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Compliance Microlives (CMLs) – Part 2

Compliance Microlives (CMLs) – Part 2

In Part 1 of my article, I proposed that we consider compliance risks using the concept of Microlives (the way that we can measure health risks and benefits over a life time). I have put together a lifespan activity calculator based on this concept and here is my case study to demonstrate how to monetize the costs and benefits of compliance:

  • A professional career lasts an average of 40 years, around 2,400 hours a year.
  • This is nearly 100,000 hours in a typical work lifetime.
  • We can then measure each activity as an increase or reduction in a longevity of a business or revenue in 30 minute intervals (‘Compliance Microlives’ or CMLs).
  • Then, let’s estimate an earning of $60,000 per year ($2.4 million over a 40 year period) and turn these CMLs into monetary amounts. A loss or gain of 1 CML.
  • $2.4 million divided by 100,000 hours amounts to $24 per hour. That‘s $12 every CML (or 30 minutes) that we win or lose based on compliance activities.

Below is a snapshot of annual risky activities and mitigators and CMLs. I have allocated CML losses and gains for each activity as well as annual and lifetime losses and gains:

Activity Loss or increase of CML per week or per instance Annual increase or decrease Lifetime increase or decrease
1.     5 minutes of compliance training or engagement or activity once a week. 2 CML per instance $1,248 based on 5 minutes of training per week $49,920   (more than a year’s net income)
2.     Engaging a third party agent without due diligence – 2 CML per week they are engaged – $8,736 per year.

Assuming the average engagement is 3 per year, that’s a loss of – $26,208 per year.

Taking an assumption of 3 engagements per year over a 40 year period, that’s                   -$1,048,230 (nearly half of the average lifetime salary)
3. Reporting incidents 200 CML per instance $2,400 $96,000

Whilst the figures I have produced may not be accurate, the principle is a sound one: money talks. If we can monetize it, we can measure it.

There are 14 activities with CMLs that I have developed. Watch out for the full list in Part 3! Wishing you a profitable compliance lifespan.

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