Regulatory and compliance are growing complex business challenges. New laws and regulations are introduced with more challenging requirements. Transparency, objectivity, and professionalism are the core values to consider. With the continuously evolving landscape, Thomson Reuters regulatory intelligence service tracks 200 changing regulatory statements and updates around the world every single day.
The corporate world is changing, growing, and evolving faster than ever, with all these, the adoption of technologies is essential which can help businesses and stakeholders avoid threats.
The ability to stay compliant with regulations across various industries is a big fuss among boards and both regulatory bodies. In the corporate world regulatory compliance solutions help institutions to
- Stay safe from legal issues
- Cut the financial penalties
- Protects the organization from reputational harm
The regulation also helps in
- Providing human safely
- Customer privacy and security
- An effective working environment
The regulations are complex and demanding. This guide will cover Regulatory Compliance Meaning, the complex regulatory system work, advantages, and challenges.
What Is Regulatory Compliance?
In general the term “Compliance” means to adhere to a rule such as a policy or any standard law.
Regulator compliance is the process of using practices and policies by which corporations comply with external mandates, applicable laws, regulations, and governing bodies such as FINRA, SEC, NERC, FDA, and the Financial Conduct Authority (FCA).
Likewise, corporate compliance is the ability of a firm to follow its own rules and regulations to stick to its industry traditions and best practices. Regulatory compliance is crucial to prevent businesses from legal penalties.
Regulatory is multisided and is of different elements for a single business.
| “A Compliance plan shows you have a system of checks in place.” ~Bruce Blehart |
Regulatory compliance helps companies to ensure their legal and ethical practices. It can protect employees and customers by protecting their data and personal information. If the compliance standards are not followed correctly it can result in large penalties and fines.
What are the examples of Regulatory compliance?
Regulatory Compliance examples include
- Payment card industry (PCI)
- Data Security Standard(DSS)
- Health Insurance Portability and Accountability Act (HIPAA)
- California Consumer Privacy Act (CCPA)
- Federal Information Security Management Act(FISMA)
Why Is Regulatory Compliance Important?
Regulatory compliance isn’t for particular sectors but it involves every industry for proper operational functioning. Managing digital assets causes complexity for businesses while providing multiple benefits.
Regulatory Compliance Management helps newly started businesses with high costs by protecting data from cyber-attacks which is very important to protect data.
Many regulations keep the data protected while others help to focus on data consistency and accuracy. This helps businesses to tackle the disaster strikes. Some of the Regulations outline the internal data process of a company by managing and accessing relevant data to keep the business under legitimate practice.
In short, data regulatory compliance standards are important for data security and safety, as well as accuracy and consistency. So, it’s crucial to follow the regulatory standards because not doing so can cause heavy fines and penalties with other critical complexities to businesses.
What Are Regulatory Compliance Requirements?
Regulatory compliance is a continuously evolving process with various obligations, the means of regulatory compliance change with regulations to comply with industry trends by sectors and locations.
Few sectors and cooperate processes and activities are more heavily regulated than others. For example, compliance is more critical for food and health sectors to ensure continuous consistent standards to safeguard healthcare and patients.
Different countries have their regulatory standards that apply to the corporate headquarters of that country while others apply to the firms doing business with them.
Regulatory Compliance in the US
The major and well-known U.S. compliance regulations are about business security. These regulations help your business form Regulatory Compliance risk while securing your data and lawsuit damages. It protects the organization from any damage as well as customers and employees. It can help protect customers from fraudulent activities and employees from working harm.
Regulatory compliance US involves the following regulation acts.
