A compliance management system (CMS) is an organized framework that helps businesses align their internal policies, procedures, and IT infrastructure with various policies and regulatory standards. It consists of documents, processes, tools, and controls that promote lawful and ethical operations while reducing the risk of non-compliance. A CMS is not just about meeting legal requirements—it is about fostering a culture of compliance by ensuring that employees understand and uphold their responsibilities across all business functions.

The CMS exists to help integrate compliance management into day-to-day operations, making sure that the organization can consistently monitor and improve its compliance posture. It also facilitates proactive risk management by providing mechanisms to identify, evaluate, and correct issues before they escalate into costly violations.

There are three core components that form the foundation of an effective compliance management system:

The board of directors assume much of the responsibility for establishing and maintaining a culture of compliance. While the board oversees various aspects of the organization, it is ultimately responsible for setting the tone at the top. Board members must create, support, and communicate compliance policies to all stakeholders, including senior management and third-party partners. With clear oversight, the board ensures that compliance efforts are taken seriously throughout the organization.

The compliance officer (or chief compliance officer) is responsible for leading the compliance function. This role typically involves reporting directly to the board, ensuring ongoing communication about emerging compliance issues in the regulatory landscape. The compliance officer designs, implements, and monitors compliance programs, making sure that employees receive proper training on all compliance requirements. When necessary, they are also responsible for addressing potential violations and implementing corrective actions.

The compliance program is the operational core of a CMS. It includes structured policies, procedures, and internal controls designed to guide all employees in fulfilling their compliance responsibilities. A well-defined compliance program includes risk assessments, regular audits, and continuous monitoring. Training programs and reporting mechanisms are likewise essential to ensure that all employees are aware of their obligations and can follow current standards.

Not every company has the same compliance management needs. In support of these needs, organizations may adopt different strategies for managing compliance. These approaches can range from highly controlled to more flexible, depending on the company’s risk tolerance and operational needs.

The three most three common approaches are:

This approach offers flexibility, with leadership setting broad guidelines while leaving specific procedures to employees or individual departments. Organizations that use this model trust their teams to interpret and implement compliance standards in a way that works for them, as long as legal and regulatory requirements are still met. This is often most effective in results-oriented environments where employees are evaluated on outcomes rather than strict adherence to rigid procedures.

In this top-down approach, compliance is strictly enforced by management. This model leaves little room for flexibility, as all employees are expected to follow precise rules and protocols. It is typically employed in high-risk industries like healthcare or manufacturing, where non-compliance could result in severe consequences (such as legal penalties or safety incidents).

The shared model distributes compliance responsibilities across the organization. Rather than relying on a central authority, all employees are expected to take ownership of compliance and hold each other accountable. This approach fosters collaboration and shared responsibility. It is particularly effective in organizations with flat structures or collaborative work cultures.

Regulatory standards exist for various reasons. In many cases, these regulations are in place to prevent businesses from acting in ways that might be contrary to the continued safety and happiness of the community. Organizations are responsible for providing quality products and services and operating in a way that does not mislead or put their customers or others at risk. Compliance may also help promote ‘fair play’ within the market, establishing guidelines for businesses to follow when dealing with competitors.

Ethical issues are often at the heart of federal, state, and local mandates. Failure to operate within these laws may result in severe penalties for businesses, including fines, jail time for company executives, or even forced closure or retooling of the business itself. 

Of course, ethical concerns are not the only motivation behind business regulation. Establishing standards, laws, and best practices can create a competitive advantage. For one thing, customers are likely to be more willing to work with a company that adheres to vital processes and procedures. At the same time, many of these procedures exist to promote better management of the business itself, and organizations may see improvements across the board when they comply with established standards, laws, and best practices. This is particularly apparent regarding company IT systems.

Benefits of compliance management

Implementing strong compliance management practices offers several key advantages:

• Improved trust
  A comprehensive approach to compliance demonstrates the organization's commitment to ethical behavior and regulatory adherence. This helps build trust with customers, employees, and partners. Similarly, safeguarding sensitive data and following standards helps strengthen stakeholder relationships.
• Risk mitigation
  By proactively identifying and addressing risks—such as vulnerabilities in IT systems or non-compliance with data protection laws—businesses can avoid costly breaches, legal penalties, and reputational damage.
• Enhanced productivity
  Structured compliance processes, including automation of approvals and patch management, help reduce manual work. This allows employees to focus on core activities while ensuring critical tasks, like system updates, are addressed promptly.
• More informed decision making
  Compliance programs provide real-time data and insights. This provides leadership with reliable, actionable data and helps organizations remain agile in the face of emerging risks or regulatory changes.
• Clearer workflows
  By establishing clear procedures—such as service level agreements (SLAs) and escalation paths—compliance management keeps responsibilities well-defined and helps ensure that tasks are handled efficiently.
• Better reporting of financials
  Compliance management ensures financial processes follow regulatory guidelines, resulting in more accurate and transparent financial reporting. With standardized controls in place, businesses can reduce the risk of errors or discrepancies.

