A 4-Step Framework for Proactive Product Compliance
What does it mean to put a proactive compliance program in place? What are the components? Many best-in-class companies use a four step methodology for proactive compliance. The methodology speaks to an organization’s need to monitor, assess, strategize/plan for product compliance risk, and then unify internal processes to ensure that the product compliance strategy is implemented and effective.
Let’s talk about monitoring compliance. This is obviously not an easy process with the ever-growing amount of market-specific, industry-specific, and product-specific regulations. It becomes even more complex when you talk about monitoring countless social media platforms where consumers and suppliers can expose, at any time, information about an organization’s product. Best-in-class companies have invested in tools that can help. In fact, there are two fundamental pieces to monitoring. The first is staying in tune with current news and trends, but the second is being able to reference existing legislation in order to ensure proactive mitigation of any risk to manufacturing, distributing, or selling a product in a specific geography, market or industry. Thankfully, there are leading regulatory monitoring tools and reference tools in the market, such as 3E Company’s Regulatory Monitoring and WebInsight™.
It is not enough just to monitor the current news or pending regulatory changes, one must also assess what these pieces of news and changes may mean for an organization. In fact, assessing may be one of the toughest parts in the process because it requires having deep domain expertise and understanding the often gray areas of the law. There are generally many areas of concern when one begins to assess risk tied to product compliance. One in particular is the base chemistry/toxicology of product ingredients. Having a formal system in place to assess the hazards and exposure risks of a particular substance is paramount to alternative or de novo assessments. Another integral piece to assessing your product compliance risk is monitoring the upstream risk in your supply chain. With the Dodd-Frank Act in the United States on monitoring and controlling conflict minerals and the UK Anti-Slavery Act on the use of forced or slave labor in an organization’s supply chain, companies have the potential for new risk exposure from their suppliers. Additionally, looking more downstream, organizations are forced to assess the risk of external pressure on their organization from NGOs, Industry Associations, and end-consumers.
3) Strategize and Plan
Now that an organization has taken a look at the market landscape and assessed a variety of different product compliance risks, it is important to digest the information, and strategize and implement a plan. This can be more difficult than it sounds, but with the right foresight companies can mitigate risk. The first step is to see how an organization can plan for risks throughout its product’s lifecycle. At 3E we have seen many clients and the market shift to insert compliance as a core part of the product lifecycle. In fact, many organizations believe that integrated product compliance leads to further supporting innovation within their product lines.
Additionally, organizations are also faced with putting a system in place to make their upstream supply chain more visible or transparent. Many organizations are beginning to deploy initiatives for suppliers to aid organizations in their compliance efforts. Recent examples of this include incentive programs, recognition programs, or even gamification. Social audits or audits in general are still a necessary component, as is the case with many large diverse supply chains like Apple’s which stretch across the globe, but audits alone will not steer organizations within one’s supply chain to be proactively compliant. Lastly, due to the social world we live in, organizations should be acutely aware of the effect that non-compliance has on their brand reputation. A recent example was the allegations of slave labor in one of Red Lobster’s Thai seafood exporters. Red Lobster had to audit its supply chain and deal with the bad press that will take a toll on its public image and likely its top line. While we all hope this was an isolated incident, it speaks to an organization’s need on a moment’s notice, whether allegations are true or false, to have to defend their brand.
Once an organization has a strategy in place and wants to implement a plan, how do they do it? In most organizations, it is at this step that one finds difficulty in steering the company to rally around and support a centralized program for product compliance. Corporate divisions like product development, quality, and compliance are siloed in such a way operationally that it can be difficult to get different parts of the organization on the same page, and move forward with a central, agreed-upon plan. In this case, almost always the strategy or plan will fail until there is an event that triggers the organization to look deeply at proactive compliance. It is therefore necessary that senior leadership, including C-level leadership, make this a core tenant in their management and risk strategy. Organizations that are seen as best-in-class integrate product compliance into their management frameworks and with R&D, more than other companies. Most, in fact, treat it as a symbiotic or complimentary process to innovation.
Organizations world-wide struggle with the increasing cost of compliance. It is no longer a luxury for companies to have a proactive product compliance strategy and program in place that address current market conditions and those yet to come. In future posts, we will explore the role that proactive product compliance plays in a corporate, intelligent compliance strategy, highlighting how a company can shape its culture and business processes to embrace this methodology for proven results and additional customer value.
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