Regulatory Compliance

With the number of corporate scandals that have hit the United States in the last 10 years, the need for regulations and relevant laws has become more obvious. Many of the more recent regulations are a direct result of some of these corporate scandals. Failure to comply with relevant laws and regulations could result in civil penalties or criminal prosecution.


1. What is Regulatory Compliance?

Various governments and governing committees set the regulations and laws that you need to follow while operating your business. Following these relevant laws and regulations is the essence of regulatory compliance. Generally, the relevant laws and regulations will be well defined, allowing you to ensure corporate compliance. However, in some cases, you may need to contact someone who better understands the regulations to make sure that you are obeying all relevant laws.

In some cases, the penalty for not obeying these laws may be a non-compliance report. With this report, you would outline your proposal to correct the violation. This non-compliance report would be the penalty for a minor violation of the relevant laws. A major violation of these relevant laws could result in a product recall, a class action lawsuit or even criminal charges. Regulatory compliance is a very important part of all of today's business models.

Though governments may set regulations and laws for various reasons, from an issue that only affected a few people but was well publicized, or an issue that affected many thousands of people. The regulations and laws are put in place to ensure that the issue is not repeated. In some cases, the regulations and laws may not make sense. This does not mean that you should not obey the relevant laws.

2. How Do You Ensure Regulatory Compliance?

When the relevant laws are clearly defined, regulatory compliance is easy. Someone within your company will write a standard operating procedure to ensure corporate compliance. The standard operating procedure would help ensure regulatory compliance. Your standard operating procedure will have to be detailed, and you may have to have a separate procedure set for each regulation, but this will be the easiest way to ensure corporate compliance.

The standard operating procedures that are set up for corporate compliance will affect all aspects of your business. When your business complies with all of the relevant laws and regulations, you do not need to worry about whether you will be reported for doing something that violates these regulations. Granted, in the United States when your business is inspected to verify corporate compliance, you will be allowed to contest any non-compliance issues.

In addition to federal regulatory compliance, if your business operates internationally, you will need to learn all relevant laws for all other countries that you will be doing business in. The International Standards Office sets a number of the international standards that you will need to follow. Corporate compliance gets even more complicated in the UK, as the European Union sets some of the regulations, and the UK sets more of them. These regulations may overlap, but they will not contradict each other.

3. Why Do We Need Regulatory Compliance?

If we did not have any relevant laws to follow in our business practices, it would be too easy for problems. For example, the USDA requires that raw pork products be tested for trichinae before being sold, even to restaurants. The only way around this regulation would be to clearly mark that the end product is uncooked and must be cooked to a safe temperature - with the temperature clearly marked on the label. Once this information is added to the label, the pork no longer needs to be tested and product is available for immediate shipment after production. Many of the class action lawsuits are a result of a lack of corporate compliance to the relevant laws. When we have corporate compliance to the relevant laws, these lawsuits are considered unfounded and dismissed.

In the case of the Securities and Exchange Commission (SEC), some of the penalties for a lack of corporate compliance would be severe criminal penalties. If a business is not following all relevant laws, the business owner and all other responsible parties will have criminal charges filed against them. This may sound scary, it is. Criminal charges are considered the last and most drastic deterrent to ignorance of the relevant laws. Government agencies are going to try other methods first.

4. The Benefits of Regulatory Compliance

When companies obey all relevant laws, many things go easier for both the company and the consumer. The consumer benefits because the laws are written to protect their interests. When these laws are violated, the consumer is at risk, financially, physically or emotionally. When the consumer is put at risk, the company, and employees are also put at risk.

If a company does not work on regulatory compliance, the company may quickly go out of business. In many cases, the government will levy a fine against a company that does not enforce corporate compliance. For smaller businesses, this fine will be enough to put them out of business. In many cases, whether the business is smaller or larger, employees may lose their job, any shareholders may receive less executive benefits, and the process may multiply from there.

Though a business owner may not think so when researching the relevant laws for their business, regulatory compliance has developed over the years to protect the consumer.

5. The Risks of Not Ensuring Regulatory Compliance

With the higher cost for regulatory compliance comes the higher cost for failure to comply with all relevant laws. The owner of a larger business may try to plead ignorance, stating that an employee was in charge of ensuring corporate compliance. Pleading ignorance is not going to work with a federal or international regulation or law. The government is going to insist that all business owners, regardless of the size of their business, either know all the relevant laws and regulations or hire someone who will learn these relevant laws and regulations. If the business owner hires someone else to learn the relevant laws, they will still be held responsible for corporate compliance.

