example, in the heavily regulated financial services industry, this oversight helps financial services firms address compliance with federal consumer financial laws to reduce violations and the risks to consumers if they violate these laws.
  • Compliance program: A set of documents containing policies, standards, and processes that are enforced by leadership and acts as a training and reference tool for all employees.
  • Compliance audit: An independent review that determines if an organization is adhering to internal policies and procedures and complying with consumer protection laws. With this audit, leadership can ensure ongoing compliance and manage compliance risks.