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Business tips: What is regulatory compliance?

As new technologies and processes change the playing field, businesses in every industry must keep up

Photo courtesy of docstockmedia/Shutterstock.com
Photo courtesy of docstockmedia/Shutterstock.com

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Every business has rules to follow. Regulatory compliance is the process of understanding, tracking, and applying these rules. 

However, not all regulatory compliance is the same. As new technologies and processes change the playing field, businesses in every industry must keep up. What does that look like? And what happens if it’s done incorrectly?

Here’s everything to know about regulatory compliance across industries.

Understanding regulatory compliance

To be “compliant,” a business must follow different rules. Some, like the Health Insurance Portability and Accountability Act, are only for one industry, and some regulations are even specific to certain countries. 

Each set of regulations is overseen by an official organization, often part of the government. For example, the Federal Trade Commission enforces consumer protection laws to help prevent fraud and unfair business practices. 

Every company is responsible for determining which regulations it must follow. That’s where regulatory compliance comes in. This is an umbrella term for solutions that help companies get and stay compliant. 

Regulatory compliance can cover many efforts, including:

  • Identification: Businesses must know which regulations and requirements to follow.
  • Implementation: Everyone in a business needs to know and follow the rules at all times.
  • Documentation: Enforcement organizations often need proof that companies are following specific rules.

Companies often have teams or trained individuals ensuring regulatory compliance. According to the latest data from the U.S. Bureau of Labor Statistics, nearly 360,000 people were working as compliance officers in 2022 alone. 

The importance of regulatory compliance

Regulatory compliance can be difficult, time-consuming, and expensive. So why does it have to be a priority? 

Legal responsibilities

Regulations aren’t just rules—they’re legally enforceable. That means companies can face serious punishment for noncompliance. 

Enforcement agencies and sometimes even customers can take a noncompliant business to court. The outcome depends on which rules were broken. However, punishments can include millions of dollars in fines, prison time for people involved, and big impacts on the company’s trustworthiness.

Risk management

Regulatory compliance is just one part of risk management. But it’s an effective way to catch problems with clear definitions. 

Some business risks are difficult to identify and understand. However, regulations act like a cheat sheet because they spell out exactly what’s expected. Companies can compare their processes to the specific language of the regulation. This makes it easier to see places where an individual, team, or workflow isn’t following the rules. 

Customer protections

Regulatory compliance is also important because it protects everyday people. Some regulations say that every business is responsible for protecting its customers in certain ways. For example, Truth in Advertising laws say an ad must be “truthful, not misleading, and, when appropriate, backed by scientific evidence.”

This isn’t just good news for companies that want to avoid fines and jail time. It also helps protect the economy. When people trust the organizations they do business with, they may keep spending money. They’re also exposed to fewer financial risks. 

This, in turn, further benefits the companies. More trust means more business.

Fair market practices

Some regulations help level the playing field in certain industries. That helps ensure that market competition stays fair. 

This is important because certain practices increase visibility and make a business look better to consumers, even if there’s no true advantage. Some companies might feel “punished” for following the rules while others benefit from noncompliance. Consistent enforcement means that every company is treated equally and allowed to succeed based on other factors.

Teamwork

Compliance is a team effort. When everyone protects the company by following the same rules, employees may feel more confident working together. This also helps build trust between teams with different goals. 

On top of that, compliance often means a lot of training. These sessions give employees important knowledge that helps them do better work. They may be able to improve existing skills, advance their careers, or prevent big issues for their teams. 

Quick tips for staying compliant

Regulatory compliance isn’t something any business can master overnight. This ongoing process takes a lot of time and effort. 

However, compliance doesn’t have to feel impossible, either. It’s helpful to brush up on tips for staying compliant without causing headaches.

For example, every company is responsible for keeping up with regulatory changes. But these changes happen quickly and can impact tiny parts of a workflow. That’s why it’s important to know where to look for updates.

Companies should also have plans in place to act on regulatory shifts. When do the regulations go into effect? Who is responsible for what? How will the business share updated rules with every employee? 

Finally, every business needs a good way to keep track of regulatory efforts. The right documentation can sometimes mean the difference between compliance and noncompliance.

Remember, compliance is a team effort. Marsh McLennan Agency provides business insurance and other solutions that help your company follow the rules and stay efficient. Visit their website to learn more.

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Written By

Jon Stojan is a professional writer based in Wisconsin. He guides editorial teams consisting of writers across the US to help them become more skilled and diverse writers. In his free time he enjoys spending time with his wife and children.

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