For many organizations, regulatory compliance is both a substantial challenge and an important success factor. A company that can tame its regulatory compliance challenges will enjoy sustained growth, avoid costly data breaches and fines, and maintain a strong competitive position.
So how does an organization achieve that compliance expertise? One crucial strategy is to use a regulatory compliance framework: a tool that can help your organization meet its regulatory and compliance obligations, reduce compliance risk, and achieve strategic objectives. Read on to learn more about compliance frameworks and how you can implement relevant frameworks to achieve and maintain compliance.
What Is Compliance?
“Compliance” means adhering to established guidelines, policies, standards, or laws that apply to your industry and organization. For example, if you provide technology services to other companies, you may collect, handle, or store customer data. You are then legally obligated to protect that data. To achieve compliance with those laws, you might need to demonstrate compliance with an industry standard known as PCI DSS, the standard for keeping payment card data secure.
Along similar lines, if you are a healthcare provider and collect protected health information (PHI), you must comply with the Health Insurance Portability and Accountability Act.
In the past, corporate compliance was about simply adhering to a few static standards. Today organizations must comply with a host of regulations and international standards. They must also continuously monitor regulatory changes to assure that they maintain compliance with the standards that apply to them.
This can all be an overwhelming endeavor. Fortunately, you can reduce the burden and achieve your compliance goals by understanding the various compliance and regulatory frameworks relevant to your organization.
Penalties for Non-Compliance
Failure to meet your regulatory compliance obligations can result in costly monetary penalties and censures – and those penalties come after lengthy investigations, which will also drive up your internal costs during the investigation itself.
Sometimes companies may also be forced to suspend their operations. In the most critical cases, a business might even lose its license or certification to operate. Specific penalties vary depending on the compliance regime and rules.
Example 1: HIPAA
Violations of the Health Insurance Portability and Accountability Act almost always result in financial penalties. Civil penalties can be issued either by the U.S. Department of Health and Human Services’ Office for Civil Rights (OCR) or by a state attorney general.
The penalty structure is based on numerous factors, the number of people affected, the nature of the data exposed, and whether the company knew it had a violation. HIPAA violations may also result in criminal penalties, prosecuted by the Department of Justice.
Example 2: GDPR
The General Data Protection Regulation (GDPR) applies to companies doing business in the European Union. Fines for GDPR violations can amount to 4 percent of a company’s annual global revenues or 20 million euros ($22.8 million), whichever is larger.
Example 3: PCI DSS
The Payment Card Industry Data Security Standard (PCI DSS) applies to companies that collect, process, transmit, or store customers’ credit card information. Non-compliant organizations may be fined up to $500,000 if they suffer a security breach. These fines are imposed by banks or payment processors. In the most extreme cases, a merchant might be banned from processing credit card transactions entirely.
What Are Compliance Controls and Procedures?
And internal control is an activity intended to prevent improper transactions and to assure that everyone in the organization adheres to policies and procedures. For example, a company might require two executives to sign checks above $10,000; or block employees from accessing certain websites from the corporate network. Procedures provide guidance about how everyone must behave to prevent the violation of corporate policies and regulatory requirements.
Internal controls and procedures are an essential part of compliance programs. You can reduce compliance risks and maintain ongoing compliance by standardizing, automating, and executing these controls and procedures.
You can implement many internal controls to assure compliance with internal policies or external regulations and reduce organizational risk. These include:
- Documented policies
- Standard operating procedures (SOPs)
- Internal audits
- Due diligence
- Risk assessments
- Segregation of duties
- Approvals, authorizations, and reconciliations
- Employee training
All stakeholders in an organization, from the board and the C-suite to managers and employees (as well as vendors and other third parties), should follow compliance policies and execute proper procedures. The company must also dedicate time and resources to compliance communication and training.
Audits are also an essential element of enterprise compliance programs. The chief compliance officer (CCO) or another authorized entity must conduct internal audits to compare the current compliance posture with the relevant laws or regulations and then implement corrective action to close gaps.
What Is a Compliance Framework?
