Compliance monitoring: Building effective programs for governance
As regulatory enforcement reaches record penalty levels while case volumes decrease, achieving clear visibility into your compliance performance has never been more critical. The SEC's enforcement results from fiscal year 2024 demonstrate this shift: While enforcement actions dropped 26% to 583 cases, organizations faced "record dollars" in penalties according to enforcement tracking firms.
This enforcement evolution creates a stark reality for contemporary organizations. Those with effective monitoring systems benefit from the SEC's favorable treatment of entities that "self-reported or remediated securities law violations or otherwise cooperated meaningfully." Meanwhile, organizations without proactive detection capabilities face increasingly severe financial consequences when violations are discovered externally.
PwC's 2025 Global Compliance Survey confirms executives now rank technology as their top compliance risk priority, validating strategic investment in comprehensive monitoring infrastructure. Yet, FTI Consulting's research reveals 59% of organizations cite "lack of resources (personnel, tools)" as barriers to achieving ROI on their compliance programs.
This comprehensive guide will help you understand and build effective compliance monitoring programs by explaining:
- What compliance monitoring means in today's regulatory environment
- How internal monitoring ensures operational compliance and risk mitigation
- Essential components of effective monitoring plans and frameworks
- Five practical steps to create comprehensive monitoring programs
- Key elements of successful monitoring systems and their benefits
- How to coordinate compliance monitoring and internal audit functions
- How AI technology automates compliance monitoring capabilities
What is compliance monitoring?
Compliance monitoring refers to systematic quality assurance processes organizations implement to verify how effectively their business operations meet regulatory obligations and internal policy requirements. This continuous oversight has evolved from periodic check-box exercises to strategic risk management capabilities that directly impact organizational resilience and market position.
Today's regulatory environment demands more than traditional audit approaches. The Institute of Internal Auditors’ (IIA) new Global Internal Audit Standards represent what the Institute calls "a pivotal achievement," requiring updated measurement approaches that integrate governance, risk, and control processes.
Current compliance monitoring must address evolving regulatory landscapes, including SEC cybersecurity disclosure requirements, which mandate reporting material incidents within four business days through Form 8-K. These new requirements demonstrate why proactive monitoring capabilities have become essential for regulatory compliance.
Typically, dedicated compliance teams coordinate monitoring activities using advanced compliance management platforms, while internal audit provides additional verification, particularly in complex multi-jurisdictional organizations. This integrated approach ensures both operational compliance and strategic risk management.
What does internal monitoring of compliance ensure?
Internal compliance monitoring ensures staff adherence to company policies while providing early warning systems for potential regulatory violations. While auditing verifies control existence, monitoring determines whether staff consistently follow those controls in daily operations. This distinction proves crucial for avoiding regulatory penalties, data breaches, and operational disruptions.
Monitoring programs must address evolving risk environments. The IIA's 2024 Pulse Report identifies compliance and regulatory risk among the top concerns, with organizations struggling in cybersecurity oversight, third-party relationship management, operational enterprise risk management, and governance culture assessment.
Program scope depends on organizational complexity. Smaller companies might designate a single compliance professional, while enterprises deploy comprehensive compliance teams responsible for establishing audit strategies and continuous monitoring frameworks. Regardless of scale, policy management technology can streamline policy administration while creating verifiable, audit-ready documentation for accurate compliance reporting.
Compliance monitoring that scales
Transform compliance monitoring from reactive auditing to proactive risk intelligence with integrated governance platforms that grow with your organization's complexity.
Read moreWhat should a compliance monitoring plan look like?
Effective compliance monitoring plans must balance comprehensive coverage with strategic risk prioritization. Your monitoring framework should demonstrate both regulatory adherence and operational efficiency to stakeholders, including auditors, regulators, and board members.
Your compliance monitoring plan should include:
- Comprehensive risk coverage: Your plan must address all compliance risks across departments, along with specific mitigation strategies. This includes traditional operational risks and emerging areas like AI governance, cybersecurity incident response, and multi-jurisdictional regulatory coordination.
- Proportionate implementation: The monitoring approach should align with your organization's size, complexity, and risk profile. Mid-market companies preparing for an IPO transition require capabilities that differ from those of established public companies managing global operations.
- Clear documentation framework: Your plan should specify testing methodologies, responsibility assignments, monitoring frequency, and evidence collection procedures. This documentation proves essential during regulatory examinations and supports favorable treatment for organizations demonstrating proactive compliance efforts.
5 steps to create a compliance monitoring program
Compliance monitoring programs should achieve dual objectives: establish systematic auditing processes and ensure regulatory compliance effectiveness. When implemented strategically, these programs reduce liability and penalties while supporting business objectives.
1. Conduct a comprehensive compliance assessment
Before designing monitoring procedures, conduct a thorough risk evaluation across your entire organization. Today's risk environment requires organizations to allocate sufficient resources to comprehensive risk assessment. This assessment provides monitoring programs with solid foundations while ensuring no gaps exist in coverage areas.
Your assessment should evaluate regulatory requirements across all jurisdictions where you operate, internal policy frameworks, third-party relationship risks, and emerging regulatory areas like AI compliance and cybersecurity incident management.
