Regulatory Compliance: Everything Other Executives Need to Know

What is Regulatory Compliance?

The definition of regulatory compliance is the way organizations make sure they are following any and all applicable laws, rules, or requirements that govern how their business is conducted.

A regulatory requirement is a rule imposed on an industry by a government entity to protect employers, employees, and customers.

Depending on the industry, the oversight of regulatory agencies can apply to almost every organization. There are also certain standards that the federal government holds virtually all companies licensed to operate in the United States accountable for. 

Why Regulatory Compliance Matters

Regulatory compliance is important because of the critical role it plays in protecting a company’s resources, security, and reputation. By being compliant, companies avoid paying costly fees or losing the support of key stakeholders. Regulations further benefit organizations by making them more adept at risk assessment and putting them closer to achieving internal goals.

Compliance issues can be found in almost every aspect of day-to-day business operations, including but not limited to:

• Recruitment, hiring, and onboarding
• Employee privacy (e.g. HIPAA for health information)
• Occupational safety (e.g. OSHA safety standards)
• Insurance/Workers’ compensation
• Discipline and firing

How is Regulatory Compliance Different Across Industry and Countries?

Regulatory compliance is highly specified to not only industries, but countries as well. Certain industries and countries are far more regulated than others. Compliance requirements vary depending on exactly what is being protected as well as how nations choose to serve public interest. 

Compliance risks may range from ethical concerns to access of confidential information or environmental protection. Mandates, laws, and rules are put in place by government agencies in an effort to keep individuals from violating privacy, accessing other people’s information, or committing fraud, because unfortunately these all happen far too often. As a result, regulations in healthcare, information security, and financial services are often far more strict than other industries.

How Do You Achieve Regulatory Compliance?

The best way to achieve regulatory compliance is through careful regulatory compliance management. Prepare a step-by-step plan to follow every relevant government regulation that applies to your business.

Communication is essential at every step along the way to compliance. Customers and employees alike must be notified of any policy changes that will affect their respective roles in the product lifecycle. 

Keeping extensive records is another way to achieve regulatory compliance. Helpful information to keep track of includes changes to company policy, records of business dealings, and records of stock sales/transfers. Coordinate with service providers and supply chain partners to make sure everyone stays on the same page.

Overall, organizational focus should remain on continual improvement through risk management. Remember that your goal is not just to be compliant today, but to be prepared for change so you can be compliant in the future as well.

5 Steps for Implementing a Regulatory Compliance Plan

1. Determine your goals - What do you want to achieve with your compliance strategy? This question should be answered by corporate governance, as the exact focus here depends on the context of your business plan. This could mean increasing employee awareness of regulations, reducing noncompliance fines, or implementing new protocols for problematic processes.
   
   
2. Identify any regulations that apply to your business - This may sound simple, but can be far more complicated in practice. Understanding precisely how changes will apply to the business can be a significant challenge to even the most prepared teams. Assign a legal professional the ongoing task of monitoring changes in regulation to stay organized.
   
   
3. Draft clear policies and procedures - Write out specific rules that someone at any level of the company could easily understand. Collaborate with every department to get insight on the effects of new policies and take their feedback into consideration as policies continue to be revised.
   
   
4. Train employees - Build a comprehensive program that is capable of providing certifications to employees and onboarding new hires. A best practice is to schedule a series of incremental training sessions. To improve retention, include plenty of hands-on activities and hypothetical applications of regulations.
   
   
5. Plan for internal audits and track violations - Information can help managers identify recurring compliance violations. Efficient record-keeping will Keep all important documents and personal data secure and well organized to strengthen mitigation strategies. 

3 Ways to Help Ensure Regulatory Compliance 

1. Research the market - Stay ahead of changes in the regulation of your industry by reading trade publications, evaluating emerging trends, and consulting with internal teams, especially the legal department.
   
   
2. Establish compliance training - Understanding how policy changes will affect employees’ day-to-day work routines allows you to set expectations accordingly. Prepare scenarios to provide specific examples of regulatory compliance in applicable situations employees might encounter on the job.
   
   
3. Conduct compliance audits - On a regular basis, evaluate compliance programs’ performance across all levels of your organization. These will act as practice for externally conducted compliance audits, which are required to be carried out by independent third parties under the regulations of certain federal agencies.

By managing compliance properly, businesses can stay ahead of issues long before they become problems, enabling profitability while reducing downtime. 

Regulatory Compliance Challenges 

A regulatory compliance strategy ends up being only one part of a company’s overall compliance structure that also includes broader corporate measures to meet regulatory standards. Regulation compliance management should be directed by a certified compliance officer, who is the executive in charge of regulatory requirements. 

Despite their shared goal, it can be challenging to keep the different business processes aligned, as they may fall under several different jurisdictions. Rules, guidelines, and laws may vary depending on where a business is incorporated and where each branch of operations is located.

Compliance regulations are also constantly being changed, with new requirements being introduced as existing ones are updated. This can lead to significant strains on infrastructure, with both personnel and capital being diverted from normal workflows as they stay up to date. 

If a company violates any regulation, restructuring is often a legal requirement to prevent future penalties. This can be not only time-consuming, but costly, as noncompliance also carries with it enormous fines which can cripple a company financially. Violations can also lead to security breaches, lawsuits, sanctions, and settlements that may damage a firm’s reputation to the point where it is almost impossible to obtain new business. 

Regulatory Compliance in the Digital Age 

With a wide range of cloud software solutions now available, maintaining regulatory compliance is easier than ever. A product lifecycle or quality management system can be a valuable tool for organizations looking to digitize the regulatory compliance process. 

Comprehensive checklists can be edited collaboratively, which ensure that everyone is on the same page to keep operations compliant. This also helps when developing new products or reworking processes, as you already know what pitfalls to look out for.

However, digitization has not come without its own unique set of challenges. Data privacy concerns, for example, have significantly increased as more and more people work remotely from their personal devices. Sweeping regulations such as the European Union’s General Data Protection Regulation (GDPR) hold business to strict requirements, such as making it necessary to inform users of a data breach or any other cybersecurity threat within 72 hours of it happening. 

Automation is another valuable resource when it comes to staying on track with compliance. By setting precise workflows and timely reminders, you can take measurable actions to maintain regulatory compliance.

Learn more about Propel’s regulatory compliance use case here.

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