Successful compliance management requires that organizations develop a clear understanding of their infrastructure and all associated systems. This demands that businesses take the following actions:

Assess

Assessment involves identifying the systems, processes, vendors, or applications that are noncompliant. This may include vulnerable or unpatched systems, or simply those that fail to meet regulatory requirements in other ways. To assess systems, first import all relevant regulations into a regulatory framework and taxonomy. Next, create controls, and harmonize them so that there are no duplicates—many regulations have similar requirements. These controls may be used to assess systems, and control tests should be regularly scheduled for continuous monitoring.

Prioritize

Any compliance issues discovered through control tests, as well as those that are identified in an audit log, must next be prioritized based on necessary effort, potential impact to the business, and issue severity. By classifying compliance issues based on the risk involved to the business and the resources needed to remediate them, organizations can work to resolve important ‘low-hanging fruit’ problems first, before moving onto others that may be not as pressing or as simple.

Respond

Compliance is focused on monitoring, prioritizing, and reporting issues, rather than remediating them. When compliance problems are discovered, the compliance management team must review the details and decide whether to transfer it to IT or another team for remediation, or to simply accept the associated risk and leave the compliance issue unresolved. In the event of a policy exception, performing risk assessments will give the risk team the information they need to determine whether to mitigate, accept, transfer, or avoid the risk. Only a small number of policy exceptions should be allowed, and every policy exception should include an end date and reminders for informing users when the exception is about to expire.

Report

Once any changes have been made and the systems have been reassessed, create a report validating that the changes have taken effect, and that the system is now compliant. Additionally, there should be monitoring and reporting occurring at every stage. Continuous monitoring will help identify trends, more quickly identify non-compliance issues, and provide real-time updates of resolutions and exceptions.

Compliance management plays a critical role across various industries, helping organizations adhere to relevant laws and regulations while minimizing risks. The following examples highlight how compliance management is applied in key sectors, with a focus on the regulations that govern them:

Data privacy

With increasing attention on how personal data is collected, stored, and used, compliance management in the realm of data privacy is essential for protecting consumer information. Organizations must implement strict controls to ensure they follow data privacy regulations, especially when handling sensitive customer data.

Several key regulations that govern data privacy compliance include:

• General Data Protection Regulation (GDPR)
  This European Union law requires businesses to safeguard personal data, provide transparency on how data is used, and allow customers to request the deletion of their data.
• California Consumer Privacy Act (CCPA)
  CCPA mandates that businesses notify California residents about how their data is collected and used. It also gives consumers the right to opt out of data collection or request that their data be deleted.
• Payment Card Industry Data Security Standard (PCI DSS)
  eCommerce and other businesses handling credit card data must adhere to PCI DSS, which requires encryption, vulnerability scanning, and other controls to protect cardholder information.

Financial compliance

In the heavily regulated financial sector, compliance management is crucial for maintaining transparency, preventing fraud, and mitigating financial risks. Financial institutions must adhere to strict regulations designed to prevent financial crimes and support market stability.

Key regulations for financial compliance include:

• Basel III
  This regulatory framework aims to strengthen bank capital requirements and improve risk management to prevent financial crises.
• Dodd-Frank Act
  This law enforces transparency in financial markets, encouraging institutions to follow fair practices and reduce systemic risk.
• Know Your Customer (KYC) regulations/laws
  KYC is a category of laws and regulations that emphasize the organization’s responsibility in knowing who they are doing business with. Financial institutions are required to verify the identity of their customers—a key practice for preventing money laundering and other financial crimes.

Healthcare compliance

Healthcare organizations face stringent regulations designed to protect patient data and ensure the safety and efficacy of medical treatments. Compliance management in healthcare involves enforcing access controls, securing medical records, and ensuring that audit trails are in place for regulators to investigate breaches. It also involves regular staff training to prevent accidental disclosures and other compliance violations. 

