Regardless of company size and industry, every business needs to adhere to specific rules and regulations in their operations. Regulatory compliance essentially refers to the guidelines imposed by the law, which organizations need to follow. For example, it may involve observing specific rules to ensure a safer working environment for all employees. Or it might mean taking measures to ensure the data privacy of a company.
Some are industry-specific, such as outlined standards for the food and beverage sector for ensuring the safety of the products or the requirements on how to handle cybersecurity and sensitive data for financial services providers effectively. This piece will cover regulatory compliance and why it’s essential in business.
What is regulatory compliance?
In a nutshell, the term regulatory compliance can be defined as the adherence of a business to international, federal, and state laws that are relevant to the company’s operations. While there are general requirements, the rules can also vary depending on the type of industry of the organisation. It typically involves legal mandates that are set forth by the government.
Why is it important?
In the last century or so, there’s been an increase in the volume of guidelines, standards, and laws across all sectors. In other words, it touches all industries and is, therefore, a vital facet of all operations. In addition, compliance targets are always moving with the constantly evolving regulatory environment. As a result, it isn’t uncommon for business leaders to find that something suddenly shifts as soon as they’ve reached complete adherence, and they need to tweak their approach to remain compliant.
- Failure to stay compliant. When organizations fail to adhere to rules and regulations, they risk opening themselves up to financial liabilities and potential lawsuits. Studies have shown cases involving cyber breaches, and the losses associated with them are sharply rising. Through compliance, you’ll be able to protect the reputation and resources of your business. This is especially important when you consider the fact that it takes a considerable amount of time and money to create trust with vendors, prospects, and customers, and a significant portion of that centres around the ethical behaviour of the organization. Compliance is the foundation which a company’s reputation is built upon. And a single misstep in this area can potentially ruin the image that took years to build.
- Protects the company. Regulations exist to protect all parties involved, from the brand and its employees to the consumers. Non-compliance can result in more than just mere fines. For example, the existence of security regulations is there to ensure protection against potential data breaches. Financial rules exist to keep safe against fraud, and as their name suggests, safety laws are designed with the purpose of ensuring the safety of everyone.
- It creates a good impression for the company. The more compliant a company is, the better public perception of the brand will be. When you get right down to it, they’ll avoid the harmful exposure that non-compliance may potentially bring. Your organization will create a good impression on its existing and potential customers if it complies with all industry and legal rules, standards, and regulations. This will allow you to encourage more sales out of your customers, draw in more prospects, and help your company grow more than it would have.
The implementation of a robust plan for regulatory compliance is essential for any business to succeed and grow. After all, any non-compliance concerns can have a considerable impact on a company. So be sure that you make compliance audits, training, and maintenance of procedures and policies a part of your business operations.