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Compliance with regulatory requirements doesn't require you to do a lot of work. Regulatory compliance offers many benefits to companies by making it easy for them to adhere to the correct laws, regulations and industry standards. The specific compliance requirements differ by industry and nation. In countries with robust business operations and economic climate, regulatory compliance is mandatory for all sectors and companies.
Compliance with regulatory requirements is crucial for industries with strong compliance oversight, such as the financial services industry and the healthcare sector, and in sectors where data protection, cyber security, and consumer privacy issues are crucial to ensuring business continuity and legal compliance.
Noncompliance has recently had consequences for various companies, including oil and gas companies like BP and manufacturing plants like Republic Steel. Other companies affected include telecommunications firms.
A company that has achieved regulatory compliance can confidently tell its stakeholders that they have met specific standards and are certified by a regulatory body widely accepted in the industry. It can demonstrate its reliability and ethics by following laws and regulations relevant to the business objectives in which it operates. This can increase stakeholder confidence and improve its competitiveness.
What is Regulatory Compliance?
Compliance with regulatory requirements means that an organization thoroughly understands all laws and regulations applicable to its industry and business. These regulations can be set on a local, state or federal level, as well as an international one.
Corporate compliance is different from regulatory compliance. It involves following internal rules and policies to achieve self-determined goals and objectives. Both types of compliance, however, are essential because they can determine the strategic direction of an organization and its ethical framework and ensure accountability.
What is Regulation?
A regulation is a law passed by a government body that grants enforcement authority to a regulatory agency. The Sarbanes-Oxley Act of 2002 is one of the best-known regulations in the United States. SOX set up strict rules for U.S. companies that are publicly traded to ensure financial compliance and corporate transparency. It aims to protect the public and investors from financial fraud.
SOX also gave the Securities and Exchange Commission enforcement authority and created the Public Company Accounting Oversight Board to oversee audit regulations. A second regulation, the Health Insurance Portability and Accountability Act of 1997 (HIPAA), regulates the protection of patient data, specifically electronic protected medical information (ePHI), and grants the U.S. Department of Health and Human Services the authority to enforce compliance.
Other examples of compliance regulations that are relevant to the U.S. Business landscape include:
- Health Information Technology for Economic and Clinical Health Act
- Payment Card Industry Data Security Standard
- California Consumer Privacy Act (CCPA)
- General Data Protection Regulation of 2016 of the European Union (GDPR).
What does Regulate mean?
While "government regulation" refers to law, "regulate" means controlling or overseeing by using rules and regulations. The legislative and executive branches create laws. Government agencies enforce them, track noncompliance, and ensure compliance.
What is a Regulator?
Agencies act as regulators in their respective industries by creating frameworks and guidelines. This helps organizations meet compliance requirements. HHS, for example, offers HIPAA guidelines that outline the rules and suggest safeguards to assist covered entities (e.g. hospitals) in implementing HIPAA.
The SEC also provides links to documents that explain the steps for SOX Section 404 Compliance for Small Businesses. The term "regulator", also known as an external auditor, is used by regulatory agencies to check if a company has met its regulatory obligations.
What Challenges Are Associated With Regulatory Compliance
A company may face several possible consequences if it does not adhere to mandatory regulatory compliance. For example, they could be forced to participate in remediation programmes that include compliance audits on-site and inspections from the regulatory agency. Organizations that are not compliant usually face fines and penalties. Companies that commit repeated or glaring compliance violations can damage their brand reputation.
Infrastructure and personnel costs can make it costly to follow compliance rules. Companies must invest capital to comply with compliance laws and regulations and maintain business processes. Financial challenges are especially acute in highly regulated industries like finance and healthcare. The following are other business strategy challenges associated with regulatory compliance:
- How emerging regulations may influence existing business models and business directions;
- Incorporating and developing a culture of compliance and promoting it throughout the organization is critical.
- Hiring compliance officers and their responsibilities, and the compliance functions required by departments such as legal, compliance audit, and business, is a crucial decision.
- Anticipating compliance trends and integrating regulatory process that increases efficiency.
