What is a Compliance Framework?

Regulatory compliance is a substantial challenge for many organizations— but that doesn’t mean you can give compliance short shrift. On the contrary, mastering compliance is critical for sustainable growth, protection against data breaches (and ensuing monetary penalties from regulators), and maintaining a competitive advantage over rivals. 

One crucial tool to develop your compliance program is a compliance framework: a guide that can help your organization meet its regulatory obligations, reduce compliance risk, and achieve strategic objectives. 

In this article we will explore how to use compliance frameworks effectively, so that you can attain and sustain compliance even amid today’s complicated (and sometimes difficult) business landscape.

What Is Compliance?

“Compliance” means adhering to established guidelines, policies, standards, or laws in your industry and organization. For example, if your organization handles customer data as a technology service provider, you are legally obligated to protect that data — typically by complying with standards such as PCI DSS (Payment Card Industry Data Security Standard). Another example: healthcare providers must comply with the Health Insurance Portability and Accountability Act (HIPAA) when handling protected health information (PHI). 

Today compliance extends beyond static standards, encompassing a multitude of regulations and international standards that necessitate constant vigilance and adaptation.

Penalties for Non-Compliance

Failure to meet your regulatory compliance obligations can result in costly monetary penalties or other adverse events, such as loss of operating licenses. Moreover, those penalties come after lengthy investigations, which are another source of potentially painful cost.

Example 1: HIPAA

HIPAA violations almost always result in financial penalties. Civil penalties can be issued by the U.S. Department of Health and Human Services’ Office for Civil Rights (OCR) or by a state attorney general.

The penalty structure is based on numerous factors: the number of people affected, the nature of the data exposed, and whether the company knew it had a violation. HIPAA violations may also result in criminal penalties, prosecuted by the Department of Justice.

Example 2: GDPR

The General Data Protection Regulation (GDPR) applies to companies doing business in the European Union. Fines for GDPR violations can amount to 4 percent of a company’s annual global revenues or 20 million euros ($22.8 million), whichever is larger.

Example 3: PCI DSS

The Payment Card Industry Data Security Standard (PCI DSS) applies to companies that collect, process, transmit, or store customers’ credit card information. Non-compliant organizations may be fined up to $500,000 if they suffer a security breach. Banks or payment processors impose these fines. In extreme cases, a merchant might be banned from processing credit card transactions entirely.

What Are Compliance Controls and Procedures?

Internal control is an activity intended to prevent improper transactions and to assure that everyone in the organization adheres to policies and procedures. For example, a company might require two executives to sign checks above $10,000, or block employees from accessing certain websites from the corporate network. 

Internal controls and procedures are essential to compliance programs. They serve as the foundation for practical compliance management tools. You can reduce compliance risks and maintain ongoing compliance by standardizing, automating, and executing these controls and procedures.

You can implement all manner of internal controls to assure compliance with internal policies or external regulations and reduce organizational risk. These include:

• Documented policies
• Standard operating procedures (SOPs)
• Internal audits
• Due diligence
• Risk assessments
• Segregation of duties
• Approvals, authorizations, and reconciliations
• Employee training

All organizational stakeholders, from the board and the C-suite to managers and employees (as well as vendors and other third parties), should follow compliance policies and execute proper procedures. The company must also dedicate time and resources to compliance communication and training, so that employees know how to follow policy and procedure.

Audits are another essential element of enterprise compliance programs. The chief compliance officer (CCO) or another authorized person should conduct internal audits to compare your current compliance posture with the ideal posture required by regulation; then implement corrective action to close any gaps you find.

What Is a Compliance Framework?

Compliance frameworks exist to streamline the often daunting task of adhering to various regulatory obligations. Frameworks serve several essential purposes in governance and compliance:

1. Roadmaps for compliance. Compliance frameworks provide organizations with clear and structured roadmaps for navigating regulatory obligations. They break down complex requirements into manageable steps, offering a coherent path toward meeting these obligations.
2. Mitigating compliance risks. Compliance frameworks assist organizations to identify and reduce compliance risks. Organizations can address potential issues by following established guidelines, reducing the chance of a non-compliance event. 
3. Efficiency through standardization. Compliance frameworks promote efficiency by providing standardized approaches to compliance management. They help organizations to optimize processes, allocate resources efficiently, and adhere consistently to regulatory requirements across various departments and functions.
4. Adaptation to regulatory change. Regulatory requirements are subject to frequent revisions. Compliance frameworks offer organizations a flexible mechanism to adapt to these changes efficiently. By aligning their compliance programs to a framework, organizations can seamlessly incorporate new regulatory mandates and maintain ongoing compliance.
5. Demonstrating commitment. Following a recognized compliance framework reflects an organization’s commitment to ethical and legal practices. It is tangible evidence to stakeholders that the organization is dedicated to complying with relevant regulations and industry standards.