Key healthcare regulations include:

• Health Insurance Portability and Accountability Act (HIPAA)
  This law requires healthcare organizations to protect the privacy and security of patient information by implementing access controls, encryption, and audit trails.
• General Data Protection Regulation (GDPR)
  For healthcare providers operating in the EU, GDPR helps promote data protection by ensuring organizations comply with consent requirements and data breach reporting.
• Food and Drug Administration (FDA) regulations
  US-based companies must comply with FDA guidelines to ensure the safety of medical devices and pharmaceuticals.

Compliance management has never been more important, but that does not mean that every management system is equally effective. In choosing the right tool, businesses should prioritize those options that not only meet current needs but are also able to adapt as compliance requirements evolve.

Below are the top features to consider when choosing a compliance management solution:

• Customization
  Compliance requirements can vary greatly between industries and regions. A customizable tool allows businesses to tailor workflows, forms, and reporting templates to fit their specific compliance needs.

• Detailed reporting
  Comprehensive reporting capabilities are critical for maintaining transparency and accountability. The tool should generate detailed, customizable reports that provide insights into compliance activities, such as who has accessed sensitive data, when changes occurred, and how risks were managed. This feature also simplifies the audit process by offering easy access to relevant compliance records.

• Automated workflows
  A compliance tool should automate routine processes like document approvals, incident reporting, and risk assessments. Workflow automation reduces human error while ensuring timely task completion, allowing teams to focus on higher-priority compliance tasks.

• Strong security
  Given the sensitive nature of compliance data, strong cybersecurity measures are non-negotiable. The tool should offer features like encryption, role-based access controls, and audit trails to safeguard data from unauthorized access or tampering.

• Scalability
  As businesses grow, so do their compliance needs. A scalable tool can handle increasing volumes of users, data, and regulatory requirements without sacrificing performance. This ensures that the solution can continue to meet compliance needs even as the organization expands and changes.

• Regulatory change management
  A good compliance tool will have built-in regulatory change management capabilities, providing updates on relevant laws and standards. This feature helps businesses quickly assess and adapt to new compliance requirements, reducing the risk of falling behind on critical regulations.

• Integration capabilities
  Seamless data integration with other business systems is essential for maintaining a unified compliance management approach. The tool should be able to integrate with existing platforms, including cloud-based and on-premises systems, to aggregate and correlate event data. This allows for a more holistic view of compliance efforts and helps streamline data flow across the organization.

Adhering to regulations, laws, standards, and policies is a necessary aspect of modern business. Unfortunately, correctly managing compliance may, at times, be a difficult prospect. Here we briefly explore several challenges that may stand in the way:

Growing number of regulations

New laws and standards are always being created to ensure that business IT systems are operating safely, securely, and in a way that will not risk exposure of sensitive customer data. This means that organizations' compliance management solutions must be extremely adaptable, which many current options are not. Counter this by implementing a compliance management tool that offers automated regulatory updates and change management.

Changing security landscapes

Security threats are evolving even more quickly than regulatory standards; a seemingly secure system today may easily become vulnerable tomorrow to new threats and unaccounted for attack methods. Continuous monitoring solutions and regular IT security audits can help quickly identify emerging threats and vulnerabilities before they impact compliance.

Lack of integration and visibility

Most business’ IT systems are not centrally contained; they are spread out in distributed environments across multiple on-site and cloud-based platforms. Without integrated reporting or enterprise-wide visibility, it may be hard to achieve a complete view of the current compliance state, as well as associated vulnerabilities and risks. The use of centralized compliance platforms that integrate with cloud and local systems provide comprehensive reporting and a unified view of the organization’s overall compliance state.

Overly complex infrastructures

Complex IT environments coupled with large teams may make coordination difficult, slowing down compliance assessments and creating inconsistencies or misunderstandings in establishing responsibilities. Simplify compliance processes by using automated workflows and assigning clear ownership of tasks.

Third-party integration

Businesses that work with contractors, vendors, or other third-parties may be liable for how those partners manage any sensitive customer or business data they gain access to. This can be problematic, as effective compliance monitoring of third-party, non-full-time contractors is not always possible. Prioritizing third-party risk management (TPRM) solutions can provide a more effective approach to compliance management when working with contractors from outside the company.

