Every organization has to follow a certain set of regulations to ensure smooth business operations. Regardless of the size of the industry, regulatory compliance defines the steps any business follows as per its policies regarding customer relations and enterprise operations. Nevertheless, failure to abide by regulatory policies can cause significant challenges for companies, including reputational damage and financial losses. However, failure to comply with standard regulations costs an average of $14.82 Million to the businesses.
What is Regulatory Compliance?
Regulatory compliance means that a business follows the rules, laws, guidelines, and specifications set by governments, agencies, trade, and other groups. Regulations that people have to follow are usually implemented to protect workers, customers, the public, the environment, etc. However, compliance with regulations is meant to ensure that businesses are not involved in anything illegal or unsafe that could put other people or businesses at risk.
Moreover, compliance with regulations is essential for many businesses and organizations worldwide. Almost every business has to follow some regulations. Nevertheless, data privacy is one of the most common compliance rules that all businesses and most countries have to follow.
What are Regulatory Compliance Requirements?
Any set of rules an organization must follow to operate legally is a regulatory requirement. Almost every business is subject to a handful of federal and state laws. Nevertheless, organizational management, employee relations, and customer interactions are only a few sectors regulated by law.
General Purpose of Regulations
Whether it’s workers, customers, the general public, or the security of corporate operations, regulations are usually implemented to safeguard business entities. The following are some of the main areas that the bodies in charge of regulating should often concentrate on:
- Developing and executing organizational controls
- Maintaining awareness of and evaluating organizations’ adherence to rules and requirements
- Making it possible for businesses to document their adherence to regulations and requirements
Industries Where Regulatory Compliance is Mandatory
Some regulations are equally applicable to all sectors. However, there’s always a particular set of requirements regarding regulatory compliance that may vary from country to country. Some sectors of the economy, types of businesses, or other entities are subject to the following rules:
- Banks and financial institutions
- Healthcare sector
- Corporate and tax regulations
- Requirements for taxes and the tax law
- Rules governing antitrust
- State certification
- Rules governing interstate business transactions
- Privacy and data protection in the context of technology
- Communication, news, and technological advancements
Regulatory Compliance Requirements for Different Sectors
Organizations in the United States are subject to tens of thousands of rules and regulations. These rules and regulations often only affect businesses operating in certain sectors or dealing with specific types of information. The following are some examples of industry or region-specific laws:
- Dodd-Frank Act: Legislation passed in 2010 to make the financial sector more open and accountable.
- Sarbanes-Oxley Act (SOX): The federal Sarbanes-Oxley Act (SOX) established stringent financial and auditing requirements for publicly listed corporations. The purpose of the legislation is to reduce accounting fraud and mistakes.
- Payment Card Industry Data Security Standard (PCI DSS): This standard, not created by the government but by the four leading credit card firms, establishes standards to enhance the safety of transactions, including credit and debit cards.
- Sherman Act (1890): An essential antitrust statute in the United States, the Sherman Act of 1890 forbids monopolization-causing commercial practices such as anti-competitive agreements.
- Securities Act (1933): The stock market crisis of 1929 prompted the approval of this legislation, which aimed to make financial statements more transparent and reduce instances of fraud.
- Bank Secrecy Act (BSA): The BSA mandates that banks and other financial organizations aid the United States government in its fight against money laundering.
Regulations Regarding Data Security
- Federal Information Security Management Act (FISMA): Concerning data and technology security, it mandates that all federal agencies establish plans to protect their computer networks and electronic data from unauthorized access.
- GDPR: An updated EU legislation governing the personal data of EU people is the General Data Protection Regulation.
- California Senate Bill: The purpose of California Senate Bill 1386 is to ensure that all Californians whose personal information might have been compromised are notified in the event of a data breach.
- Health Insurance Portability and Accountability Act (HIPAA): This law governs the use and disclosure of certain types of patient information by healthcare providers, insurers, and other entities, as well as the protection of health insurance coverage for employees who change employment.
- Joint Commission: Hospitals, health organizations, and programs in the United States are accredited by the nonprofit Joint Commission (Healthcare).
How Can Businesses Ensure Regulatory Compliance?
Following are some general steps to follow standard regulations regarding regulatory compliance:
Identification of Industry Requirements
Companies can perform research to determine the legal regulations relevant to their enterprise. For instance, if a business accepts credit cards, it must consider regulatory requirements regarding receiving those payments.
Documentation of Procedures
Businesses have to go through compliance audits after a regular time interval. Nevertheless, the proper documentation demonstrates that business procedures are following regulations.
Regular Assessment of Standards
Rules are dynamic and subject to change. However, keeping up with upgrades constitutes an essential for staying compliant.