2. Identify and prioritize the highest-risk areas
Resource-constrained organizations must weigh their monitoring plans toward areas posing the greatest risks. This strategic approach ensures financial and human resources target the most crucial compliance areas effectively.
This prioritization becomes especially challenging because, as Tom Keaton, former Director of Internal Audit at Crown Castle, notes, "There are mission-critical risks outside of internal audit's typical scope. You can't fill your audit plan with these risks, but you have to incorporate them into your planning."
Consider regulatory enforcement patterns, potential penalty severity, business process criticality, and stakeholder impact when establishing priorities. Organizations should review SEC enforcement trends, industry-specific regulatory focus areas, and peer company violation patterns when making these determinations.
3. Align compliance reporting with strategic objectives
Your compliance reporting must support the regulatory compliance strategy while ensuring high-risk areas receive appropriate attention. This alignment proves particularly important as regulators increasingly emphasize data and metrics to verify compliance program effectiveness.
Reporting frameworks should provide board-ready summaries, regulatory filing support, stakeholder communication materials, and performance trend analysis that demonstrates program effectiveness over time.
4. Monitor results and measure effectiveness
Once implementation begins, measure current compliance approaches to determine monitoring program effectiveness. The Society of Corporate Compliance and Ethics emphasizes that effective programs incorporate alignment of legal and regulatory expectations, risk-based audit planning, and structured monitoring methodologies.
Key performance indicators should include issue detection rates, resolution timeframes, recurrence prevention success, and regulatory relationship quality. Organizations should track both quantitative metrics and qualitative assessments of program effectiveness.
5. Engage subject matter experts strategically
Areas requiring specialized knowledge need focused attention from appropriate internal or external experts. Complex organizations should evaluate whether certain risks are interdependent, enabling collective reports and action plans that maximize efficiency while leveraging expertise synergies.
Consider regulatory complexity, technical specialization requirements, cost-benefit analysis of internal versus external expertise, and integration requirements with existing compliance infrastructure when making these decisions.
Elements of a compliance monitoring system
Successful monitoring systems combine different review approaches to spot potential problems before they become violations. Rather than checking compliance only during scheduled audits, leading organizations now monitor continuously to catch issues early.
Effective monitoring programs typically include these core components that work together to provide comprehensive oversight:
Operational and performance reviews
Policy documentation represents only the first step in compliance management. Actual employee behavior and process effectiveness determine real compliance outcomes. Performance reviews should evaluate compliance adherence alongside traditional metrics, providing insights into communication barriers, operational challenges, and procedural gaps that might compromise compliance effectiveness.
These reviews should occur at prescribed intervals using measurement approaches aligned with individual role responsibilities. Effective reviews identify process improvements, training needs, and system enhancement opportunities that strengthen overall compliance infrastructure.
Policy reviews and updates
Regulatory environments evolve rapidly, requiring annual policy review cycles at a minimum. The pace of regulatory change continues to accelerate, with new requirements emerging across areas like cybersecurity disclosure, ESG reporting, and digital assets, making regular policy updates essential for maintaining compliance.
Organizations should prioritize policy reviews based on the frequency of regulatory changes, business impact assessments, and risk exposure evaluations. Major organizational changes, new regulatory requirements, or significant business developments should trigger immediate policy reviews, regardless of scheduled cycles.
Continuous control monitoring integration
The IIA advocates continuous control monitoring (CCM) technology as transformative, "empowering organizations to move from periodic checks" to ongoing surveillance. This approach provides real-time visibility into compliance status while reducing administrative burden on compliance teams.
CCM systems integrate with operational technologies to provide automated exception reporting, trend analysis, and predictive risk assessment that traditional manual processes cannot deliver effectively.
Coordinating compliance monitoring and internal audit
Internal audit often builds upon compliance team foundations, creating layered oversight that strengthens overall monitoring effectiveness. While compliance or risk teams conduct initial monitoring activities, internal audit typically provides secondary verification through more intensive examination processes.
This dual-layer approach varies by organizational size and complexity. Smaller organizations may rely primarily on compliance team monitoring when internal audit resources are limited, while larger enterprises benefit from coordinated compliance and audit functions that provide comprehensive coverage.
As regulatory complexity increases and business relationships extend through third and fourth-party networks, automation becomes essential for robust monitoring. Advanced compliance solutions prove particularly valuable for monitoring applications, automatically generating audit-ready reporting and intuitive dashboards that provide stakeholders with clear visibility into current compliance status.
Why is compliance monitoring important?
At its foundation, monitoring ensures organizational operations function as designed while identifying non-compliance issues before they escalate into regulatory violations. However, modern monitoring programs provide value across multiple organizational dimensions.
1. Demonstrates a compliant culture and procedures
Comprehensive monitoring documentation helps organizations evidence that appropriate procedures represent operational norms rather than exceptional practices. This documentation proves crucial during regulatory examinations, providing favorable treatment for organizations demonstrating consistent compliance commitment.
2. Improves operational performance
Performance improvement requires understanding the current state as the starting point. Monitoring provides essential data for identifying gaps, measuring progress, and validating improvement initiatives. This makes monitoring a foundational element of effective compliance programs and critical for organizational success.
