Every business is guided by laws and regulations. Some regulations may be industry-specific, such as for banks or broker-dealer firms. Other regulations apply broadly, such as those from the Occupational Safety and Health Administration (OSHA) or rules imposed by the Health Information Portability and Accountability Act (HIPAA).
The challenge for businesses trying to navigate those regulatory requirements, however, is that regulations change all the time — and those changes can be easy to miss. And since non-compliance can lead to monetary fines, legal fees, and other costs, building a capability to meet those regulatory compliance duties is a high priority for any business.
In this piece we take a look at legal compliance management and how to best develop legal compliance policies.
What is regulatory and legal compliance, and why does it matter?
Being in regulatory compliance means that a business adheres to local, federal and even international legal mandates, laws, and industry regulations. Usually this goes hand in hand with being in legal compliance, although in some cases (such environmental law) regulatory compliance in the European Union sometimes sets a higher standard than legal compliance in the United States.
Regulatory compliance management is what a company does when it sets out to follow all applicable laws. Typically that means establishing an internal compliance team, which in turn creates a compliance program that becomes part of your organization’s internal business processes and workflows.
Led by a compliance manager or officer, the compliance team may divide a business into segments guided by different legal requirements and compliance regulations; and then works to assure that each segment is in full compliance at all times.
Establishing a compliance management system is important because even brief periods of non-compliance can lead to costly penalties. Data breaches resulting from non-compliance can result in monetary fines that run into the millions. Businesses suffering a compliance lapse might also be shunned by business partners or passed over for lucrative business contracts.
How regulatory and legal compliance management protects a business
A robust compliance management system works both internally and externally to make sure a business doesn’t break any laws or miss any industry regulations.
Internally, a compliance management system serves to enforce company policies by:
- Encouraging employees to report any compliance risk or error they discover.
- Making reporting of compliance issues to the compliance team mandatory.
- Establishing a process so that compliance reporting can be done safely and quickly.
- Outlining an audit process to identify weak or missing compliance controls, investigate non-compliance issues, and remedy outdated compliance measures.
- Updating company policy as compliance requirements change.
Externally a compliance management system works the same way, but with a focus on complying with industry-specific laws, regulations and mandates by:
- Working with the legal department to ensure a business is always in compliance with new regulations.
- Updating industry-specific certifications, complying with new standards and communicating that all regulatory requirements are being met.
- Working with fresh information from lobbyists and industry organizations to be on the forefront of any changes coming down the pipeline.
Compliance management software can automate this process, and integrate compliance management into risk assessment and risk management workflows where it belongs.
How to develop your own legal compliance management policies
The first step is to evaluate current legal policies, perhaps with the help of the legal department. It’s not uncommon to find redundant or contradictory policies, especially if you are reviewing a system that has been maintained in a Word document or a spreadsheet.
New regulatory requirements are issued by governing bodies on a regular basis. If you find yourself facing a new requirement, take a step back and look through your existing policies to determine whether you have a relevant policy on the books already.
If the regulation is completely new, and you have no relevant policies, follow these five steps to compliance:
- Understand what exactly the new regulation requires
- Identify what you have to do for reporting: which government body is the recipient of the report, how frequently the report should be filed, and what details must be included.
- Identify the proper internal department to be responsible for this particular piece of compliance reporting, and make sure the compliance team has adequate resources to tackle this new requirement.
- Document every step of the way and establish an auditing policy.
Be on the lookout for these three threats to efficient compliance management:
- Poor communication between departments and managers, employees and managers, and different departments within the same business.
- Reliance on complicated spreadsheet systems that are difficult to update or audit. Sometimes referred to as “legacy systems,” these compliance management systems are vulnerable to human error and sometimes can’t keep pace with difficult compliance issues.
- Refusal to update technology or to take advantage of compliance management software that uses artificial intelligence (AI) to keep you updated on any compliance risk.
Five steps competitive companies take to stay in compliance
As you evaluate, organize, and update your compliance management system, remember that you are not alone in this process. Reach out to your peers and business partners and learn what they are doing.
Here are five steps toward compliance:
- Keep up on industry specific laws and regulations both at home and abroad. Be mindful of your supply chain and any regulations overseas that could affect your compliance process.
- Get the best help. If you don’t have a compliance officer or a compliance team, find a business consultant who can help you establish one.
- Communicate company policy to everyone from the CEO office to the front desk, and make sure employees know where to direct compliance questions and issues.
- Keep excellent records and make sure auditing is frequent and on point.
- Invest in compliance management software that will help you keep track of and document the entire process.
Cybersecurity and compliance management tools
Among the many tools that can help your business stay competitive while keeping cybersecurity and compliance as top priorities, are modern compliance management software like ZenGRC. Powered by artificial intelligence (AI) and constantly updated, this software works for you nonstop by scouring regulators’ websites for updates and new regulations.
ZenGRC’s compliance, risk, and workflow management software is an intuitive, easy-to-understand platform that not only keeps track of your workflow, but also lets you find areas of high risk before those risks manifest as real threats.
Worry-free compliance management is the Zen way. For more information on how ZenGRC can enable your CMS, contact us for a demo.