Financial compliance protects customers and investors while preserving the stability and integrity of the financial system. The board of directors plays a key role by setting the tone, guiding compliance efforts, and ensuring the company meets standards set by regulatory agencies.
A strategic risk assessment is meaningless without a solid financial compliance program. When companies ignore compliance, they expose themselves to a range of financial risks, including credit and liquidity risk. For example, noncompliance can trigger fines, lawsuits, and other penalties that weaken a company’s financial position.
This can result in missed debt payments and unmet financial obligations, amplifying credit and liquidity risk. The board of directors must actively mitigate these risks by understanding relevant regulations and ethical standards, then embedding that knowledge into the organization’s enterprise risk management strategy.
What is Financial Compliance?
Financial compliance refers to the adherence to various laws, regulations, standards, and internal policies that influence how an organization manages its financial operations, reporting, and transactions. Its purpose is to ensure financial integrity, prevent fraud or misconduct, and protect the stakeholders’ interests.
Types of financial compliance include:
- Regulatory Compliance: Ensure the organization follows external laws and regulations, including securities laws, anti-money laundering and know-your-customer rules, tax reporting obligations, and anti-bribery laws.
- Financial Reporting Compliance: Involves producing clear and accurate financial statements in accordance with Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and country-specific standards.
- Internal Controls and Policies: Implementation of systems to automatically detect, prevent, and respond to financial risks.
These laws and standards aren’t meant to impede business operations or hinder earning potential. They provide numerous benefits to organizations. They help build the reputation of an organization, especially financial institutions in the financial services industry, and maintain trust with stakeholders, such as customers and investors, through transparency and ethical business practices.
Navigate board software options wisely using our comprehensive vendor comparison tool.
Understanding the Board's Role in Financial Compliance
The board sets the bar for how the entire organization follows compliance measures. Board directors must understand the relevant laws, regulations, and industry standards and how they apply to their own financial situation.
1. Oversight of Financial Reporting
Transparency is a cornerstone of financial compliance. By reporting financial information clearly and accurately, companies protect stakeholders and build trust — an asset that can offer a competitive edge. To achieve this, organizations must implement strong processes, procedures, and controls that ensure financial reports are accurate, reliable, and compliant with regulations. Ongoing monitoring and regular reviews help safeguard the integrity of all financial reporting.
2. Establishing a Strong Compliance Framework
Start by developing clear compliance policies and procedures. Then, define roles and responsibilities across the organization to support key compliance functions, such as risk assessments, ongoing monitoring, employee training, and enforcement. The board may appoint a dedicated compliance officer or form a compliance committee to oversee these efforts and maintain accountability.
3. Audit Committee Oversight
A critical part of a strong compliance framework is board-level oversight of financial reporting. An audit committee within the board should supervise and evaluate the financial reporting process, ensuring that internal controls and risk management practices meet regulatory and industry standards. This oversight often includes both internal and external audit procedures to verify compliance and accuracy.
4. Setting Risk Management and Internal Controls
Transparency and accountability go hand-in-hand with risk management. Financial compliance depends on identifying and addressing risks, particularly those tied to balance sheet items that impact financial stability.
A risk assessment matrix can help determine which risks pose the greatest threat. Once identified, the organization can implement internal controls — preventive, detective, or corrective — to mitigate those risks. These efforts lay the foundation for a robust enterprise risk management framework.
For those seeking deeper knowledge, there are enterprise risk management certification programs, such as the one offered by the Open Compliance and Ethics Group (OCEG), that provide training in governance, risk, and compliance (GRC) to help embed these practices within an organization.
5. Promoting Ethical Conduct and Compliance Culture
Understanding compliance is just the beginning. To make the compliance framework effective, the board must cultivate a company-wide culture of ethics and accountability.
This starts with two-way communication. The board should clearly communicate ethical expectations through regular training and updates on evolving standards. Just as important, employees must feel safe and supported in reporting concerns or misconduct. A culture that encourages speaking up strengthens compliance and builds trust across the organization.
Board Management Made Easy With OnBoard
Financial compliance demands the board’s time, focus, and effort because it’s essential to achieving the organization’s goals. To meet compliance requirements and reduce risk, the board must educate itself and agree on the right measures, processes, and tools. To stay focused on this priority, the board should delegate or deprioritize less critical tasks.
An effective, modern board creates a first-mover advantage by investing in new software solutions purpose-built to revolutionize the boardroom. OnBoard AI integrates strategically into select capabilities to maximize the impact of today’s board leadership.
- Minutes AI: Uses speech recognition and natural language processing to automatically create transcribed meeting minutes in real-time.
- Assist AI: Provides instant insights to enhance decision-making and streamline board governance.
Ready to see how OnBoard can help your organization meet financial compliance? Request a free trial of OnBoard today.
Enhance strategic meetings with OnBoard's intuitive board management tools.
Ready to upgrade your board’s effectiveness with OnBoard the board intelligence platform? Schedule a demo or request a free trial.
About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
Latest entries
CompanyOctober 21, 2025Boards Are Using AI. The Risk Is How. OnBoard Launches AI Suite for Responsible Governance- Board Management SoftwareOctober 21, 2025Coming Soon: Faster Prep, Cleaner Records, Better Decisions with OnBoard AI Suite
Board Management SoftwareOctober 20, 2025How to Write a Committee Report (+ Free Template)
Board Management SoftwareOctober 7, 2025AI Meeting Summaries: Benefits, Tools, and Quick Start Guide