| US Regulatory Acts | Purpose |
Health Insurance Portability and Accountability Act (HIPAA) | The purpose of this act was to secure the patient’s information.A way to transfer patients’ information to health insurance companies and doctors of healthcare systems. |
Sarbanes-Oxley Act (SOX) | This act was made in 2002The purpose of this act was to protect investors’ money from fraudulent groups of publicly traded companies.This established standards for financial institutions not to disclose the financial data of the public if they do so it can result in legal penalties. |
Dodd-Frank Act | This act was made after the financial crisis of the year 2008This act was made for taxpayers, banks, investors, and traders.The main purpose was to ensure transparency and accountability |
Payment Card Industry Data Security Standard (PCI DSS) | This act was set for technical and operational compliance.It provides secure transactions to cardholders.It helps businesses to process card payments and transactions securely. |
California Consumer Privacy Act (CCPA) | This act applies to businesses for customer information that are based in the state of California.It requires $25 million of revenue if the plan is to disclose any customer’s personal information.This act gives the right to the customer say no to their collected data. |
Federal Information Security Management Act (FISMA) | This act came into existence in 2002 and is updated many times such as in 2010 and 2019 for cybersecurity threats.The need for this act was to inform all federal agencies to keep an account of documents and implement the information for security protection and risk assessment.The growing threats of cyberattacks and their monitoring were major concerns in this act. |
Equal Employment Opportunity Commission (EEOC) | This act was made to defend the discrimination among employees and job applicants based on race, color, nationality, gender, disability, genetic information, or any revenge in the working space.This applies to firing, hiring, promotion, harassment, training, wages, and benefits in both public and private sectors. |
U.S. Compliance Regulatory Agencies
Major regulatory compliance agencies in the U.S include
Federal Trade Commission (FTC)
It protects businesses from unfair practices. It helps the customer from deceitful activities and stops the unfair methods to dominate the market.
Occupational Health & Safety Administration (OSHA)
It ensures a safe and healthy work environment. It regulated the working conditions.
Food and Drug Administration (FDA)
It regulates the overseas companies involved in food production, cosmetics, drugs, and medical operations.
National Institute of Standards and Technology (NIST)
It regulates the development of the requirements of regulatory compliance requirements in the IT industry under FISMA.
Payment Card Industry Security Standards Council (PCI SSC)
It develops the security of payment methods across the world.
Suggested Read: What Is Regulatory Reporting? Why Is It Important? A Detailed Guide
Regulatory Compliance Outside The U.S.
Regulatory compliance and regulations vary from country to country. Global Regulatory Compliance has been established outside the U.S. as well.
- European Union is a supernational entity and its regulations apply to all of its member countries. For financial supervision, it has established the European Systemic Risk Board (ESRB) with independent entities like the European Banking Authority (EBA), and for technical process, it has established the European Securities and Markets Authority (ESMA).
- GDPR (General Data Protection Regulations) applies to all European Union citizens regardless of the location of the organization.
- United Kingdom (UK) has its regulatory compliance such as the Financial Conduct Authority (FCA).
What Are The Benefits Of Regulatory Compliance?
The benefits of regulatory compliance are beyond the risk of penalties. Keeping the regulatory requirements can be beneficial in the long term for businesses which includes.
Strong Reputation
Regulatory Compliance systems help businesses and institutions to meet their regulatory laws and thus maintain the strong business reputation that regulatory bodies and customers can trust.
Adhering to regulatory compliance helps in building public relations and enhancing stakeholder confidence. So, it can result in building a reputation and better branding with other organizations.
Reduced Risks And Increased Profitability
Adhering to Financial Regulatory Compliance can reduce the risk of financial disasters and prevent businesses from fraudulent activities. There are chances for businesses to grow with sustained customers.
When the customer data is secure other business partners prefer to work with trustworthy and long-term relationships.
Improved Customer Retention
Regulatory Compliance services help in customer retention. Both clients and businesses maintain relationships based on trust. Handling personal and business data and information gains trust and protects the customer from any harm.
Increased Operational Efficiency
Regulatory compliance helps organizations with proper operational functioning. It helps organizations to perform all operations efficiently and accurately with defined regulations. It improves the operational efficiency with reduced costs.
Reduce Lawsuits
Legal and Regulatory Compliance helps organizations with legal regulations. It ensures the framework for all legal regulators. Firms can avoid legal issues by following the regulations such as GDPR.
This costs less than noncompliance penalties.
The Outcomes Of Non-Compliance
Where there are benefits for businesses being compliant there are consequences and worst outcomes for businesses that are non compliance.
Non-compliance arises when businesses fail to comply with laws and regulations. Regulatory compliance framework is the key requirement for organizations and they prefer to comply to avoid lawsuits and penalties.
The average cost of compliance is around $5.47 million while the cost of non-compliance is $14.82 million.
Failing to meet the compliance regulations can result in the following consequences.
Heavy Fines
Regulatory bodies or governing authorities may leave penalties and heavy fines against the non-compliant businesses which can include
- Disclosure of customer data
- Discriminatory practices in the recruitment process
- Violation of regulations and more.
Reputational Harm
Unethical business practices can lead to a negative image. Customers and partner organizations do not trust companies with bad reputations.
