Regulations have long existed to govern how organizations collect and use information online, as well as what cybersecurity precautions organizations should take while conducting business online. As digital transformation of business processes has accelerated in the last few years, however, that means ever more organizations — large and small — must comply with all those regulations.
Regulatory Compliance: A Definition
Regulatory compliance is an organization’s adherence to the laws, regulations, or guidelines set in place by a governing body that might apply to that organization. Some regulatory compliance obligations pertain only to a few firms in a specific industry, or only to large firms but not small ones. Other regulatory compliance obligations apply to much broader groups.
Contrary to popular belief, the consequences of failing to meet your compliance obligations aren’t solely restricted to regulatory fines. Compliance failures can leave a company subject to civil litigation from third parties, bar a company from bidding on lucrative contracts, or ruin the company’s reputation with would-be customers.
Why Is Regulatory Compliance Important?
Technology has transformed the way that companies conduct business. As a result, governments on a global scale are implementing regulations to protect their constituents from harm, especially as data privacy, data protection, and financial fraud become hot topics for the average citizen.
As organizations continue to grow, it’s critical that they adhere to whatever regulatory compliance directives pertain to their specific industry.
The importance of regulatory compliance largely stems from the understanding that companies need to maintain a minimum standard for the way they conduct their operations, such as how to handle customer and employee data or how to conduct retail transactions.
What Are the Challenges With Regulatory Compliance?
Adhering to regulations isn’t as simple as one might assume. After all, companies need to invest money and resources to implement compliance programs, in the form of internal company policies and training programs to assure that employees will follow the protocols demanded by the regulations.
Additional challenges with regulatory compliance:
- Keeping pace with technology advancements, so companies don’t fall behind on emerging risks or potential regulatory changes.
- Encouraging internal staff to take the training required and play their part in assuring that the compliance programs are followed.
- Hiring for specific roles, such as a chief compliance officer, whose primary responsibility is to assure that the business follows all mandated regulations;
- Implementing compliance software to attain, and maintain, compliance.
Regulatory Compliance by Industry
The compliance requirements that businesses must obey can vary greatly depending on the industry since the data each industry uses, and even the operational requirements, are different.
Here are of the most well-known regulations within major industries:
Financial Services
Payment Card Industry Data Security Standards (PCI DSS)
Any business, no matter the industry or size, that accepts, processes, stores, or transmits cardholder data is required to comply with the PCI DSS. The PCI standards apply to all merchants, financial institutions, and service providers with the goal to protect payment account data throughout the payment lifecycle.
Sarbanes-Oxley Act (SOX)
This law, also known as the Corporate Responsibility Act of 2002, was introduced in response to protect investors from fraudulent financial reporting, and threatens strict penalties for any business found to be non-compliant. SOX also amended existing laws enforced by the Security and Exchange Commission (SEC) by adding four key areas of focus: corporate responsibility, increased criminal punishment, accounting regulation, and new protections.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act was introduced in 2010 in response to the 2008 financial crisis. It aims to improve the financial stability of the U,S. economy. Dodd-Frank imposed new liquidity requirements on banks, established the Consumer Financial Protection Bureau and all the CFPB’s attendant regulations, and did much more, too.
Healthcare
Health Insurance Portability and Accountability Act (HIPAA)
Any organization within the healthcare industry (hospitals, health insurance providers, pharmacies, and so forth) or any third-party partners of healthcare organizations must comply with the Health Insurance Portability and Accountability Act (HIPAA), which was enacted in 1996 to protect the privacy and security of certain health information that is transmitted electronically.
Cybersecurity & Data Privacy
General Data Protection Regulation (GDPR)
This data privacy and protection law was enacted in May 2018 by the European Union (EU) and applies to any organization that collects, stores, and processes personal data for any natural persons within the EU, regardless of where the business is based. Failure to comply with the GDPR can result in penalties of up to €20 million or 4 percent of total revenue, whichever is greater. Since 2018, multiple businesses have already been fined by data protection authorities in the EU over non-compliance.
California Consumer Privacy Act (CCPA)
The CCPA went into effect in 20202 and applies to any for-profit business that has more than $25 million in annual revenue, collects the personal data of more than 50,000 California residents, or achieves 50 percent of its annual revenue targets from selling consumers’ personal data. Any business with consumers from California must abide by this regulation, and failure to comply can result in a fine of up to $7,500 per compromised record (though companies get 30 days to comply once they are notified of non-compliance).
Energy & Manufacturing
Occupational Safety and Health Act (OSHA)
The Occupational Health & Safety Act of 1970 was introduced to maintain the health and safety of working men and women by mandating proper working conditions. All businesses must comply with the General Duty Clause of the OSH Act, which requires that all workplaces be kept free of serious hazards, and must also provide research, information, education, and training regarding occupational safety and health.
What Is the Relationship Between Regulatory Compliance and GRC?
Governance, risk, and compliance (GRC), is defined as an organization’s ability to achieve its goals, address uncertainty, and maintain integrity. GRC includes three specific pillars: corporate governance, enterprise risk management, and compliance.
The primary objective of relying on GRC is to help organizations devise a strategic approach to improve decision-making by senior leadership, demonstrate effective risk management practices, and meet compliance requirements.
In the context of regulatory compliance, GRC refers to the controls and measures set in place to assure that the organization adheres to regulations dictated by relevant industry requirements or governing agencies.
How Can Audits Assure Regulatory Compliance?
Businesses may engage compliance officers to oversee compliance management, and part of this process may even include leveraging a compliance management system (CMS), which can include risk assessments, policies & procedures, implementing corrective action, and more.
In many cases, a compliance audit is required by law to gain certification that the business is compliant with a regulation. (This is the case with the PCI DSS framework, for example.) Therefore, compliance audits are instrumental to assure that organizations are adhering to the regulations required and to establish a baseline in the current-state of compliance versus the future desired state.
ZenGRC from Reciprocity is a GRC platform that can help your organization to implement, manage, and monitor your regulatory compliance efforts.
With ZenGRC, a team of GRC experts are always at your service. ZenGRC’s single source of truth audit-trail document repository lets you quickly access the evidence you need to demonstrate regulatory compliance, as required by law when audit time rolls around.
ZenGRC is also fully equipped to help you streamline management for the entire lifecycle of all your relevant compliance frameworks including PCI, ISO, HIPAA, and more.
Find out if ZenGRC is right for your organization and schedule a demo today to get started on the path to worry-free regulatory compliance — the Zen way.
