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01 Chapter - Compliance Flashcards

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1
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A
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2
Q

What is Compliance?

A

Compliance refers to the act of adhering to rules, regulations, laws, policies, and standards set by governing bodies or organizations.

It ensures that businesses and individuals operate within legal and ethical frameworks.

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3
Q

What is the General Definition of Compliance?

A

Compliance means conforming to laws, regulations, policies, or standards that govern a particular industry or organization.

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4
Q

What does Deterrence Theory suggest?

A

Deterrence Theory suggests that penalizing violations discourages non-compliance, reducing infractions both by the offender and others.

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5
Q

What is Organizational Compliance?

A

Organizational Compliance is when companies establish processes to ensure their operations align with internal policies, industry standards, and legal obligations.

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6
Q

Why is Compliance essential for organizations?

A

Compliance is essential for maintaining integrity, avoiding legal consequences, and fostering a culture of accountability within organizations.

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7
Q

What are the key aspects of Compliance?

A
  • Laws & Regulations
  • Standards
  • Best Practices
  • Professional Standards
  • Internal Benchmarks
  • Governance
  • Policies & Procedures
  • Transparency
  • Rules
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8
Q

What are Best Practices?

A

Best practices refer to the most effective and efficient methods for achieving something, based on experience, research, and expert consensus.

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9
Q

Give an example of Best Practices in software development.

A

Using Agile methodology is considered a best practice for project management.

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10
Q

What are Professional Standards?

A

Professional standards are a set of rules, guidelines, or ethical principles that govern the conduct and performance of professionals in a certain field.

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11
Q

What is an example of a Professional Standard in healthcare?

A

Maintaining patient confidentiality is a professional standard for doctors.

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12
Q

What are Internal Benchmarks?

A

Internal benchmarks are performance targets or standards set within an organization to measure its progress or success.

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13
Q

What is an example of an Internal Benchmark?

A

A sales team might set an internal benchmark of increasing monthly sales by 10%.

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14
Q

What is Governance in the context of Compliance?

A

Good corporate governance provides the framework for ethical decision-making, transparency, and accountability.

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15
Q

What role do Policies & Procedures play in Compliance?

A

Internal policies translate external legal and regulatory requirements into specific guidelines for employees.

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16
Q

What does Transparency mean in an organization?

A

Transparency refers to openness and clarity in an organization’s operations, building trust and demonstrating accountability.

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17
Q

What is Risk Management?

A

Risk management is the process of identifying, assessing, and controlling risks that could threaten an organization’s success.

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18
Q

What are the key components of Risk Management?

A
  • Identification
  • Assessment
  • Control
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19
Q

What are Operational Risks?

A

Operational risks are related to internal processes, systems, or human error.

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20
Q

What are Compliance Risks?

A

Compliance risks are the risks of failing to comply with laws, regulations, or industry standards.

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21
Q

What are Financial Risks?

A

Financial risks are related to financial activities such as market volatility and credit risk.

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22
Q

What are Legal Risks?

A

Legal risks involve the potential for legal action or disputes.

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23
Q

What are Reputational Risks?

A

Reputational risks can damage an organization’s reputation.

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24
Q

Describe the Risk Management Lifecycle.

