What is Regulatory Compliance?

Regulations have long existed to govern how organizations collect and use information online and what cybersecurity precautions organizations should take while conducting business online. As digital transformation of business processes has accelerated in the last few years, however, that means ever more organizations — large and small — must comply with all those regulations.

Regulatory Compliance: A Definition

Regulatory compliance is an organization’s adherence to the laws, regulations, or guidelines set in place by a governing body that might apply to that organization. Some regulatory compliance obligations pertain only to a few firms in a specific industry or only to large firms but not small ones. Other regulatory compliance obligations apply to much broader groups.

Contrary to popular belief, the consequences of failing to meet your compliance obligations aren’t solely restricted to regulatory fines. Compliance failures can leave a company subject to civil litigation from third parties, bar a company from bidding on lucrative contracts, or ruin the company’s reputation with would-be customers.

Why Is Regulatory Compliance Important?

Technology has transformed the way that companies conduct business. As a result, governments on a global scale are implementing regulations to protect their constituents from harm, especially as data privacy, data protection, and financial fraud become hot topics for the average citizen.

As organizations continue to grow, they must adhere to whatever regulatory compliance directives pertain to their specific industry.

The importance of regulatory compliance largely stems from the understanding that companies need to maintain a minimum standard for the way they conduct their operations, such as how to handle customer and employee data or how to conduct retail transactions.

What Are the Benefits of Ensuring Regulatory Compliance?

Companies that establish comprehensive regulatory compliance management can gain considerable benefits and outcomes in the short and long term, such as:

• Preventing Needless Legal Issues: Frameworks for regulatory compliance ensure all relevant legal requirements are fulfilled.
  For example, industries that must collect and store vast quantities of user data might avoid legal complications by adhering to regulations such as GDPR. As a result, the cost of compliance is substantially lower than the cost of non-compliance.
• Increasing Workplace Efficiency and Safety: Implementing workplace anti-discrimination and harassment policies can help to create a healthy work environment that boosts the organization’s productivity and efficiency.
  Furthermore, implementing safety and security norms might help to prevent mishaps and increase resilience.
• Gaining Stronger Branding: Following regulatory compliance standards can help establish stronger public relations since completing regulatory commitments boosts stakeholder confidence.
  The same approach may be utilized in branding and marketing efforts to communicate the organization’s dedication to compliance processes, ethical rules, and conventions.
• Reducing Risk and Increasing Profitability: Businesses may gain ongoing rewards when customer turnover is healthy. Customer confidence may be maintained by adhering to regulatory compliance rules.
  For example, securing consumer data from breaches or theft might be a competitive differentiation. Furthermore, business partners value collaborating with a trustworthy company, which leads to enhanced synergies and long-term relationships.

What Are the Challenges With Regulatory Compliance?

Adhering to regulations isn’t as simple as one might assume. After all, companies must invest money and resources to implement compliance programs through internal company policies and training programs to ensure that employees will follow the protocols demanded by the regulations.

Additional challenges with regulatory compliance:

• Keeping pace with technology advancements so companies don’t fall behind on emerging risks or potential regulatory changes.
• Encouraging internal staff to take the required training and play their part in assuring compliance programs are followed.
• Hiring for specific roles, such as a chief compliance officer, whose primary responsibility is to assure that the business follows all mandated regulations;
• Implementing compliance software to attain and maintain compliance.

Regulatory Compliance by Industry

The compliance requirements that businesses must obey can vary greatly depending on the industry since the data each sector uses and even the operational requirements are different.

Here are the most well-known regulations within significant industries:

Financial Services

Payment Card Industry Data Security Standards (PCI DSS)

Any business, no matter the industry or size, that accepts, processes, stores, or transmits cardholder data is required to comply with the PCI DSS. The PCI standards apply to all merchants, financial institutions, and service providers to protect payment account data throughout the payment lifecycle.

Sarbanes-Oxley Act (SOX)

This law, also known as the Corporate Responsibility Act of 2002, was introduced to protect investors from fraudulent financial reporting and threatens strict penalties for any business found to be non-compliant. SOX also amended existing laws enforced by the Security and Exchange Commission (SEC) by adding four critical areas of focus: corporate responsibility, increased criminal punishment, accounting regulation, and new protections.

Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act was introduced in 2010 in response to the 2008 financial crisis. It aims to improve the financial stability of the U.S. economy. Dodd-Frank imposed new liquidity requirements on banks, established the Consumer Financial Protection Bureau and all the CFPB’s attendant regulations, and did much more.

