8 Steps to Ensure Regulatory Compliance

Published Date: 24 June 2021 | 8 min read

8 Steps to Ensure Regulatory Compliance

For companies operating in highly regulated industries, abiding by legal requirements can be challenging. Across sectors, new regulatory compliance requirements tend to be seen as restraints on entrepreneurial activity. Compliance frameworks can lead to the fear of having to face an exhausting process of adaptation and documentation.

But in the modern market, compliance opt-outs are not in the picture. An organization can only succeed by keeping pace with regulatory changes and leveraging what they offer. Besides, when done well, being compliant turns from a legal burden to a competitive differentiator.

This article will provide you with a step-by-step process to ensure regulatory compliance and understand its benefits for your business.


What is regulatory compliance?

Regulatory compliance is a company’s adherence to laws, regulations, guidelines, or standards relevant to its specific industry, business type, and processes. The expression is also used to refer to an organization’s goal to ensure all local, national, and international legal requirements are met.

In general, being compliant means conforming to a rule issued by an official legislative body or an independent authority in the sector. But not all companies are subject to the same rules. Therefore, the state of being compliant can take different shapes for each business depending on various factors such as:

the country in which it is located,

the industry in which it operates,

the type of products or services, the type of clients, the supply chain, etc.

For example, a company operating in the food sector in New York must meet standards regarding food quality, animal health, and hygiene established by the US Food and Drug Department. On the other hand, a firm providing financial services in Sweden must comply with regulations focused on fraud prevention, data protection, cybersecurity, and financial instruments provided by the Swedish government, the EU Commission, the European Central Bank, the European Central Authority, and so on.


How to ensure regulatory compliance

To achieve regulatory compliance, you should initiate an effective compliance program that includes the following steps:


1. Determine which regulations are relevant to your business

The first step is determining which laws apply to your organization - based on your industry, location, operations, etc.


2. Identify the requirements you need to comply with

Once you are aware that your business is subject to a specific regulation, you should get a good understanding of its impact on your organization. You need to get insights on its provisions, which rules you need to meet, which processes you need to implement to address those requirements, and how you are supposed to document your compliance.


3. Conduct an initial internal audit

Then, you should evaluate your current compliance status through a compliance audit. A compliance audit is an extensive assessment of your company’s policies and processes. It’s aimed at identifying potential gaps or risk areas and acting accordingly. For each of your compliance obligations, you should assess:

Are your internal processes aligned with legal provisions?

Does your staff know the rules your business is subject to and work in accordance with these rules?

Do you have accurate, up-to-date documentation detailing how you maintain ongoing compliance?


4. Establish and document compliance policies and procedures

Adjust your internal operations based on the issues and weaknesses discovered during the audit.

However, implementing compliant processes is not enough. You need to be able to report on your compliance management.

To do so, you need to write documentation describing the measures designed to fulfil your legal obligations, the procedures in place to ensure compliance, and how you control their ongoing effectiveness. These documents will be essential in the case of formal external audits carried out by independent third parties.

Compliance policies and procedures should be reviewed periodically and be updated whenever needed.

Moreover, they should be available and readily accessible for all employees. Employees play a significant role in maintaining compliance, so they should follow policies and procedures that mirror the company’s legal obligations. It’s good practice to have your staff sign such policies to ensure that they read and acknowledged them - and reduce the company’s liability in the event of violation from an employee.


5. Provide your employees with regular compliance training

The distribution of relevant material to your employees is essential for making them aware of what is expected of them. However, handing over compliance policies when onboarding new hires or in the event of an update is not enough to make sure that everyone is on the same page.

Besides, employees may be reluctant to change their work habits and complicate their daily workflows to adapt to new requirements. Or they could simply make unintended mistakes, as people are error-prone by nature. If your staff lacks the necessary knowledge to carry out their job in compliance with legal requirements, they could even violate them inadvertently.

Maintaining regulatory compliance is everybody’s responsibility. Even if you have a designed team or person tasked with compliance management, all your workforce needs to be actively involved in the process and sensitized to critical issues. Proper education and periodical training will shape employees’ behaviour and instill a compliance-conscious company culture.


