For most companies, compliance is one of those things that doesn’t arouse interest unless there’s an audit or the fear of a potential lawsuit.
But here’s the truth. Non-compliance can hit your business where it hurts most – your finances, reputation, and operational stability.
From labor regulations to data privacy laws, today’s businesses are trying hard to navigate this complex legal web because even a small oversight can snowball into severe lawsuits and fines.
The strategies listed in this blog will make managing regulatory compliance less overwhelming, ensuring that you are always one step ahead of the rules.
The importance of regulatory compliance
In an environment where there is increasing scrutiny from investors and the public, staying compliant is not a choice, but a must-do.
It signals that your organization operates within the parameters set by governing bodies, ensuring greater transparency and credibility.
On the outside, regulatory compliance might look like ticking a few boxes, but in reality, it’s far more than that. By following certain laws and regulations, you can save yourself from not just costly lawsuits and penalties, but also reputational harm, data breaches, and employee mistrust.
Here’s what regulatory compliance can bring for your business:
Increases stakeholder trustWhether it’s your customers, employees, or investors, staying compliant can help you gain the trust of everyone who matters to your business. With increased confidence in your organization, people would want to work with you and be a part of your growth journey.
For example, if you are HIPAA compliant, people will be confident of your ability to handle sensitive patient data.
Drives operational clarity and efficiency
Various laws and regulations require maintenance of accurate reports of your company’s processes, policies, employee records, finances, and much more. This helps create an effective internal system, reduces inefficiencies, and ensures your teams act with confidence and accountability.
Improves your ability to adapt
Federal and state level laws are constantly changing and improving. As a company that takes compliance seriously, you are likely to keep a constant eye on these changes, adapt swiftly, and operate in a hassle-free way even during regulatory shifts.
Safeguards against legal risks
With regulatory compliance, you can steer clear of hefty fines and legal troubles that are often a consequence of non-adherence. More importantly, it protects you from the lasting damage of negative publicity, ensuring your company stays in a positive light.
The cost of non-compliance
Staying compliant is a costly affair – think of the expenses incurred in continuous record-keeping, tax filings, and audits. If you are concerned about this, then think of the costly repercussions non-compliance can bring – both financially and...
Not adhering to the laws and regulations set by the government exposes your business to severe risks that extend beyond just the monetary losses.
While there are huge penalties and other legal ramifications that are time-consuming and draining, there is also tremendous harm to the reputation.
Besides, operational disruptions due to regulatory investigations and audits can disturb the productivity of employees and impact ongoing projects.
Another important thing to note is that some clients might need proof of compliance before they enter into business with your company. A non-compliant status can blow up your chances of getting investments or closing a big deal, leading to revenue loss. And most importantly, non-compliance can also increase the risk of data breaches, cyber-attacks, and data loss, which can be a huge setback for any company.
Clearly, investing in compliance is a profitable deal that saves you from the costly risks of negligence.
Laws and regulations every business leader should know
There is a dense web of federal, state, and local laws and regulations, adhering to which can save you from legal hassles and bring multiple other benefits.
Listing down some of the important laws and regulations that you keep track of:
Sarbanes-Oxley Act (SOX)Aimed at preventing corporate fraud, the SOX act requires public companies in the U.S. to file regular financial reorts, set internal controls for protecting sensitive data, and ensure annual audit of financial statements and controls.
The act also requires that the accuracy of financial statements be certified by CEOs and CFOs, besides asserting that effective internal controls are in place.
By improving the accuracy and reliability of financial disclosures, the SOX act helps:
Non-compliance can lead to hefty fines and prison sentences. In an instance of a substantial non-compliance, the act can delist companies from stock exchanges. Executives signing misleading statements can also trigger big penalties and even imprisonment.
General Data Protection Regulareportstion (GDPR)
GDPR (EU law but globally impactful) has set stringent rules that require companies to responsibly collect and process the personal data of people residing in the EU.
GDPR requires organizations to:
Fines and penalties are imposed based on the severity of the violation and can vary in individual cases. When things indicate deliberate infringement, penalties can be higher.
Fines of up to €20 million or 4% of global annual turnover (whichever is higher) can be levied for data breaches.
California Consumer Privacy Act (CCPA)
CCPA equips California consumers with more control over their personal data, such as IP addresses, passport numbers, birth dates, email addresses, education data, and much more.
Under this law, Californians have the right to access their personal information, prevent its sale to third parties, and even request organizations to delete the data collected.
For organizations, complying with CCPA means:
Non-compliance with CCPA can lead to fines of up to $2500 for unintentional violations. However, for an intentional breach, it can go as high as $7500. Moreover, consumers can initiate lawsuits and demand statutory damages from companies.
Health Insurance Portability and Accountability Act (HIPAA)
HIPAA focuses on protecting the privacy and security of the health information of patients, such as their past and present medical conditions, their names, addresses, and other personal data, care provided to them, etc.
