Making the business case for compliance is never an easy task. That challenge is all the more true during difficult economic times, when businesses might cut their spending across numerous departments or projects to assure long-term sustainability. Compliance programs aren’t exempt from that pressure.
To make that business case for compliance, it’s important that all an organization’s stakeholders understand both the risks associated with a poor compliance program as well as the benefits of a strong one.
In this post, we’ll cover the considerations that compliance officers need to prepare a solid business case for the compliance program.
What is compliance in business?
We could define compliance as the act of following with a command, or being in accordance with laws, regulations, or standards.
The business world has a host of rules that regulate how businesses operate and how they interact with customers and customer data. Some are federal or state laws; some are executive branch regulations to implement those laws. Others are industry standards that help a business to protect itself against threats both internal and external.
Compliance with all of these rules is necessary, to assure that businesses operate lawfully and ethically.
An effective compliance program is an evolving, ongoing initiative. Laws and regulations change frequently, and so does the threat landscape of cybercriminals hoping to gain access to sensitive data by exploiting the loopholes of a weak compliance program. All of this means that organizations should revisit their compliance programs regularly, to assure that the program can still meet all the obligations it has.
What types of compliance obligations are there?
Some laws and regulations tend to be more prevalent in certain industries or certain types of businesses. For example, the Foreign Corrupt Practices Act prohibits bribery of foreign government officials, so it’s mostly applicable to companies that conduct significant business overseas. The Sarbanes-Oxley Act requires effective internal control over financial reporting, but for publicly traded companies only. FedRAMP is a security standard that applies only to government contractors providing cloud-based services to federal agencies.
Other rules and standards, however, are applicable more widely. The Health Insurance Portability and Accountability Act (HIPAA) establishes privacy standards for personal health information; that can sweep up any business that stores healthcare data about its employees. Any business that processes credit card transactions is expected to adhere to the rules set forth in PCI DSS which dictate how companies use, store, and share a customer’s financial data.
What is the difference between compliance and compliance management?
While compliance is the act of adhering to regulatory and industry-specific standards, compliance management refers to the ongoing management of those compliance efforts.
Achieving compliance in the first place requires both time and resources — but that effort can easily be undone, if there are no methods in place to assure that you maintain compliance on a daily basis.
For example, when you begin the risk assessment process, you may find that one compliance issue is that personal data is held in an unsecured repository that multiple unnecessary team members can access.
So you take the necessary mitigation steps: removing access for unnecessary team members, implementing compliance training for necessary team members on password strength and accessing information over unsecured networks, and so forth. You achieve compliance at that specific moment.
But how will you stay in compliance over time, as new team members come and go? How do you assure that the steps you took to get into compliance remain in effect over the long term? That’s compliance management.
What are the benefits of compliance?
Now let’s take a closer look at the benefits of compliance that the chief compliance officer should state when making the business case for a compliance program.
Reduce Legal Liability
A great starting point for the conversation, and probably the most relevant benefit of a compliance program, is its ability to shield your company from legal liability. The penalties for non-compliance can include hefty sanctions, lawsuits, and more.
Even if the board only has the bottom line in mind, compliance helps to assure that revenue isn’t blocked or degraded by legal action taken against the company. For example, federal guidelines dictate that a single HIPAA violation can cost upwards of $1.5 million or more in fines and legal settlements.
Improve Efficiency and Security
In addition to avoiding legal ramifications, many compliance standards provide guidance on operational frameworks that can boost corporate efficiency and productivity.
Risk assessments and compliance audits can also reveal previously unknown threats or risks in your IT environment. You can then mitigate those issues and better protect the company from compliance risks like data breaches or ransomware.
Another benefit of a strong compliance program is its ability to foster trust with customers. When prospective clients see that your organization has done its due diligence to protect them and their data from harm, they’re more likely to engage in (or remain in) a business relationship with you.
For example, U.S. agencies such as the Defense Department now expect businesses to comply with the security standards in FedRAMP or CMMC. You won’t be able to win government contracts without a compliance program to achieve those standards.
What is the cost of non-compliance?
Yes, creating a comprehensive compliance program is an investment. Considerations include building a qualified compliance team, adopting a governance, risk management, and compliance (GRC) tool, and the time investment of preparing, implementing, and managing an ongoing program.
While the costs of a compliance program may seem high, risking non-compliance can cost much more.
Regulatory fines are steep. In 2018, non-compliance drove nearly $4 billion in penalties plus an additional $794 million in judgments, according to the U.S. Securities and Exchange Commission. Aside from legal penalties, there is also the cost of business disruption, lost productivity, lost revenue, and any remediation expenses to get the organization operational again.
How can a company improve compliance?
To improve corporate compliance, a company must understand where its compliance stance is today and how that stance can be improved. Companies must also have a way to track changes in compliance legislation, and monitoring to ensure compliance is maintained within the organization. This is almost impossible to do manually, particularly in larger organizations.
That’s where ZenGRC can help. ZenGRC is a cloud-based tool that allows customers to track their compliance functions across a number of frameworks at any time. Our central dashboard provides easy-to-understand metrics and guidance to enable proper benchmarking and improvement in your corporate compliance stance.
ZenGRC’s compliance templates can help you to understand what data you have, what you need, and how to fill those gaps while our automated system handles the tracking and alerting for necessary compliance maintenance functions.
ZenGRC not only takes the burden out of achieving compliance at the start, but also of maintaining compliance over time as your organization grows and legislation changes.
Stress-free compliance is the Zen way! To learn more, book a free demo of our platform today.