Compliance management is a shared responsibility that involves stakeholders across all levels of the organization. From top-level leadership to individual employees, those that are directly involved in managing compliance and their responsibilities include:

• Board of directors
  As previously stated, the board holds ultimate accountability for compliance. They set the compliance agenda and communicate compliance expectations, while overseeing the development of policies.

• Senior management
  Senior executives are responsible for translating the board’s compliance directives into actionable strategies. They allocate resources, establish a compliance office or designate a compliance officer, and ensure that compliance policies are effectively implemented. Senior management also conducts audits, assesses risks, and regularly reports to the board on compliance status.

• Compliance officer
  The compliance officer leads the day-to-day management of compliance programs. This role involves developing and monitoring compliance procedures, serving as the point of contact for compliance issues, coordinating training, and ensuring that all departments can effectively integrate compliance into their operations.

• Compliance team
  In larger organizations, a dedicated compliance team may work alongside the compliance officer to implement programs, monitor compliance efforts, and provide ongoing support for regulatory adherence.

• Employees
  On an individual level, every employee is responsible for following the organization’s compliance policies. This includes participating in training, adhering to legal and regulatory requirements relevant to their roles, and reporting any potential violations. 

• Third-party vendors and partners
  Organizations must also ensure that their third-party vendors and service providers comply with relevant regulations. Extending compliance management to external partners is a necessary step in mitigating risks associated with outsourcing.

Just as many of the hurdles standing in the way of effective compliance management have evolved in recent years, top organizations are expanding their approach. Today, ensuring regulatory compliance often requires a versatile approach capable of monitoring, analyzing, and reporting on all relevant environments. Having the right tools is a major step towards this goal.

Otros compliance best practices include:

Performing daily systems scans

When it comes to comprehensive compliance monitoring, ‘recent enough’ may not be recent enough. Compliance issues can crop up quickly and unexpectedly. As such, performing daily systems scans can help ensure that when problems or vulnerabilities manifest themselves, businesses can act before those problems begin to impact operations.

Reviewing and refining policies

Empresa policies are not (and should not be) static; they need to be dynamic and flexible enough to pivot towards any new advancements, laws, and security threats that may arise. Schedule regular dates to review IT policies and be prepared to update them when necessary.

Staying current on new regulations

It is the responsibility of the business to remain current on all IT compliance and regulation legislation. RSS feeds and other services can give organizations the forewarning they need to plan for changes as they come.

Integrating automation

Manual compliance management is inexact, inefficient, and incredibly time consuming. And, as an organization grows, it can be difficult for manual compliance processes to keep up. Automation makes it possible to pass certain essential, repetitive tasks onto machine programs. This allows businesses to streamline compliance management, for improved accuracy, consistency, and productivity—scaling to match even the most sudden business growth.

Remaining up to date on all patches

Possibly the easiest and most effective step that businesses can take to ensure compliance is to keep all their IT systems patched and up to date. In many cases, patching can be almost completely automated. All patched systems should be patch tested to ensure viability before they are allowed to resume their functions.

In many cases, compliance is a legal requirement. And even where it is not mandated by law, compliance with key IT or business policies and standards can provide significant benefits. To get started with compliance management, follow these steps:

• Get commitment from all leaders and key decision makers within the organization.
• Create a formalized program identifying vital standards and regulations, conceptualizing policies, and creating controls.
• Identify the critical systems, assets, processes, and vendors that compliance must be managed against.
• Identify those who should be responsible for the compliance of the critical systems, assets, processes, and vendors.
• Create a centralized repository—such as a configuration management database (CMDB)—to identify non-compliance for data, audit logs, and asset information.
• Where needed, deploy external parties to assist with specialized knowledge.
• Offer and mandate compliance training throughout all relevant departments.
• Automate control testing for ongoing compliance monitoring.

ServiceNow, a leader in the Gartner Magic Quadrant for IT Risk Management, is also an industry leader in digital compliance solutions. Built on the award-winning Now Platform, ServiceNow Governance, risk, and compliance (GRC) empowers businesses to build effective governance frameworks.

Within these GRC frameworks, users can import regulations, identify policies, and establish policy lifecycles, assign, and test controls, create attestations, schedule regular tests, and perform issue and task management procedures to respond to compliance failures as they arise. Through it all, ServiceNow GRC is supported by dynamic, centralized dashboards and intuitive reporting, allowing organizations to get the information they need to act quickly and decisively.

See how far the right approach to compliance management can take you; demo ServiceNow today!