What Is the Difference Between Compliance Framework and Compliance Strategy?

Two critical concepts often come into play in regulatory compliance: compliance frameworks and compliance strategies. While both aim to assure adherence to laws and regulations, they are very separate concepts.

A compliance framework is a blueprint. It gets up close and personal with regulatory demands, offering practical, step-by-step guidance to meet specific requirements efficiently. Compliance frameworks are the tactical tools used for day-to-day decision-making and activities related to compliance. They are detailed, precise, and serve as the organization’s playbook for adhering to particular regulations or industry standards.

Your compliance strategy takes a broader view, outlining the organization’s long-term compliance vision and goals. These high-level plans provide direction without delving into specific tactics. They assure that an organization’s compliance efforts align with its broader mission and objectives, offering a roadmap for the future.

Together, frameworks and strategy form the cornerstone of a robust compliance program. They combine precision and direction to navigate the complex world of regulatory adherence effectively.

4-Step Process to Implement a Compliance Framework

The first step in implementing a compliance framework is to find the one that applies to your organization. Compliance frameworks are usually tailored to a specific industry and purpose.

Next, compare the framework’s requirements against your controls and procedures. This analysis will reveal the gaps in your compliance program. (Hence this step is known as “performing a gap analysis.”) To identify these gaps quickly, you can use pre-loaded content in a compliance framework content registry.

Third, remediate the discovered gaps by implementing new controls or strengthening existing rules and procedures.

Finally, review your updated compliance program to confirm that you have successfully implemented all the controls required to achieve compliance.

Regular monitoring is also vital to assure that you maintain compliance over time.

5 Common Compliance Frameworks

Five of the most common compliance frameworks are explored below:

Health Insurance Portability and Accountability Act (HIPAA)

The HIPAA framework sets the standards and requirements to protect sensitive health data.

Purpose: Its purpose is to protect sensitive patient health information and to prevent disclosure of that data without the patient’s consent or knowledge.

Applicability: HIPAA applies to any healthcare organization that collects, stores, or processes protected health information (PHI). These “covered entities” include hospitals, medical providers, and insurance companies. Business associates of these covered entities must also comply with HIPAA.

Federal Risk and Authorization Management Program (FedRAMP)

FedRAMP provides standards to help federal agencies evaluate the risks of cloud-based solutions. A cloud service provider should be “FedRAMP-compliant” so that it can be a more attractive vendor to those agencies.

Purpose: FedRAMP’s purpose is to assure that cloud service providers have implemented strong cybersecurity controls to protect government data from data breaches.

Applicability: Cloud providers seeking to sell their products to U.S. government agencies must obtain FedRAMP authorization.

Payment Card Industry Data Security Standard (PCI DSS)

The PCI DSS framework outlines 12 requirements to protect credit card data and cardholders.

Purpose: PCI DSS aims to protect cardholders’ identities by protecting their card data. To this end, it specifies operational and technical controls organizations must implement to achieve compliance.

Applicability: Any business entity that processes, stores, or transmits credit card data must comply with PCI DSS, including merchants (stores and e-commerce), banks, and service providers, regardless of size.

The Sarbanes-Oxley Act (SOX) and COSO

The Sarbanes-Oxley Act requires all publicly traded companies in the United States to maintain effective internal control over financial reporting. The primary framework to achieve compliance with SOX is the COSO internal control framework, adopted by the Committee of Sponsoring Organizations in 1992 and updated in 2013.

Purpose: The main purpose of SOX is to combat corporate fraud by increasing transparency in accounting and reporting processes.

Applicability: SOX applies to all public companies operating in the United States. Companies planning an initial public offering (IPO) must also comply with SOX.

General Data Protection Regulation (GDPR)

The GDPR is an EU-wide regulation to assure data privacy and security for European Union residents.

Purpose: The GDPR aims to protect the personal data of EU residents. It specifies the rules that all companies must follow if they operate in the EU or collect the data of EU citizens.

Applicability: The GDPR applies to any organization that does business in the EU or interacts with EU citizens.

The five frameworks listed above are only a few that exist to help with regulatory compliance. A company might use any number of them (and will likely use multiple frameworks) to achieve full compliance with all its regulatory obligations.

Simplify Your Compliance Program with RiskOptics ZenGRC

Implementing a compliance framework can be quite complex with manual processes and spreadsheets. Simplify the complexity with RiskOptics. This compliance and audit management solution provides a guided, content-rich approach to help you quickly set up and maintain your compliance process.

Schedule a demo to learn how ZenGRC can give you a unified, real-time view of risk and a faster and smarter path to compliance and risk management.