Consumer technologies that are constantly evolving also create compliance issues for businesses. Employees using their mobile devices in the office can cause compliance issues because they store sensitive data relevant to compliance. Lack of security on mobile and IoT devices can create compliance vulnerabilities for organizations.
The Internet of Things proliferation has resulted in a massive increase in endpoints and connected devices. To remain compliant with regulations, digitized businesses must keep updated on required updates and patch existing software solution as soon as vulnerabilities are discovered.
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What Is The Difference In Compliance Across Industries And Countries?
Some industries are heavily regulated. Financial services, for example, are subject to compliance regulations designed to protect investors and the public from unethical business practices. Laws are in place for energy suppliers to protect the environment and ensure safety. Government agencies must adhere to compliance regulations which mandate equal treatment and ethical behavior.
Because they store sensitive patient data, healthcare companies are also subjected to strict compliance laws. Hospitals and healthcare providers must demonstrate that they have taken the necessary steps to ensure patient privacy, including encryption and server security. HIPAA mandates data privacy and security to protect patients' medical records. For instance, HIPAA's Breach Notification rule requires that compliant organizations and their business partners notify patients after a data breach. Cloud service providers (CSPs) and other business partners of healthcare organizations must comply with HIPAA privacy and security rules.
The requirements for regulatory compliance vary from country to country. SOX is U.S. law, but other countries have similar legislation, such as Germany's Deutscher Corporate Governance Kodex and Australia's Corporate Law Economic Reform Program Act 2004 (CLERP 9).
Multinational companies must be aware of the compliance regulations of every country they operate in. The GDPR, for example, went into effect in 2018. It applies to all data EU citizens collect regardless of whether the software development company is located within or outside the EU. GDPR applies to everyone whose data is situated in the EU. This includes EU citizens.
GDPR has expanded consumer privacy rights by requiring businesses to tell customers how their data is being used. Companies operating under GDPR rules, for example, must inform all parties affected and the supervising authority of a data leak within 72 hours.
California residents have the right, under the CCPA, to know the data collected about them and whether it is sold and the option to refuse the sale of that data. The Act mandates that consumers have access to all personal information collected by CCPA-compliant companies.
Vermont's 2018 law requires that data brokers disclose precisely what data they are collecting and allow individuals to opt out of the data collection. Other states in the U.S. have considered their own data regulations but to varying degrees. However, countries such as Australia, Argentina, and Canada have comprehensive federal data privacy laws.
How Can Companies Ensure Compliance With Regulatory Requirements?
Companies must first analyze their requirements and mandates specific to their industry to achieve regulatory compliance. Then, they need to develop processes to meet those requirements. The following are typical steps for achieving regulatory compliance:
- Identify the applicable regulations. Determine what laws and compliance regulations apply to your company's operations and industry. This includes federal, state, and municipal regulations.
- Determine the requirements. Identify which regulations apply to your organization and plan how to implement them.
- Documentation of compliance processes. Documentation of compliance processes with instructions specific to each role in maintaining compliance. These details will be helpful in regulatory audits.
- Compliance standards are constantly updated. The company must monitor changes to determine whether they are relevant. Then, edit the procedures and train your staff.
Benefits of Compliance with Regulatory Standards
Compliance helps you avoid penalties, such as license revocations and financial losses. It also reduces risks like data breaches and security breaches.
Some of the benefits are:
- Staying up to date with the ever-changing regulatory environment For companies that are constantly adapting and updating their regulations to meet federal, industry, and state standards, perfect compliance may seem like an impossible dream. A GRC platform with compliance programs will help you anticipate these unexpected curves.
- Protecting the resources of your business and its reputation: Failure to comply can lead to massive reputational loss and a broken trust among your customers. You can lose your license, impacting your ability to achieve your business goals and objectives. Maintaining regulatory compliance helps to mitigate risks and keep operations running smoothly.
- Protecting your business from cyber threats: Cybersecurity Compliance helps reduce the risk of malware attacks and data breaches internally and externally. This type of compliance protects the data privacy of your company, employees and customers. Suppose you want to improve your cybersecurity compliance. In that case, the National Institute of Standards and Technology is a great place to begin.