This can lead businesses to
- Lack of trust
- Can affect the customer relationship
- loss of positive business image
Additional Costs
The fines and penalties are additional costs that businesses face in violation of the regulations. After this, it is difficult to restore the amount and resources.
| “If you think Compliance is expensive – Try Non- Compliance” ~former U.S. Deputy Attorney General Paul McNulty |
Business Confusion
Legal actions and lawsuits can cause operational harm. This can cause multiple losses of supply chains and security risks. Compliance penalties can affect business productivity and staff activities.
Industries That Must Adhere To Regulatory Compliance
Every industry needs to stay compliant with regulatory requirements. Different industries must adhere to regulatory compliance.
Healthcare Regulatory Compliance
Healthcare regulatory compliance includes a set of processes for healthcare companies to stick to rules and regulations for the sake of patient’s health.
This may include
- Health Insurance Portability and Accountability Act (HIPAA)
Financial Services Compliance
Financial service compliance includes a set of rules and laws that financial institutions must adhere to to work ethically and lawfully. Financial Regulatory Compliance software helps financial institutions to manage finances in the financial sector. This may include
- Consumers law
- Financial crimes
- Common reporting standards (CRD)
Cybersecurity Regulatory Compliance
It includes the security and protection of IT computer systems. This regulation plays an important role in cybersecurity, data protection, and system protection. The errors in symptoms like worms, bugs, and errors.
This may include
- Health Insurance Portability and Accountability Act (HIPAA)
- Federal Information Security Management Act (FISMA)
Corporate Regulatory Compliance
Corporate compliance involves the following company’s regulations as well as the state and federal laws that apply to their operations. The firms are accountable for environmental, social, and governance conditions.
Also Read:
Steps To Implement Regulatory Compliance
Implementing regulatory compliance requires several steps. Typically it involves 9 steps, explained below.
Appointing A Resource For Compliance
You can appoint one or more external regulatory compliance officers as a resource to take care of compliance needs. A compliance office can act as a spokesperson for the organization when communicating with external organizations for compliance activities.
After the first step identify all the regulations that apply to your business. These regulations can be federal, state, or local authorities or apply only to your business.
Auditing The Needs
After analyzing the need for regulations make an audit report for all the areas where the current regulated report lacks. In this step, you learn the weaknesses of the current measures and know the place for betterment.
Assigning Roles And Responsibilities
How to measure Regulatory Compliance? Who is responsible for the process, in this step you seek answers to these questions by assigning the roles and responsibilities to the relevant and dedicated resources.
Developing Policies
Adjust and coordinate the policies and review them frequently adjust and adapt them with the introduction to new policies. There should always be a box for improvement when it comes to compliance regulations
Testing Process
Test the requirements to see if they are worthy to be continued or changed.
Employees Training
Every employee needs to contribute to regulatory compliance. This is only possible when every employee is assigned their roles after their proper training.
Monitoring Process
When you only focus on compliance completion. This can lead to rush and mistakes and it might end up with an incomplete process. Regulatory Compliance platforms for continuous monitoring processes can be beneficial for ensuring everything is in place.
Measuring The Process
With monitoring measuring step is of great importance, because when you measure the whole process you know if your efforts are getting results.
Reports And Documentations
Collect and centralize all the audit reports in the form of documents. Documenting the procedure can help organizations stay updated on what they have done and what needs to be done in the future. It can help the externals to see the fully documented compliance audit.
Final Thoughts
Regulatory compliance isn’t an option it’s mandatory with the shifting sand of the regulatory landscape. Regulations are rules that every organization should follow. No Non-compliance isn’t a problem but violating them can cause serious issues. Companies must follow the regulatory requirements and automated regulatory compliance can help organizations to ensure their laws and regulations.
FAQs
What Are The Three Types Of Regulatory Compliance?
There are different types of regulatory compliance, three types include financial compliance, legal compliance, and data compliance.
What Is The Regulatory And Compliance Role?
The role of regulations and compliance is to ensure that a company or organization is following the applicable laws and regulations.
What Is An Example Of Regulatory Compliance?
Regulatory Compliance examples include the Payment card industry (PCI), Data Security Standards (DSS), and the Health Insurance Portability and Accountability Act (HIPAA).
What Is The Difference Between Regulatory Compliance And Policy Compliance?
Regulatory compliance involves a set of regulations and laws by government and regulatory bodies while policy compliance is the set of regulations by an organization
What Is A Regulatory Compliance Checklist?
A regulatory compliance checklist is the complete documentation of necessary steps that an organization must take to comply with laws and regulations.
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