6. Rely on experts

Although you might try your best to satisfy all of your company’s obligations, ensuring full compliance can be challenging.

Smaller or growing organizations may have a harder time staying on top of changing rules and implementing the right processes. Therefore, it’s advisable to leverage specialists in the field by involving external advisors or hiring in-house experts, such as CCOs.

The Corporate Compliance Officer (CCO) role has seen increasing demand and significance in recent times. The CCO typically monitors the regulatory landscape, initiates and oversees compliance projects, programs, and processes, and is the go-to person providing competent advice supporting all other departments.


7. Constantly improve your regulatory compliance

Achieving regulatory compliance is not a one-time project - it’s an ongoing effort that translates into three core activities:


Continuous monitoring of the legal landscape

Laws are issued and amended frequently, and new compliance requirements are added to respond to social, economic, or security needs. To promptly act accordingly, you need to stay up to speed with any changes that might affect your business and its compliance profile. If you are ready for upcoming changes earlier on, you won't risk being caught off guard when new legislation applies.


Performing periodic audits

You should schedule regular internal audits for each aspect of your business (financial, technological, operational, etc.) to continuously assess the capabilities of your compliance processes and uncover inefficiencies or discrepancies concerning regulatory compliance.


Adjusting policies and procedures to adapt them to regulatory changes

Emerging regulations have the potential to influence the business model and significantly affect the company’s work. To ensure daily operations carry on as usual, changes in compliance policies and procedures should be followed by proper staff training on the updates.


8. Leverage tech tools and entrust the right providers

Ensuring regulatory compliance with manual, paper-based processes makes the complex journey even more complicated (and more expensive).

Let's take the example of the obligations under the GDPR.

If you keep physical records on the shelves of your office, it gets tough to find the documents relating to a specific client who exercised their right to have their data deleted. Likewise, you couldn’t know that the time has come to erase the personal data held on rejected candidates.

Thus, not having the ability to respond promptly following a data subject’s request or delete personal data that you no longer have the right to keep, you would end up not being compliant. And becoming compliant would be challenging because it would require hours and hours of manual work to go through the various filing cabinets, find the documents you are looking for, and act as you are required to.

On the contrary, if you rely on purpose-built digital solutions, maintaining compliance gets much easier. A document management system is precisely meant to help with handling records and GDPR compliance. Having all your customers, employees, and business data in the same electronic platform, easily accessible and readily available, transforms a 3-days job into a 1-minute task.

Consequently, many firms are adopting tech tools to automate manual tasks and reduce the number of employees devoted to compliance.

Still, not all software service providers are equally secure and trustworthy. Choosing partners wisely can go a long way toward maintaining a healthy supply chain.

Make sure you rely on a third-party service provider with robust IT security policies in place and assess that they are transparent about their own sub-providers, data center locations, and data processing policies (in particular, verify that the chosen service provider stores data within the European Union or has compliant measures in place to transfer data outside the EU).


What is the compliance cost?

The cost of compliance refers to the expenses a business has in order to abide by laws and regulations in terms of personnel, infrastructure, and operations. These expenses include:

The salaries of employees working in the compliance department

The time, resources, and money spent on compliance reporting

The systems employed in compliance processes

The cost of being compliant typically rises with the stiffening of legal requirements and with the company’s growth. For example, a small firm operating in a single location will have lower compliance costs than a global enterprise working across several jurisdictions.

Other types of expenses are often associated with the concept of compliance cost, such as:

Regulatory risk, that is the risk that a legal change or new requirement could impact the market or industry - and, consequently, the company - by increasing the cost of following the rule.

For example, changes in the tariffs for international trades can affect companies that run an import-export business. Besides weighing on the company's balance sheet, these changes can also negatively affect the competitiveness of a business or make it less attractive for investors.

Compliance fees, e.g., the financial penalties that a company can incur for non-compliance.

