Regulatory compliance refers to adhering to the laws and standards set forth by government and regulatory entities in a particular state, nation or sector. It is a central component of doing business in most parts of the world, as failing to comply with these regulations can potentially lead to legal repercussions and financial fines. Businesses must understand the regulations that govern their particular industry and adjust their practices accordingly in order to run their operations smoothly.
When starting a business, the owner will select a business legal entity that defines the different business structures and their tax requirements, depending on whether it is a corporation, limited liability company, partnership or sole proprietorship. Regulatory compliance then must be taken into consideration regarding the organizational structure of the business and its obligations and duties to the government and its customers.
What is regulatory compliance ?
Regulatory compliance is the adherence to the laws, rules and regulations set out by governing organizations or companies. It involves understanding the regulations and standards that apply to your business, and making sure that you are taking the necessary steps to abide by these laws. Companies can be held liable for non-compliance and may face legal consequences, fines or other penalties if they do not adequately adhere to these standards.
Understanding regulatory bodies and compliance laws
The term “regulatory body” refers to any government agency, authority or organization that sets forth regulations and compliance standards. There are both public and private regulatory bodies; for example, the US Securities and Exchange Commission (SEC) is a public agency that is responsible for regulating and overseeing financial markets, while the Better Business Bureau (BBB) is a private organization that promotes trust and transparency in the marketplace.
Each regulatory body sets forth various compliance regulations that must be adhered to by businesses, depending on the type of industry they work in. Compliance laws can be complex and can fluctuate over time, so it is important for businesses to stay up-to-date with the latest regulations and make sure they are correctly abiding by them.
How regulatory compliance impacts businesses
Adhering to regulatory compliance is a crucial part of doing business in any industry. Companies that don't take compliance seriously might find themselves in hot water with the law. Companies that are regularly inspected or audited by a governing body may face fines or other penalties if they are found to be in non-compliance. Failing to comply with the law may also result in customer lawsuits, or even criminal investigations.
Staying up to date with the newest regulations is a time-consuming and expensive endeavor, requiring businesses to dedicate resources to constantly ensure they comply with applicable laws. Moreover, the fines and penalties incurred due to non-compliance can cause serious financial losses that can adversely affect a business’s bottom line.
The benefits of regulatory compliance
Despite its associated costs, regulatory compliance is actually beneficial for businesses in the long run. Compliance can help businesses build trust and credibility with customers, as well as protecting their reputation in the marketplace. Compliance also helps businesses avoid potential legal repercussions if something goes wrong. And, most importantly, having a strong compliance system in place helps businesses protect their customers’ sensitive data.
Creating a culture of compliance
The best way to ensure ongoing compliance is to create a culture of compliance within the workplace. This means that all employees, from the highest-level executives to the most entry-level workers, are knowledgeable about the company's compliance policies and procedures. It also means that all employees should be expected to adhere to these policies and procedures, as well as acting as enforcers whenever they observe non-compliance behavior.
Improving customer protection
An effective compliance program can also help protect customers and other stakeholders. By adhering to the latest data protection and privacy regulations, businesses can better protect customer data from malicious actors. Moreover, compliance regulations can help ensure fair and ethical practices in the marketplace, protect the integrity of products and services, and prevent fraudulent activities.
How to implement compliance regulations
Implementing a compliance system requires businesses to take a number of steps. Businesses need to be up-to-date on the latest law regulations, develop a clear and written compliance policy, create an internal compliance team, and also monitor changing regulations so that their operations remain compliant.
Identify applicable regulations
The first step in compliance is to identify the applicable regulations that apply to your business. This typically involves understanding the regulatory framework of the industry and location in which your business operates, in order to make sure that your company is in compliance with all applicable laws. It also involves researching any industry-specific regulations, such as requirements for employee safety or consumer protection.
Create a compliance program policy
Once you have identified the applicable regulations, you can then create a compliance program policy that outlines exactly what is required to stay in compliance. This policy should list all applicable laws, provide guidance on how to comply with those laws, and set out any penalties that may be imposed for non-compliance. It should also include a code of conduct for employees, which can help ensure that everyone in the company is on the same page when it comes to compliance regulations.
Create an internal compliance team
Having an internal compliance team is essential for ensuring ongoing compliance with applicable laws. This team should consist of professionals educated in compliance regulations, such as lawyers or certified compliance officers. They should be responsible for monitoring regulatory changes, implementing a compliance program policy throughout the organization and training employees on the applicable laws.
Regularly monitor compliance changes
Finally, businesses must regularly monitor changes to compliance regulations. This includes paying attention to new emerging laws, industry trends and changes to the organization’s own regulations. This can help ensure that the company is able to effectively and quickly respond to any changes in the regulatory landscape and ensure ongoing compliance.
Adhering to regulatory compliance is an important part of doing business in most industries. It can not only help businesses protect customers and maintain a positive reputation, it can also protect them from potential legal repercussions if something goes wrong. By understanding the different regulations that apply to their business, creating a compliance program policy and taking advantage of the benefits of having an internal compliance team, businesses can ensure they remain in compliance with applicable laws.
