Financial Crime World

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Understanding Compliance Key Performance Indicators (KPIs)

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Why Tracking Compliance Metrics Matters

Tracking compliance metrics is crucial for identifying areas where an organization needs to improve. By monitoring key performance indicators (KPIs), organizations can ensure that their compliance strategy is effective in preventing wrongdoing and promoting a positive compliance culture.

Types of Compliance KPIs

There are several types of compliance KPIs, including:

  • Directional Indicators: Provide an overall direction or trend for compliance performance.
  • Specific Indicators: Measure specific aspects of compliance, such as regulatory compliance expense or mean time to issue resolution.
  • Leading Indicators: Predict future compliance performance by measuring factors that are likely to impact it, such as risk severity gap.
  • Lagging Indicators: Reflect past compliance performance and can be used to identify areas for improvement.

Most Important Compliance KPIs to Track

The following 11 key compliance KPIs should be tracked:

  1. Mean Time to Issue Discovery (MTID)
  2. Mean Time to Issue Resolution (MTIR)
  3. Compliance Expense per Issue
  4. Total Regulatory Compliance Expense
  5. Risk Severity Gap
  6. Compliance Audit Coverage Rate
  7. Compliance Training Effectiveness Rate
  8. Code of Conduct Adherence Rate
  9. Whistleblower Hotline Utilization Rate
  10. Compliance Incident Frequency Rate
  11. Regulatory Non-Compliance Event Rate

FAQs

  • What is a good compliance rate?: A good compliance rate varies depending on the organization and industry, but generally, it should be above 90%.
  • How do I measure compliance rate?: Compliance rate can be measured by tracking KPIs such as MTID, MTIR, and regulatory non-compliance event rate.
  • What makes a good compliance function?: A good compliance function is proactive, transparent, and effective in preventing wrongdoing.

Conclusion

Tracking compliance KPIs is essential for ensuring that an organization’s compliance strategy is effective. By understanding the different types of compliance KPIs and tracking key metrics, organizations can identify areas where they need to improve and promote a positive compliance culture.

References and Further Reading