- Improving Efficiency: Many regulatory protocols require structured data, streamlined processes and regular reports about business functions. These all work together to increase your company's productivity over time and reduce costs.
Why Regulatory Compliance Is Essential For Business
Financial Health
Compliance officers will tell you that financial security is the primary benefit of regulatory compliance. The penalties that can be imposed for regulatory noncompliance are severe. Goldman Sachs and Wells Fargo paid $7.50 billion in fines out of the total $11.39 billion set by all U.S. Banks during 2020.
Protect Yourself From Lawsuits
Compliance with laws and regulations protects an organization from financial penalties but also against lawsuits, whether brought by an agency or another party (e.g. the public). 2019, for example, between 2011 and 2019, 142 local governments filed lawsuits against companies for noncompliance with the Americans with Disabilities Act.
Business Continuity & Competitiveness
Compliance with regulatory requirements is a guideline that shows businesses how to be successful in their respective industries. The compliance laws were also developed to create uniformity and allow companies to compete on an equal basis, with ethics and fairness. Companies that comply with regulatory requirements may be able to achieve a high position within their industry.
Keep A Solid Reputation
Consumers feel safer when companies follow regulations and laws. They trust these companies with their money, data, and loyalty.
Cybercrime Protection
The higher-risk industries, such as healthcare and financial institutions, recognize the value of the information they collect and know that they can be attractive targets for malicious actors. Other industries may feel they are less likely to be targeted. This incorrect assumption can lead to a lack of focus on regulatory compliance and security controls, which increases the potential risk of cyberattacks.
Data breaches can lead to a decrease in customer retention. This can have a devastating financial impact on a company and may even result in bankruptcy or closure. Information security programs is enhanced by regulatory compliance, which requires organizations to follow rules to protect assets from threats and act as one of the many safeguards for data protection.
Increase Profitability
Companies can market themselves more effectively by demonstrating compliance with regulatory requirements and audit reports. SOC 1, SOC 2 and SOC 3 information help clients trust their vendors and demonstrate SOX compliance. These reports are essential to the business's success. Without them, it may lose customers.
Read More: What Should You Know About Custom Software Development?
How To Use Risk Management As Part Of Regulatory Compliance Management
To create a robust corporate senior management system for compliance, it is necessary to conduct a risk assessment. This will allow you to determine the level of tolerance that each risk deserves. Accepting a risk may be part of managing compliance risks if a potential threat will not significantly impact the organization and if the cost to mitigate it is prohibitive.
A sole proprietor handling low volumes of customer data may decide not to use end-to-end encryption. It may be logical to make this decision if data is not likely to cause any harm and there are no data transfers between computers. They may purchase firewall protection for their computer to protect it from threats.
If the business owner hires a new employee with access to the data, the risk of accidental or malicious data loss increases. Now, they must reassess their potential damage to customer data and decide whether they want to invest in end-to-end data encryption. It is more difficult for larger organizations to navigate compliance regulations. They often hire a software developer consultant to help determine the right risk profile to achieve and maintain regulatory conformity.
How to Leverage Compliance Management for Profitability
Regulations can be a drag on profitability despite their many benefits. It costs money to collect compliance documentation and aggregate the required information. Communication across departments is also required, as well as ensuring consistency between departments.
The most significant cost of the audit is resource time. In a report published in November 2017, the Chartered Institute of Internal Auditors stated that it is challenging to gather audit evidence, which leads to extra time being spent on audits. Disproportionate internal controls, complex spreadsheets and disproportionate controls also slow the audit process.
Compliance management software is a powerful tool that can help reduce compliance burdens and maximize the benefits of regulatory compliance. ZenComply provides a comprehensive platform to help organizations meet compliance obligations and easily manage risks.
What Are The Seven Elements Of A Program To Ensure Compliance?
Seven different elements are needed to create an effective compliance program. Each of these elements is important, and they all work together. This is the only sure way to ensure compliance with regulatory requirements.