Healthcare

Health Insurance Portability and Accountability Act (HIPAA)

Any organization within the healthcare industry (hospitals, health insurance providers, pharmacies, and so forth) or any third-party partners of healthcare organizations must comply with the Health Insurance Portability and Accountability Act (HIPAA), which was enacted in 1996 to protect the privacy and security of certain health information that is transmitted electronically.

Cybersecurity & Data Privacy

General Data Protection Regulation (GDPR)

This data privacy and protection law was enacted in May 2018 by the European Union (EU) and applies to any organization that collects, stores and processes personal data for any natural persons within the EU, regardless of where the business is based. Failure to comply with the GDPR can result in penalties of up to €20 million or 4 percent of total revenue, whichever is greater. Since 2018, data protection authorities in the EU have fined multiple businesses for non-compliance.

California Consumer Privacy Act (CCPA)

The CCPA went into effect in 20202 and applies to any for-profit business that has more than $25 million in annual revenue, collects the personal data of more than 50,000 California residents, or achieves 50 percent of its yearly revenue targets from selling consumers’ data. Any business with consumers from California must abide by this regulation, and failure to comply can result in a fine of up to $7,500 per compromised record (though companies get 30 days to comply once they are notified of non-compliance).

Energy & Manufacturing

Occupational Safety and Health Act (OSHA)

The Occupational Health & Safety Act of 1970 was introduced to maintain working men’s and women’s health and safety by mandating proper working conditions. All businesses must comply with the General Duty Clause of the OSH Act, which requires that all workplaces be free of severe hazards and provide research, information, education, and training regarding occupational safety and health.

What Is the Relationship Between Regulatory Compliance and GRC?

Governance, Risk, and Compliance (GRC) is an organization’s ability to achieve its goals, address uncertainty, and maintain integrity. GRC includes three pillars: corporate governance, enterprise risk management, and compliance.

The primary objective of relying on GRC is to help organizations devise a strategic approach to improve decision-making by senior leadership, demonstrate effective risk management practices, and meet compliance requirements.

In regulatory compliance, GRC refers to the controls and measures to ensure that the organization adheres to regulations dictated by relevant industry requirements or governing agencies.

How Can Audits Assure Regulatory Compliance?

Businesses may engage compliance officers to oversee compliance management, and part of this process may even include leveraging a Compliance Management System (CMS), which can include risk assessments, policies & procedures, implementing corrective action, and more.

In many cases, a compliance audit is required by law to gain certification that the business is compliant with a regulation. (For example, this is the case with the PCI DSS framework.) Therefore, compliance audits are instrumental in assuring that organizations adhere to the regulations required and establish a baseline in the current state of compliance versus the desired future state.

How to Create and Implement a Regulatory Compliance Plan

The United States Sentencing Guidelines outline seven essential components of an effective compliance program.

1. Create and execute written policies, procedures, and conduct standards. Consistency is promoted throughout your business by clearly established rules and policies that describe compliance needs.
2. Create program supervision. Determine who will manage, monitor, and enforce the compliance program and act as your company’s “watchdog” in the event of questions or problems.
3. Provide education and training to employees. Employees at all levels must understand the expectations and standards of your compliance program to be able to comply. Implement a training program that appropriately communicates your organization’s program requirements, including an annual refresher session that informs employees of your code of conduct and contains modifications.
4. Create two-way communication at all levels. Establish the expectation that employees would communicate proactively and promptly, whether to ask compliance questions, report problems, or address ethical issues. Include a means for employees to disclose compliance issues and fraudulent or illegal actions anonymously and without fear of retaliation.
5. Create a monitoring and auditing system. You must evaluate the effectiveness of your company’s compliance program and identify any risks. To do this, create an internal and external monitoring structure, including formal audits.
6. Maintain consistent commitment. Create a plan for enforcing rules of conduct promptly and establishing appropriate disciplinary actions for employees who fail to satisfy program requirements.
7. Take the necessary actions. When vulnerabilities or breaches are detected via monitoring and audits, resolve the issue as soon as possible and consistently.

ZenGRC is Your Regulatory Compliance Solution

ZenGRC from RiskOptics is a GRC platform that can help your organization implement, manage, and monitor your regulatory compliance efforts.

With ZenGRC, a team of GRC experts is always at your service. ZenGRC’s single source of truth audit trail document repository lets you quickly access the evidence you need to demonstrate regulatory compliance, as the law requires when audit time rolls around.

ZenGRC is also fully equipped to help you streamline management for the entire lifecycle of all your relevant compliance frameworks, including PCI, ISO, HIPAA, and more.

Find out if ZenGRC suits your organization and schedule a demo today to get started on the path to worry-free regulatory compliance — the Zen way.