Along with harsh monetary fines, each regulation provides for specific punishments that can add up to the company’s costs - such as a temporary ban on operations, the exclusion from public funding, up to the permanent shut-down of a business.

It’s worth noting that studies have shown that the cost of violating regulatory compliance is almost three times higher than the expenses for ensuring compliance.

Reputational risk, that leaders consistently rank as their number one worry.

Media scandals have shown how Warren Buffett was right while saying that it takes 20 years to build a reputation and about five minutes to lose one. Failing to meet compliance obligations can ruin a company’s public image and jeopardize its efforts to retain customers.

Suppose that your company is required by law to implement IT security measures for protecting personal data. Still, you don’t meet said legal requirements, and a data breach occurs. Next to the loss of affected clients who abandon your business and the reduced trust from prospects, there’s also the potential price to pay in case of adverse legal actions due to the damages caused by the non-compliance. Plus, there’s the cost for repairing such damages and, finally, implementing the necessary changes in the organization to ensure compliance.


Why is regulatory compliance important?

Here are six benefits that regulatory compliance can bring your organization.


Decrease the risk of adverse legal action and financial penalties

Nothing drives an organization to review and improve its practices like an upcoming audit or the possibility of a hefty fine. The costly consequences of business disruption can be very motivating as well. Compliance can keep a company on the right side of the law - but this is only the beginning. In the long run, being compliant can also turn into a massive strategic advantage.


Protect your business

There are very good reasons behind laws and regulations. Rules are not imposed to place a burden on companies. They are meant to protect businesses, employees, and customers. For instance, data protection regulations aim at protecting people’s privacy, AML laws are intended to fight fraud and financial crimes, IT security standards are designed to prevent data breaches, etc.


Benefit from a level playing field and become more attractive for investors

Industry-wide rules create a level playing field where everyone has equal chances. What makes the difference is the quality of the products, the technology, and the value of the people behind them. After all, we are all someone else’s third party: the more effective our ethics and compliance are, the lower the risk we pose to others. A good compliance record is an indicator of a well-run business and may influence its desirability for investments or partnerships.


Build customers trust and improve public relations

The success of a business pretty much depends on its public image. Misconduct can cause negative press attention and affect a firm’s reputation. On the contrary, regulatory compliance improves a company’s ethical posture and conveys a trustworthy image that earns customers’ loyalty.


Optimize business processes and strategic decision-making

Ensuring compliance forces you to accurately document your business operations and be on top of your information assets. Having your data categorized and consolidated also provides you with better visibility to make informed decisions. As a result, compliance is a powerful tool for planning informed investments, improving profitability, and identifying emerging risks earlier.

Besides, having access to the correct information at the right time also increases operational efficiency. When your employees know the rules and follow them, they become less hesitant and more confident about doing their jobs.

Ultimately, a company that spends less time dealing with regulatory infractions has more resources to focus on initiatives that improve competitive positioning and help gain market share.


Attract top talent and enhance employee retention

Job seekers look for companies that take compliance seriously. An effective compliance program helps to attract and retain higher quality employees, with a lower cost of recruitment and stronger employee engagement.

The same is true for current employees. The more people feel they work in a fair environment, the more likely they will be to stay with the company. Improved employee morale, retention rates, and job satisfaction definitely generate enhanced productivity.


Penneo can help you achieve regulatory compliance

Penneo caters to the needs of customers who are subject to the strictest regulatory compliance requirements. Our digital services can be customized to meet specialized industry requirements in areas such as:

Auditing and accounting


Real estate

Legal services

Human resources

General administration

And more!

We can assist you in combining security needs and business goals to create a healthy and safe atmosphere for your organization and produce successful results.

Penneo has carefully developed processes to ensure its services’ conformity to legal requirements. Our official third-party audit reports demonstrate that everything we provide abides by the highest industry security standards.

By relying on Penneo for processing your documents and online transactions, your firm will comply with AML, GDPR, eIDAS, and other relevant regulations. Besides, you will equip your business with an effective tool to strengthen your entire security system and improve your corporate social responsibility.


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