Since this law deals with medical data and records, it’s applicable primarily to healthcare providers, insurers, and other business associates.
As a law specific to healthcare data, HIPAA mandates:
HIPAA violations can lead to civil and criminal penalties. For example, for unknowingly violating the law, there can be fines ranging from $100 to $50,000. For willful neglect that’s corrected within the given time frame, fines can range from $10,000 to $50,000.
Fair Labor Standards Act (FLSA)
FLSA is one of the most significant labor laws in the U.S. that ensures that employees in both full-time and part-time roles in the private as well as public sector are compensated fairly for their work.
By laying down fundamental standards for minimum wage, overtime pay, child labor, and record-keeping, FLSA safeguards employees from unfair or biased practices at work.
FLSA requires companies to:
Non-compliance with FLSA can lead to civil money penalties as well as criminal penalties that include imprisonment and fines.
Americans with Disabilities Act (ADA)
The ADA was established to ensure people with disabilities don’t have to face discrimination in areas like employment, transportation, access to public spaces, etc.
The law applies to both private and public businesses and mandates:
Non-compliance with ADA can result in costly lawsuits and civil penalties. Besides, not adhering to ADA might paint a weak picture of your organization, declining employees’ trust in your culture.
Practical strategies for managing regulatory compliance
At Hobasa, we believe that managing regulatory compliance is not a one-off activity. It’s an ongoing process that needs to be prioritized and evolved with the changing laws and regulations.
Sharing below some powerful and practical strategies to help you stay compliant.
Conduct regular compliance audits
With regular compliance audits, you can keep a close eye on your company’s adherence to internal policies as well as external laws. Such audits often help unearth gaps or any risk areas that might get swept under the rug, inadvertently, though.
With well-structured and streamlined audits, you can:
These findings can reveal the hidden and the not-so-hidden vulnerabilities (before regulators do), empowering you to develop action plans, form strategies, and strengthen internal controls.
Another benefit of regulatory compliance is that it gives a positive image about your company, as an entity that takes compliance seriously and works proactively for continuous improvement.
Maintain proper records and documentation
Most of the laws require you to keep accurate documentation of your compliance processes, changes, roles and responsibilities. Besides you also need to keep comprehensive employee records, financial disclosures or customer data consents.
With meticulous records, you will have evidence ready during audits proving that your organization is compliant with the necessary laws. Second, such records can also act as useful assets for internal reviews.
Records are especially important at the time of an audit, investigation, or lawsuit, serving as your strong line of defense. On the contrary, ineffective or inaccurate documentation can exacerbate a situation, leading to legal actions, penalties, and by that extension reputational harm.
As a best practice, when maintaining documents, ensure that you use cloud-based platform with audit trails and encryption for easy accessibility and traceability. They should be crystal-clear and centrally accessible to avoid hassles and the unnecessary to and fro, when you need information.
Establish clear policies and procedures
At Hobasa, we believe that having well-defined policies and procedures in place can help you navigate the complexities of compliance confidently.
With these policies, your employees will have a structured path to follow, ensuring everyone from the C-suite to those working at the ground level have an understanding of what’s expected of them.
These policies should translate complex regulations into actionable internal protocols and be well-tailored to fit your specific business model, industry, and risk profile. Regularly reviewing these policies is also important to ensure that they are in alignment with the changing laws as well as your internal working systems.
When forming policies, clearly mention the response procedures for violations i.e. how your business will respond in instances of non-compliance. This includes any corrective actions or investigative steps that would be taken.
Keep track of the evolving legal landscape
The legal landscape is constantly changing. This means your policies and procedures can get outdated if they don’t evolve at the same pace.
That’s precisely why it’s essential to have a full-fledged internal system where a designated person tracks these changes regularly. Or you can also subscribe to government agencies like EEOC and the DOL and get regular updates on the ongoing developments.
Your compliance teams can run a periodic review of t, these changes to interpret how new rules might affect your specific operations, and what exact changes you need to implement to ensure compliance.
Leverage technology to streamline compliance management
For managing regulatory compliance, the support of the right tools is indispensable.
At a time when everything is digitized, you can’t solely rely on manual processes to manage compliance, as it would not be just inefficient, but extremely risky. As the regulatory complexities increase and laws continue to evolve, you need to have the right tools that can:
Investing in such tools will allow your teams to act proactively and carry out processes with minimal errors, and free up their valuable time so that they can focus on other business areas as well.
Make compliance your competitive advantage
How smoothly your business will run depends a lot on how compliant it is with the laws and regulations of your country and state.
With compliance, you get the benefit of a better brand image. But that’s not it. You also save the money that could have been lost in lawsuits and penalties. By understanding key laws like HIPAA and ADA, maintaining proper documentation, and conducting regular audits, you can future-proof your organization and even open doors to new partnerships and enhanced customer relationships.