All companies, regardless of industry or size, must follow certain laws and regulations as part of their operations. For example, regulatory compliance would require a company to adhere to the Equal Employment Opportunity Commission’s requirements to ensure nondiscriminatory employment practices.
What Do You Mean by Regulatory Compliance?
Regulatory compliance refers to a company’s adherence to applicable state, federal, and global regulatory frameworks. Based on the industry and nature of the business, particular needs may differ. Regulatory compliance is distinct from other types of corporate compliance.
Why Should Business Owners Familiarize Themselves With Regulations?
The amounts of laws, regulations, and guidelines have expanded substantially during the last century. If your company does not abide by these rules, you risk facing legal action and penalties.
In various enterprises, regulatory compliance management is more significant, leading to new positions like corporate and regulatory compliance officers, as well as compliance managers. Their key responsibility is to ensure that the firm complies with strict, complicated legal regulations.
Some regulations are designed to safeguard data security. Customer retention can be impacted by data breaching protocols, which can negatively influence a company’s goodwill. As the number of data breaches per year arise, consumers are placing more trust in organizations that adhere to regulatory compliance.
What Happens if You Are Not Compliant With Your Industry’s Regulations?
Companies that fail to follow mandated regulatory compliance policies need to engage in remediation programs, including on-site compliance audits and inspections by the authorized state body.
Here are a couple of consequences of non-compliance:
The most evident consequences are the penalties imposed by the government for non-compliance. Fines for minor infractions, such as missing the date for completing your private company’s yearly corporation report, could be a few hundred dollars. However, breaking the Securities and Exchange Commission’s (SEC) or other financial standards can mean millions of dollars in fines.
Controversies and Reputational Damage
A higher cost to a firm’s reputation is incurred when an organization is accused of violating laws or rules significantly. For years afterward, the harm to one’s reputation might have an impact on sales and earnings.
What Are the Areas of Focus Where Regulations Should Be Ensured?
There are a few areas that need more regulation than others. A couple of examples are:
The United States’ data protection is a combination of federal and state rules and regulations. Due to the lack of a comprehensive federal law governing the acquisition or use of personal data, federal data protection rules focus on individual industries and sectors, such as healthcare and financial services. Recently, California, New York, and Washington have adopted privacy legislation.
Approximately 180 worker protection regulations are enforced by the US Department of Labor. These laws are supervised by authorities such as the Equal Employment Opportunity Commission. The Fair Labor Standards Act set a federal minimum wage of $7.25 per hour. Moreover, The Occupational Safety and Health Administration is responsible for enforcing workplace safety legislation.
To conclude, owners must recognize the importance of regulatory compliance and the systems required to control and decrease compliance risk.