A
  • Risk Identification
  • Risk Analysis
  • Risk Mitigation Planning
  • Risk Management Implementation
  • Review and Tracking
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25
What is the focus of Risk Identification?
Identifying and documenting all potential risks that could impact an organization.
26
What activities are involved in Risk Analysis?
* Qualitative analysis * Quantitative analysis
27
What is the goal of Risk Mitigation Planning?
Developing strategies and plans to reduce the probability and/or impact of high-priority risks.
28
What does Risk Management Implementation involve?
Putting the risk mitigation plans into action.
29
What is the focus of Review and Tracking in Risk Management?
Continuously monitoring and reviewing the effectiveness of risk management efforts.
30
What are the four foundational pillars of Corporate Governance?
* Accountability * Transparency * Responsibility * Fairness
31
What does Accountability in Corporate Governance mean?
It emphasizes the responsibility of the board and management to be answerable for their actions and decisions.
32
What is Transparency in Corporate Governance?
Transparency refers to openness and clarity in the company's operations and decision-making processes.
33
What does Responsibility entail in Corporate Governance?
The duty of the board and management to act in the best interests of the company and its stakeholders.
34
What does Fairness ensure in Corporate Governance?
Fairness ensures that all stakeholders are treated equitably and with respect.
35
What is the central concept of Corporate Governance?
Corporate Governance is the system of rules, practices, and processes by which a company is directed and controlled.
36
What is the role of the Board of Directors?
The board is responsible for overseeing the management of the company and setting its strategic direction.
37
What are the components that support Corporate Governance?
* Board of Directors and Committees * Policies and Procedures * Legal and Regulatory Framework * Organisational Hierarchy * Monitoring and Internal Control
38
What is the role of the Board of Directors?
The central governing body responsible for overseeing management, setting strategic direction, and ensuring the company's long-term success.
39
What does the Board Integrated Risk Management Committee focus on?
Oversees the company's risk management framework, ensuring risks are identified, assessed, and mitigated effectively.
40
What is the primary responsibility of the Board Audit Committee?
Monitors the integrity of the company's financial reporting, internal controls, and audit processes.
41
What does the Board Human Resources & Remuneration Committee handle?
Deals with issues related to human resources, including executive compensation, succession planning, and talent management.
42
What is the function of the Board Nomination Committee?
Identifies and recommends qualified candidates for election to the Board of Directors.
43
What does the Board Credit Committee oversee?
Specifically for financial institutions, it oversees the company's credit portfolio and lending practices.
44
What is the purpose of the Board Procurement Committee?
Oversees the company's procurement processes, ensuring goods and services are acquired efficiently and ethically.
45
What is the primary function of regulators?
Government agencies exercising authority over certain activities, creating rules, monitoring compliance, and enforcing standards.
46
Name two regulatory bodies in Sri Lanka that oversee the financial sector.
* Central Bank of Sri Lanka (CBSL) * Securities Exchange Commission (SEC)
47
What does the National Medicine Regulatory Authority (NMRA) regulate?
Regulates the import, manufacture, distribution, and sale of pharmaceuticals and medical devices.
48
What is the role of the Registrar of Companies in Sri Lanka?
Maintains the registry of companies, ensuring compliance with company law.
49
What are the core components of a regulatory framework?
* Legislation and Rulemaking * Enforcement and Compliance * Monitoring and Evaluation * Adaptation to Emerging Challenges
50
What is the foundation of a regulatory framework?
Legislation and Rulemaking, which involves creating laws and detailed rules for implementation.
51
True or False: Compliance risk management only focuses on internal policies.
False
52
What are the key principles of effective compliance risk management?
* Identification and Assessment * Roles and Responsibilities * Risk-Based Controls * Monitoring and Continuous Improvement
53
Fill in the blank: The level of risk before any controls are implemented is known as _______.
Inherent Risk
54
What is the goal of compliance risk management?
To minimize potential negative consequences of non-compliance.
55
What is a Compliance Risk Management Framework?
A structured approach to managing compliance risks, providing a roadmap for identification, assessment, mitigation, and monitoring.
56
What does the Governance and Oversight element of a compliance risk management framework involve?
Establishing clear roles, responsibilities, and accountabilities for compliance risk management.
57
What is the significance of monitoring and reporting in compliance risk management?
Tracks compliance performance and identifies emerging risks.
58
Define 'Residual Risk'.
The level of risk that remains after controls have been implemented.
59
What does the term 'Risk-Based Controls' refer to?
Implementing controls proportionate to the level of compliance risk.
60
What is the purpose of the Board of Investment (BOI) in Sri Lanka?
Promotes and facilitates foreign direct investment while also playing a regulatory role.
61
What are the appropriate risk responses in compliance risk management?
Avoidance, mitigation, transfer, acceptance ## Footnote These responses help organizations manage compliance risks effectively.
62
What does monitoring and reporting in compliance risk management involve?
Ongoing monitoring processes, regular reporting to management and the board, and using data and analytics to identify trends ## Footnote Monitoring helps track compliance performance and emerging risks.
63
What is the purpose of training and communication in compliance risk management?
Provide training on compliance requirements, communicate expectations and updates, and foster a culture of compliance awareness ## Footnote This ensures all stakeholders are informed and engaged.
64
What are the key benefits of a compliance risk management framework?
* Reduced risk of non-compliance * Minimized financial and reputational damage * Enhanced operational efficiency * Improved stakeholder confidence * Competitive advantage ## Footnote A robust framework helps organizations meet compliance obligations effectively.
65
What does assessing gaps in compliance risk management mean?
Evaluating current compliance posture and identifying gaps between existing practices and regulatory requirements ## Footnote This step is crucial for developing an improvement plan.
66
What is the significance of establishing a framework in compliance risk management?
Develop a structured approach, define roles and responsibilities, set objectives, and establish processes for risk management ## Footnote This ensures consistency and accountability.
67
What is involved in performing a risk assessment?
Identify and analyze potential compliance risks, considering internal and external factors ## Footnote Helps prioritize compliance efforts based on risk levels.
68
What is the purpose of putting policies and procedures in place?
Develop and implement guidelines to address compliance risks and outline clear expectations ## Footnote This translates regulatory requirements into actionable steps.
69
What should be included in reporting compliance risk management actions?
Information on risk assessments, mitigation efforts, monitoring results, and compliance incidents ## Footnote Reporting demonstrates transparency and builds trust.
70
True or False: Proactive compliance risk management focuses on prevention.
True ## Footnote Proactive measures aim to minimize the likelihood of compliance violations.
71
What are common compliance risks for businesses?
* Financial regulations * Data protection and privacy * Industry-specific regulations * Employment and labor laws * Contractual and legal obligations * Ethical and conduct risks * Operational risks ## Footnote These areas often present significant compliance challenges.
72
What is the difference between proactive and reactive compliance risk management?
Proactive focuses on prevention; reactive focuses on response ## Footnote Proactive measures are generally more cost-effective in the long run.
73
What defines compliance risk?
The risk of violating existing laws, regulations, industry standards, or internal policies ## Footnote It reflects whether an organization meets its current obligations.
74
What is regulatory risk?
The risk of changes in laws, regulations, or government policies impacting operations ## Footnote It concerns how future rules might affect the organization.
75
What are the core responsibilities of a corporate secretary in compliance?
* Ensuring compliance with laws and regulations * Adhering to internal decisions * Implementing corporate governance practices * Supporting training and development * Providing expert legal knowledge ## Footnote These responsibilities are crucial for maintaining compliance and governance.
76
What are key features of a Company Secretary focused on compliance?
* Time management * Stakeholder relations * Knowledge of compliance and regulations * Problem-solving skills * Balancing transparency and confidentiality * Effective communication * Organized record-keeping * Continuous learning * Familiarity with technology ## Footnote These skills are essential for effective compliance management.

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