Begin at the beginning with a compliance audit
When assessing compliance, an audit is always the first step. You can identify compliance problems with a thorough audit. You should check all aspects of your business, from risk management internal policies to security policies.
Tracking Compliance Violations
Begin by reviewing and tracking all compliance violations. You can use this information to determine the annual cost of compliance violations. This figure can be used to justify a budget for compliance.
Install a Compliance Officer
Management of regulatory compliance will help you ensure compliance with regulations. Nominate a compliance officer and a compliance team. These people can track the changes in regulatory environments.
Create Policies and Procedures
Your compliance team may create company policies and procedures. Your compliance audit must be reflected in the policies and procedures. You will not comply with regulatory requirements if you do not.
Set Up An Efficient Policy Management System
The Compliance team must review all policies and procedures. Also, keeping track of when employees read and signed the policies is essential. This will prove that employees are familiar with the policy and reduce their liability if they violate it.
Employee Training for Regulatory Compliance
Your compliance officer is responsible for managing regulatory compliance. Their job is to ensure that regulatory compliance occurs throughout the entire organization. Regular training is also needed to reinforce the compliance behaviour of employees.
Continual Improvement of Regulatory Compliance
You must continue to maintain your compliance training program after you have created it. Regular audits and reviews should be conducted at regular intervals. Then, you can track your compliance and ensure you meet regulatory changes.
Five Steps to Compliance
We all have examples of companies that have strayed from compliance boundaries and found loopholes to play by the rules. What is the result? The result?
Even if you ignore the worst-case scenarios, it's not fun to be non-compliant. Ensuring that your organization's operations comply with the law can be difficult and time-consuming. With our partners over the past 14 years, Be Informed has built numerous compliance solutions. There are five steps that every organization must take into account to ensure compliance.
Keep Up With The Latest Laws And Regulations
Your organization is not compliant by default. It is a process that involves scanning for new laws and regulations, identifying areas where they impact your organization, changing policies and implementing them, and then monitoring. Be sure to stay up-to-date on changes and identify the laws and regulations that apply to your company. You can avoid being overwhelmed by new rules if you are prepared.
Specialists Can Be Involved
Small and growing businesses are more likely to violate laws unintentionally. Transparency in the organization's operations is an excellent way to prevent this. Engaging consultants or hiring specialists is also advisable to ensure everything runs smoothly. Owners and employees can then ask for help, ensuring that actions and procedures comply.
Make Sure Employees Adhere To Procedures
Employees must follow company policy. Otherwise, it's not worth much. Employees may resist changes to their daily workflows, especially regarding policy changes. Involving HR is crucial in this process.
It is essential to communicate the company's policies and procedures. This includes making sure they are documented well and quickly accessible, both electronically and physically. Ensure that your employees know why policies and procedures have been changed or are in place as they are. You may need to train employees on how to adapt recipes. You may also want to consider implementing a rewards system for employees who comply with procedures and developing sanctions in the case of violations.
Regularly Conduct Internal Audits
Internal audits can be a powerful tool for identifying ineffective and inadequate procedures that may lead to noncompliance. Internal audits can focus on an organisation's financial, operational or technological aspects. When reviewing compliance, it is essential that an internal audit is independent and implements generally recognized auditing standards (GAAS).
Choose The Right Software
Managing compliance without the proper tools is a complex task. The right compliance software will help organizations to comply with the law and to reduce the risk of human error. In addition, custom compliance software development is often equipped with tools to organize documents and generate audit trails automatically. This makes it easy to prove compliance.
Be Informed, a platform for low-code development, helps organizations create solutions that ensure compliance. Witteveen+Bos, a consultancy and engineering company, created the +Compliance Solution. This solution allows clients to regain control over their business processes or maintain them and ensures they comply with all environmental laws.
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Conclusion
This article discusses regulatory compliance, both in the public and private sectors. The regulatory rulebook continues to grow despite recent attempts at deregulation. Regulatory risks have increased dramatically in some key industries, like healthcare, financial services and automotive. Managers must understand the importance and processes needed to control and reduce compliance risk.