Since the business owner is responsible for regulatory compliance, that person must have the final say in all decisions regarding regulatory matters. In the case of more than one owner for the business, it may be easier to elect one of the owners as the person with the final say. This will ensure that there is no confusion on which owner an employee should go to with all corporate compliance concerns.

Not only the US government, but US government agencies and international governments are cracking down on companies that do not ensure regulatory compliance. Researching all relevant laws is always in your best interest.

6. International Regulatory Compliance

Members of the International Standards Organization are from 157 countries. Each country has only one member in the ISO, however unlike the United Nations, the members of the ISO are not political appointees. Instead, members of this organization are from both the public and private sector, depending on the country the member is from. This unique mixture of members from both the private and public sector gives the ISO a different perspective on how the regulations will affect companies. With this unique perspective, they are able to combine the best interests of corporations and the general public.

ISO regulations are only a small portion of the relevant laws you will need to know for regulatory compliance if you do business outside of the United States. Other relevant laws will vary according to the country you are going to do business in. Canada has different regulations than countries in the European Union, which may have more regulations simply because the EU has one set of regulations, and the member countries have their own regulations in addition to the ones set by the EU.

7. Regulatory Compliance and the Americans with Disabilities Act

Though different companies only need to ensure regulatory compliance for the relevant laws for their type of business, one area that all companies need to ensure regulatory compliance is with the Americans with Disabilities Act. This act requires that all public areas become handicapped accessible. In each case, the burden falls on the company to make any changes to ensure compliance. This may include installing handicapped parking, ramps and elevators. A retail store needs to have a sign requesting that anyone who needs help with their shopping should contact the customer service desk.

The Americans with Disabilities Act also affected the Internet and websites. Corporate websites are now required to allow access for those with aural, physical and visual disabilities. Many IT professionals talk about regulatory compliance in this area, but they have not acted in a timely manner. Part of the issue with the lack of regulatory compliance on the Internet is simple confusion. Some web developers simply do not understand what the regulations are and what needs to be done to ensure regulatory compliance. Though the issue of regulatory compliance on the web may not seem like an urgent issue, the lack of regulatory compliance affects a large segment of the population. If your company focuses on this segment of the population, you may find that they are loyal customers.

8. Regulatory Compliance and Marketing

With regulatory compliance to the Health Insurance Portability and Accountability act, each patient must give their permission for health information to be passed on to their employer, though it will be passed on to the patient's insurance company for payment processing. This act protects the patient, who may need treatment for a medical issue that does not affect their ability to work. Before this act was passed, a medical practice could give your health information to anyone who requested it, including a marketing company.

In 2003, the US Government passed the Can-Spam Act, also known as S. 1877 "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003." Though the bill passed in 2003, it did not go into effect until the beginning of 2004 to allow marketing companies a chance to change their email policy. With the Can-Spam Act, companies who knowingly and purposely violated the Federal anti-spam law could be fined up to $6 million USD and/or be sent to jail. Even a claim of not knowing about the law could leave a company with up to a $2 million USD fine. To ensure regulatory compliance, not only did marketing firms have to change how they sent emails to consumers, they had to add a line at the bottom of the email allowing a consumer to opt out of receiving any further emails.

9. The Cost of Regulatory Compliance

With regulatory compliance increasing in importance in today's business world, many small businesses may feel the pinch of corporate compliance. Unfortunately, small businesses tend to bear a higher portion of the costs for regulatory compliance. According to a study by the US Small Business Office of Advocacy, businesses with fewer than 20 employees pay approximately 45 percent more for regulatory compliance than businesses with over 500 employees.

Though some regulations have become more stringent because of large corporations not enforcing corporate compliance, all businesses must pay the cost of regulatory compliance. That small businesses pay proportionately more per employee is because they have fewer employees. They may be paying close to the same amount as a larger company, but because they have fewer employees, the amount paid per employee is larger.

Large corporations are not the only companies not enforcing regulatory compliance. Small companies may not have as much of an impact on regulations because their influence is smaller. When a small company does not enforce regulatory compliance, this lack may only affect a few hundred people. However, when a large company does not enforce regulatory compliance, this may affect thousands or even many thousands of people.

At times, the cost of regulatory compliance gets passed on to the consumer. This may be an unfortunate side effect of regulatory compliance. However, since the issue of regulatory compliance is to protect the consumer, it is something that we need to accept.
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