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What is regulatory compliance?

A guide to its meaning, importance, what to know, and what to look for.


Have questions about regulatory compliance? Find the answers here.

Read time: 8 minutes

Companies of all sizes across all industries must meet local, federal, and international governmental regulations in how they work and conduct their business.

These regulations aim to protect people’s health, safety, the environment, data and much more.

In this article, we look at the topic of regulatory compliance including what it is, why it’s important, and best practices to protect your business.

What is regulatory compliance?

Regulatory compliance is when an organization adheres to laws and mandates created by governments or regulatory bodies relevant to the industry in which it operates.

Compliance requirements can vary from state to state and country to country depending upon the type of industry and the locations where the organization conducts business. 

Often, compliance can be a moving target, with constantly changing standards and behaviors to reflect evolving conditions, like environmental awareness, technology advancements, and scientific progress.

Why is regulatory compliance so important?

Being compliant means your company is actively striving to meet all regulations, reflecting an effort to ensure the best outcomes for its customers and employees. It also minimizes exposure to lawsuits and financial liabilities.

The consequences of non-compliance

Regulations exist for a reason and failing to meet requirements comes with consequences.

Monetary fines

Governing authorities may levy fines and settlements against a business that violates regulations including leaking customer data, engaging in discriminatory hiring practices, and more. Failure to pay the fines can result in penalties like a suspension of operations and more fines.

Operational restrictions

Repeated violations could see the organization prohibited from serving customers, barred from operating in certain industries or selling goods in specific markets, or being disqualified from bidding on future government contracts. All of this results in loss of business.

Business disruption

Forced work stoppages can have implications up and down the supply chain, affecting everything from raw material delivery and manufacturing to distribution and sales. Other distractions like lawsuits and legal actions take focus and resources away from daily operations, and security breaches can grind operations to a halt until the cause is found and fixed.

Increased scrutiny

Going forward, a business with a history of non-compliance may be subject to more intense scrutiny from governing bodies. This can slow operations, increase costs through mandatory adoption of compliance technologies or the forced hiring of a compliance officer, and the company may find itself facing stricter regulations or more frequent compliance audits.

Reputational damage

Media coverage of data breaches or companies found guilty of unethical business practices generally do not contribute to a positive image. Partners and customers affected by a data breach or other violation may be reluctant to continue to do business with the firm for lack of trust, erasing years of relationship building.

Additional costs to consider

These fines and penalties for non-compliance are all in addition to the costs of the actual cause of the violation. For instance, paying the money demanded by hackers in a ransomware attack (not recommended), incurring the time and expense of restoring infected databases and equipment to pre-breach status, or the costs of a product recall.

The benefits of ensuring compliance

The benefits of compliance go beyond minimizing risk of fines and other penalties and maintaining a solid reputation. Advantages of consistently meeting regulatory compliance policies include:

Avoidance of legal issues

Maintaining compliance protects the business from legal liabilities and potential lawsuits. If customer/patient data is properly stored, or workplace safety procedures and fail-safes are in place, for example, the business may not be liable in the event of a violation.

Increased customer retention

Client and business partner relationships benefit from trust. Proper handling of personal or business data and information encourages trust and may help customers feel better about continuing the business relationship.

Increased profitability

Streamlined workflows, more efficient employees, and reduced exposure to fines and legal issues all have a positive impact on the bottom line. Staying in compliance is a lot less expensive than falling out and paying the price to regain compliant status.

Competitive differentiator

Businesses can promote their commitment to compliance policies in marketing and public relations efforts to attract customers seeking to partner with businesses that value their privacy.

For more information about how these certifications can support your business goals or how we can help your business achieve regulatory compliance in your industry, contact us.

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