3. Achieves regulatory compliance excellence
Many regulatory frameworks require demonstrated monitoring capabilities for licensed operation. The SEC, FINRA, FDA, and other agencies evaluate monitoring program robustness when granting or maintaining regulated status. Organizations with sophisticated monitoring capabilities face fewer regulatory challenges and receive more favorable treatment during examinations.
4. Creates comprehensive audit trails
Automated compliance solutions generate detailed audit trails that reduce manual documentation risks while improving efficiency. These comprehensive records prove invaluable during regulatory examinations, legal proceedings, and board reporting requirements.
How AI technology automates compliance monitoring
AI technology is changing how organizations monitor compliance by automating time-consuming manual processes and providing early warning systems for potential violations. Instead of relying on periodic audits that catch problems after they occur, AI enables continuous monitoring that identifies issues before they become regulatory violations.
Compliance monitoring technology focuses on three key capabilities that deliver practical business improvements:
1. Unified compliance monitoring and governance
The Diligent One Platform provides comprehensive GRC capabilities that integrate risk, compliance, audit, policy, and entity management into a unified solution. This integrated approach enables organizations to scale compliance monitoring from foundational controls through complex multi-jurisdictional oversight without managing disparate systems.
The platform features advanced analytics, automation, real-time dashboarding, AI-driven anomaly detection, and configurable monitoring workflows that create resilient, scalable compliance programs. Organizations benefit from continuous monitoring capabilities with instant reporting that ensures executive and board-ready compliance visibility across the entire enterprise.
This unified approach eliminates the inefficiencies of point solutions while providing the comprehensive oversight that contemporary compliance monitoring demands.
2. Continuous controls monitoring and automated testing
Diligent's continuous controls monitoring (CCM) through ACL Analytics delivers real-time, automated testing of transactions, user activity, and controls while providing customizable dashboards and exception reporting. The system uses AI and machine learning to detect risk patterns, automate control testing, and reduce manual workloads.
This capability enables 100% population testing rather than traditional sampling methods, providing continuous compliance coverage that identifies issues before they become violations.
3. Regulatory compliance management and change tracking
Diligent's Regulatory Compliance Management centralizes regulatory obligations while automatically monitoring changes in laws and regulations. The platform aligns controls and testing to applicable requirements while supporting workflow automation for certifications and evidence gathering.
AI-based regulatory change tracking makes it easy to respond to evolving frameworks and document control activities for audits or examinations. This proactive approach ensures organizations stay ahead of regulatory changes rather than reacting after requirements are implemented.
Enhance monitoring with compliance monitoring software
Compliance monitoring has evolved from periodic audit exercises to continuous, AI-powered processes that drive business resilience and regulatory confidence. Organizations implementing intelligent monitoring programs report significant efficiency gains, enhanced risk detection, and stronger stakeholder trust.
No matter how skilled your compliance team, manual oversight cannot monitor every policy across all departments effectively. Compliance monitoring platforms enable teams to implement continuously monitored control frameworks that remediate issues proactively while demonstrating compliance effectiveness for stakeholders.
Ready to experience intelligent compliance monitoring in action? Schedule a Diligent demo to see how our AI-powered governance platform can transform your compliance outcomes and deliver measurable business impact.
FAQs about compliance monitoring
What's the difference between compliance monitoring and compliance auditing?
Compliance monitoring involves continuous oversight of operations to ensure ongoing adherence to policies and regulations, while auditing represents periodic, intensive examinations of specific areas. Monitoring provides real-time visibility and early warning capabilities, whereas auditing offers comprehensive assessment and validation.
How often should organizations conduct compliance monitoring activities?
Monitoring frequency depends on risk levels, regulatory requirements, and business complexity. High-risk activities may require daily monitoring, while lower-risk areas might need weekly or monthly oversight. Regulatory requirements often specify minimum monitoring frequencies, particularly in financial services and healthcare. The key is implementing risk-based approaches that provide appropriate oversight without creating operational burdens.
What are the most common compliance monitoring challenges organizations face?
Organizations frequently struggle with resource constraints, technology integration difficulties, and keeping pace with regulatory changes. Many companies lack sufficient personnel and tools. Additionally, coordinating monitoring across multiple jurisdictions and business units creates complexity that traditional approaches cannot address effectively.
How do organizations measure compliance monitoring program effectiveness?
Effective measurement combines quantitative metrics like issue detection rates and resolution timeframes with qualitative assessments of program impact. Key performance indicators include proactive versus reactive issue identification ratios, regulatory examination outcomes, and stakeholder satisfaction scores.
What role does technology play in contemporary compliance monitoring?
Technology enables continuous monitoring capabilities that manual processes cannot match, while providing comprehensive documentation and audit trails. AI-powered systems can analyze vast datasets to identify patterns and anomalies that human reviewers might miss. Enterprise agent deployment allows organizations to configure monitoring systems for specific business functions, achieving faster value realization and more effective risk management.
Book a demo to explore how Diligent can enhance your compliance monitoring capabilities with AI-powered risk detection and automated reporting.
