The phrase regulatory compliance comes with the onomatopoetic groaning sound made by most people involved in it. Despite what many consider the drudgery of rules and pedantic details, regulatory compliance offers several benefits for companies.
Why Regulatory Compliance is an Important Part of Business Today
Any compliance officer will tell you that financial safety is the first benefit associated with regulatory compliance. Regulatory noncompliance costs organizations steep penalties.
More importantly for the c-suite, regulatory compliance provides guidance that helps businesses succeed. Compliance law evolved to help create parity in the marketplace while offering consumers a sense of security. Enterprises need compliance to prosper ethically.
Often, however, regulatory requirements feel like a quagmire dragging down profitability. Easing compliance management burdens with compliance management software, however, can help organizations leverage the positive while removing the negative.
What Does Compliance Mean?
To define comply, reviewing a dictionary offers a broad answer of rule-following. However, within the IT sector, a more complex definition exists containing several parts.
The compliance definition for IT professionals relies on the regulation definition that governs an industry. Less obliquely, compliance relies on regulation to exist.
What is regulation?
A regulation is a law enacted by a governmental body granting a regulatory agency enforcement authority.
The Sarbanes-Oxley Act of 2002 (SOX) established rules for documenting financial compliance and granted the Securities and Exchange Commission (SEC) enforcement authority and created the Public Company Accounting Oversight Board (PCAOB) to oversee audit rules.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) regulated the protection of patient information and granted the U.S. Department of Health and Human Services (HHS) oversight for compliance.
What Does Regulate Mean?
While regulation is the law, regulate means to control or supervise using rules and regulations. Thus, the legislative and executive branches established the laws, but the so-called “fourth branch” of government, agencies, enforce these laws.
What Is a Regulator?
Agencies act as regulators for their industries by creating guidances to help organizations successfully meet compliance requirements.
Finally, the term “regulator” also acts as shorthand for the external auditor sent by a regulatory agency to test your company’s compliance.
How to Use Risk Management as Part of Compliance Management
Creating a robust corporate compliance program means assessing the risks facing your organization and determining your tolerance for each one. If a threat is unlikely to impact your organization but the cost to mitigate the potential danger is high, part of your compliance risk management process may be to accept that risk.
For example, a sole proprietor who handles low volumes of personal customer information may choose not to engage in end-to-end encryption within the office. Instead, the owner may want to purchase only firewall protection since they only use one computer. This decision makes logical sense since the information potentially accessed can do little damage and no one is sharing data between computers. However, if that owner hires an employee who can access the data, the risk changes. Now, the business owner needs to reassess the potential harm to customers.
Larger organizations have a more difficult time navigating compliance regulations. In many cases, they hire either a compliance consultant to determine the appropriate risk profile or establish a compliance department.
How Regulatory Compliance Protects Your Organization
Risk assessments form the basis of regulatory compliance, meaning that reviewing not just the likelihood of an event but its potential impact can protect you from malicious and accidental information manipulation.
Lesley Carhart, an 18 year IT veteran and information security expert with a focus on digital forensics and incident response, tweeted the following on Monday, February 26,
A regulatory compliance report brought to the Board of Directors should include the risks associated with threats. Risk, defined by most regulations as likelihood multiplied by impact, expresses Ms. Carhart’s point entirely.
Higher risk industries like healthcare and financial technology recognize the value of the information they collect as well as their space currently being targeted by malicious actors. However, a non-profit may feel that they are not as likely to be attacked.
That lowered likelihood combined with restricted resources often leads to limited regulatory compliance focus and diminished security. In other words, budget restrictions might mean focusing on employee awareness but not endpoint security or a “Bring Your Own Device” policy. Therefore, these become vulnerabilities for the organization. Despite the decreased likelihood, the lack of focus increases the impact.
Regulatory compliance, therefore, provides added information security by requiring guidelines that protect assets that might otherwise be at risk.
How Regulatory Compliance Increases Profitability
With malicious attacks on the rise, savvy consumers want to know that companies are protecting their data. Moreover, clients looking to work with third parties invest more resources in vendor management.
Regulatory compliance, and the audit reports proving compliance allow companies to market themselves better. SOC 1, SOC 2, and SOC 3 reports help clients trust their vendors and prove ongoing SOX compliance. Without those reports, which indicate the vendor met audit requirements aligned to the regulation, the business will lose customers and thus profitability.
Additionally, regulatory compliance acts as one of many safeguards ensuring data protection. Data breaches decrease customer retention causing financial impacts, including bankruptcy.
How to Leverage Compliance Management Software for Profitability
Compliance not only invokes mental funeral dirge music but comes with the cost of tedious, time-consuming work.
Collecting compliance documentation and aggregating the information to prove compliance costs companies money in employee hours. Gathering documentation requires communicating with multiple departments to ensure that they have appropriate tracked activities. Once compliance managers obtain information, they need to prove cross-departmental consistency.
During the internal or external audit process, compliance and audit teams need to incorporate the appropriate documentation to prove regulatory compliance. A low score on a regulator audit can lead to legal ramifications including penalties or having to shut down operations.
Audit time management problems are one of the most significant costs associated with the audit process. The Chartered Institute of Internal Auditors noted in a November 2017 report that gathering audit evidence often reveals problems leading to additional time spent on the audit. The report additionally noted issues such as not enough or too many controls. Spreadsheets often lead to inconsistencies lengthening the audit process. Companies who outsource the internal audit function can save money by streamlining the information gathering process with a single source of truth.
With a ZenGRC, all individuals involved in the regulatory compliance space have rapid access to a single source of truth. This ability to rapidly gather documents saves employee time which ultimately leads to cost savings.
Moreover, ZenGRC eases cross-departmental communication. ZenGRC’s role-based authorization options provide compliance managers and internal auditors control over who can read regulatory compliance documentation and who can edit it. For example, all employees may be required to read the iT security policy; however, only certain individuals should be able to make changes. With ZenGRC, your organization can provide this level of security over documentation.
If you are looking to leverage regulatory compliance through a streamlined, cost-saving process and increased customer trust, call today to schedule a demo.