A compliance and regulatory framework provides a structured set of guidelines, standards, and best practices to help organizations achieve compliance with relevant laws and regulations. When you adopt a compliance framework, you can understand which compliance requirements you must meet and how you can meet them.
With the structured guidelines and practices in a compliance framework, your organization can:
- Create a coherent picture of your current compliance posture and implement the required steps to achieve the desired posture.
- Harmonize various regulatory mandates to understand your responsibilities.
- Manage and minimize compliance risk.
- Use resources effectively to achieve and maintain compliance with minimal wastage of time and effort.
- Integrate new requirements into your existing compliance management program.
A compliance framework also provides a standard against which regulators can judge your compliance posture. By mapping your compliance program to the framework’s requirements, you can demonstrate the improvements you’ve made and show your compliance commitment.
4-Step Process to Implement a Compliance Framework
The first step in implementing a compliance framework is to find which framework applies to your organization. Compliance frameworks are usually tailored to a specific industry and purpose.
Next, compare the framework’s requirements against your controls and procedures. This analysis will reveal the gaps in your compliance program. (Hence this step is known as “performing a gap analysis.”) To identify these gaps quickly, you can use pre-loaded content in a compliance framework content registry.
Third, remediate the discovered gaps by implementing new controls and procedures or by strengthening existing controls and procedures.
Finally, review your updated compliance program to confirm that you have successfully implemented all the controls required to achieve compliance.
Regular monitoring is also important to assure that you maintain compliance over time.
5 Common Compliance Frameworks
Five of the most common compliance frameworks are explored below:
The HIPAA framework sets the standards and requirements to protect sensitive health data.
Purpose: Its purpose is to protect sensitive patient health information and prevent disclosure of that data without the patient’s consent or knowledge.
Applicability: HIPAA applies to any healthcare organization that collects, stores, or processes protected health information (PHI). These “covered entities” include hospitals, medical providers, and insurance companies. Business associates of these covered entities must also comply with HIPAA.
FedRAMP provides standards to help federal agencies evaluate the risks of cloud-based solutions.
Purpose: Its purpose is to assure that cloud service providers have implemented strong cybersecurity controls to protect government data from data breaches.
Applicability: Cloud providers looking to sell their products to U.S. government agencies must achieve FedRAMP authorization.
The PCI DSS framework outlines 12 requirements to protect credit card data and cardholders.
Purpose: PCI DSS aims to protect cardholders’ identities by protecting their card data. To this end, it specifies both operational and technical controls that organizations must implement to achieve compliance.
Applicability: Any business entity that processes, stores or transmits credit card data must comply with PCI DSS, including merchants (stores and e-commerce), banks, and service providers, regardless of size.
The Sarbanes-Oxley Act (SOX) and COSO
The Sarbanes-Oxley Act requires all publicly traded companies in the United States to maintain effective internal control over financial reporting. The primary framework to achieve compliance with SOX is the COSO internal control framework, adopted by the Committee of Sponsoring Organizations in 1992 and updated in 2013.
Purpose: The main purpose of SOX is to combat corporate fraud by increasing transparency in accounting and reporting processes.
Applicability: SOX applies to all public companies operating in the United States. Companies planning an initial public offering (IPO) must also comply with SOX.
The GDPR is an EU-wide regulation to assure data privacy and security for European Union residents.
Purpose: The GDPR aims to protect the personal data of EU residents. It specifies the rules that all companies must follow if they operate in the EU or collect the data of EU citizens.
Applicability: The GDPR applies to any organization that does business in the EU or interacts with EU citizens.
The five frameworks listed above are only a few of the total frameworks that exist to help with regulatory compliance. A company might use any number of them (and will likely use multiple frameworks) to achieve full compliance with all its regulatory obligations.
Simplify Your Compliance Program with Reciprocity ZenComply
Implementing a compliance framework can be quite complex with manual processes and spreadsheets. Simplify the complexity with ZenComply. This compliance and audit management solution provides a guided, content-rich approach to help you quickly set up and maintain your compliance process.
Schedule a demo to learn how ZenComply can give you a unified, real-time view of risk and a faster and smarter path to compliance and risk management.