As a business owner or employee of sufficient size, it’s quite understandable why the words “regulatory compliance” might elicit anxiety and stress; after all, these are both federal and industry mandates that require you to add even more concerns to your daily list of worries regarding the company.
However, with the necessary understanding of what compliance entails and how it actually protects you, you just might find yourself at the forefront of the growing list of businesses that happily implement the necessary measures.
What Does a Compliance Officer Do for Your Business?
First and foremost, a compliance officer will help you keep your business out of costly financial infractions. Not keeping pace with certain federal mandates come with considerable penalties, as well as making your business less efficient and opening it up to physical and cyber threats.
More specifically, a compliance officer will implement compliance management software that can reduce the cost of meeting compliance, while at the same time garnering more of the benefits of being up to code. Compliance, ultimately, should increase profits while making your company more secure – but it has to be implemented properly.
In the following, we’ll take a look at precisely what compliance and regulation entail in the business sphere, with examples of the kinds of mandates that are already in place for companies to follow.
- Compliance: In the Information Technology sector, compliance entails structuring your business such that it meets written, official rules that are set out by industry professionals as well as special interests in the federal government. These have been approved by general consensus, such that all companies are required to adhere to them.
- Regulation: Specifically, as pertains to the IT sector and other business industries, this means a series of laws and written rules that have been enacted by a governmental agency or regulatory commission.
Some examples of regulations are PCI DSS for the payment card industry, the Sarbanes-Oxley Act of 2002 (known as SOX), and the Health Insurance Portability and Accountability Act of 1996 (acronym HIPAA). For PCI DSS, the regulations that are overseen by an enforcement agency are dependent on the volume of credit and debit card transactions your company conducts every year; there are four levels with increased requirements for satisfying each one. SOX governs financial compliance and audit rules; it created the Public Company Accounting Oversight Board for just the latter purpose. Compliance with SOX is enforced by the Securities and Exchange Commission (the SEC). Lastly for our examples here, there’s HIPAA; it protects patient information in the healthcare industry. The U.S. Department of Health and Human Services is the agency responsible for regulating HIPAA and enforcing compliance among companies.
The Protective Function of Regulatory Compliance
The single most important contribution to satisfying regulatory compliance is making a risk assessment of your current status. This entails both ascertaining the level of risk to which your company is exposed, as well as the possible damages that these risks can incur. It’s important to take into account both external malicious attempts, and internal mistakes – there are ways to effectively protect against both. This is where your compliance manager and the management system that he implements come into play.
After making his assessment of your company’s level of compliance, your compliance manager will bring a full report to the c-suite and Board of Directors. This report should contain information on expected threats, the risk of those threats given your current level of protection, and the impact the threats would have if they became realized. Business continuity and disaster recovery protocols are, quite obviously, enhanced by a comprehensive report.
If you operate in a sensitive field such as healthcare, HIPAA is of paramount importance in today’s business climate. Much like financial technology and IT, healthcare is an especially high-risk industry because of the utility of the data to cyber criminals, and the lawsuits that can follow as a result of employee negligence. Regulatory compliance is engineered to protect your assets by outlining a series of rules.
Merging Regulatory Compliance with Risk Management
There’s a simple realization that all businesses must imbibe: not all threats can be protected against. As such, your compliance manager must ascertain all of the potential threats to your company, and then decide which ones are worth protecting against. If, for example, there’s a threat that isn’t very likely to hurt your company or organization, but the cost in protecting against it is very high, then it might be within your parameters of risk tolerance to ignore that one. It’s all about return on investment in this regard; luckily, taking care of most of the big threats usually eliminates (more or less) the little ones, too.
For example, if you conduct business with a relatively small number of customers each year, then you may not need the considerable cost of end-to-end encryption until your business grows beyond a specified amount. In fact, PCI Compliance was written precisely with transaction volume in mind.
Regulatory Compliance and Company Profitability
This part is real simple once the others are already in place. After your compliance manager and/or compliance management system are up to speed and implemented, all you have to do now is market this fact to your consumers. You’ve seen all the banners and icons on various websites, proclaiming their level of security. This has a demonstrable effect on consumer trust. Produce audit reports and certificates that certify your ongoing compliance. Consumers have spoken: data protection is of paramount importance when they are making the decision on which companies to trust.
All in all, the measures associated with compliance can be a costly, time-consuming front-end issue; the results on the back-end have proven robust, time and time again. To alleviate the document gathering, employee overtime front end issues, many companies simply outsource their compliance efforts to trusted sources that specialize in this. This, along with the implementation of compliance management software, makes a seamless transition to increased efficiency throughout the process.