Few business leaders have fond feelings toward government regulation. Regulations involve expensive tools and systems and redundant processes that slow productivity and increase costs. Worse, if an organization does not comply perfectly with regulations — even in industries with rampant regulatory change — that organization will suffer exorbitant fines and frustrating sanctions that, if not prepared for, could cause the business to fail.
Still, grumbling about regulatory compliance does a business leader little good. A much better approach to regulatory compliance is one of welcome respect — for the following reasons:
Compliance reduces risk
Many regulations exist to save businesses from their own worst instincts. Attempts to reduce expenses and improve productivity can compel business leaders to cut programs necessary for keeping the organization safe from outside threats. This is increasingly true in the Digital Age when so much of a business’s operations and information exist on networks accessible by anyone with the right tools to infiltrate them. Thus, many regulatory bodies work to ensure the safety of operations and data with industry regulations mandating a certain level of security, like encryption, firewalls, and backups.
Instead of struggling against such regulations, executives should consider them the correct business strategy or mitigating risk. In many cases, it is helpful to think of regulations as the bare minimum an organization can do to reduce risk and keep its operations safe.
Compliance improves efficiency
It seems like common sense to assume that compliance reduces efficiency. After all, when subject to industry regulations, workers must go out of their way to ensure they remain compliant. Yet, many business leaders do not realize that a comprehensive compliance management program can help increase efficiencies and demand next to no extra effort from teams.
An excellent example is the EU’s General Data Protection Regulation (GDPR), which dictates how websites must handle user data. The GDPR sets rules for organizing and protecting this data, making it much easier for organizations to utilize it effectively. Even better, a deadline for destroying user data prevents databases from becoming unruly over time.
Even in industries subject to heightened compliance — and regulations that regularly shift due to shifting social needs or advancing technology — compliance can make it easier to reduce costs and keep efficiency high. Organizations may need to employ a RegTech tool like regulatory change management software, which will make it easier to take advantage of the efficiency boost from regulations over time.
Compliance aligns business strategy
Regulatory compliance demands constant measurement to ensure an organization operates within existing industry guidelines and regional laws. Risk and compliance teams analyze, assess, and reassess different components of business operations to protect the organization from fines, sanctions, and other risks of non-compliance.
While this requires time and money, it can provide outstanding benefits that allow leaders to hone their business strategy and shore up weaknesses that might prevent them from achieving their goals. The more analyses business leaders perform, the more opportunities they have to uncover hidden insights that propel their business forward and provide an outstanding competitive advantage.
Compliance boosts brand reputation
There is no reason for a company’s long history of impeccable compliance to be kept secret from stakeholders. Compliance indicates an organization’s commitment to specific safety and security standards for customers, employees, business partners, and more. By showcasing compliance, a business benefits from marked increases in stakeholder trust, and a company earns a well-deserved elevation of its brand’s reputation.
This is true even of industry regulations not mandated by government regulatory agencies. For example, businesses that achieve an ISO 27001 security standard — which details a comprehensive range of information security controls — enjoy the respect and admiration of users keen for the total protection of their data. Users might prefer an organization that prioritizes such protections over organizations that invest less in regulatory compliance.
There are plenty of reasons to distaste for regulatory compliance but there are many more reasons to appreciate it. By reframing one’s perspective on regulation and compliance, business leaders will likely find it easier to comply and identify ways to leverage regulations for their gain.
