How a smarter approach to compliance can give your organisation a strategic advantage

Under King IV, the role of Internal Audit has evolved beyond retrospective assurance. Today, it also encompasses proactive insight and strategic foresight, helping governing bodies anticipate disruption, guide agile decision-making and embed a forward-looking compliance mindset across the organisation.

Embedding the functionality of strategic foresight into risk management and Internal Audit practices empowers organisations, particularly ones operating in volatile, high-risk contextual environments, to better anticipate disruptions, support agile governance and guide executive leadership in charting a forward-orientated compliance and risk agenda.

With this heightened professional responsibility on hand, it is obligatory then to point out that multiple early warning signals are alerting us that South Africa’s overall regulatory environment is tightening.

Along with a more stringent oversight regime, the penalties associated with regulatory transgressions are becoming more onerous too.

The early warning signs of regulatory risk

Recent headlines highlight the severity of the compliance risks organisations face. Case in point, a well-known South African bank was recently handed a R56 million fine for FICA compliance breaches, and another was penalised R13 million earlier this year by the South African Reserve Bank's Prudential Authority (PA) for also failing to comply with certain provisions of the Financial Intelligence Centre Act (FICA). The fine was a result of an inspection conducted by the PA in 2022, which revealed issues relating to the monitoring of system-generated alerts and the submission of regulatory reports. Penalties like these underline the regulators' escalating zero-tolerance approach.

Similarly, data privacy violations under the Protection of Personal Information Act (POPIA) have become increasingly costly. Recently a government department, after an unfortunate ransomware attack, was fined R5 million for failing to safeguard personal data under their curation. This contravention highlights the significant vulnerabilities even within government structures.

Risks are more than just financial

While fines can be significant, they are not the only penalties a non-complaint organisation faces. Operational disruptions, thanks to the suspension of licenses, can have a severe impact. The risk of intangible reputational damage (when the name of a transgressing company appears splashed all over the news headlines) also leaves lasting scars; undermining critical levels of trust among customers, value chain partners and shareholders.

Moreover, South Africa’s continued presence on the Financial Action Task Force’s (FATF) grey list adds another layer of friction to the already challenging mix, increasing levels of scrutiny of financial transactions and further complicating international business dealings.

Choosing to not view this encroaching tightening regulatory landscape with utmost urgency is simply not an option for quality management teams.

Why now is the time for a new approach to compliance

A forward-orientated risk and compliance approach, is a ‘proactive and holistic one’ that demonstrates organisational integrity, enhancing trust with stakeholders and providing a distinct competitive edge.

To achieve this ideal, here are some of the elements that make up this approach:

1. Keep ahead of regulatory changes

It might seem obvious, but responding timeously to an evolving regulatory landscape requires vigilance. By using technology and automating regulatory monitoring, through innovative, modern solutions like Lexis Assure, compliance teams can stay informed of new requirements and adjust their responses and policies ahead of deadlines. Continuous, monthly regulatory horizon scanning (staying on the lookout for early signals of change) is key.

2. Encouraging a company-wide culture of compliance

An effective compliance culture is one that goes well beyond the old practice of simply ticking boxes. Visible and enthusiastic leadership commitment, regular staff training (at all levels) and an enabling environment where employees understand the value guidelines and are encouraged to confidently report potential compliance concerns, is paramount. The benefits are obviously fewer compliance contraventions, but also an organisation that prides itself on operating as a valuable institution of society, an important part of the solution…not one of its problems.

3. Leverage technology for efficient due diligence

Manual due diligence processes (using spreadsheets and other old, unsecured systems) are outdated and risky. Advanced digital compliance tools like Lexis KYC, Lexis RefCheck and Lexis ProcureCheck can be used to streamline verification and monitoring, significantly reducing risk exposure by identifying red flags early. Adopting these tools boosts compliance productivity and accuracy and significantly strengthens your compliance efforts.

4. Use artificial intelligence as a part of risk management

The continued emergence of artificial intelligence is transforming how organisations approach their compliance and risk obligations. AI tools can assist in a wide range of compliance-related tasks, including legal research, automated document analysis and early detection of potential compliance breaches faster than before. In environments with large volumes of data, integrated AI-enabled systems can detect emerging patterns of risk or anomalies, such as inconsistent supplier behaviour or gaps in transaction reporting, that may signal a problem early. Platforms like Lexis+ AI can support teams in making faster, more informed decisions by surfacing relevant regulatory insights and guiding policy redevelopment. While it is important to clarify that AI does not replace human judgment, it does act as a force multiplier, amplifying the effectiveness of risk teams.

5. Regularly audit and stress-test your systems

Periodic internal audits and stress tests, including simulated data breaches and ‘compliance incidents’, go a long way to help surface latent compliance weaknesses in systems. Regularly addressing gaps proactively in this way not only protects against real-world incidents, but also gives a strong signal to regulators of your organisation’s commitment to compliance excellence.

6. Prepare incident response plans

Be warned, even the most sophisticated defenses might occasionally fail. Carefully considered incident response plans can help ensure rapid action and remediation, demonstrating organisational preparedness during crises and going a long way to mitigating potential regulatory repercussions.

Standing out above the rest

One thing can be predicted with some certainty; compliance transgressions are going to impact a number of South African organisations in the years to come.

For this reason, excellence in this domain is more than a reputational safeguard; it is a strategic differentiator. Organisations that manage to build an enviable reputation of proactive oversight will be far better positioned to attract talent, customers, investors and other valuable stakeholders.

By recognising the early signals of regulatory change and treating compliance as a strategic priority your organisation can confidently navigate complexity and carve out a real competitive advantage. With the right LexisNexis compliance toolkit in place, your organisation doesn’t just avoid penalties, you close risk gaps faster, win more business and build a reputation that earns the confidence of regulators, customers and investors alike.