The term “heavily regulated industry” is commonly used when referring to many industries today. In the U.S., it can apply to healthcare, finance and insurance, energy, technology, life sciences, and manufacturing, to name a few. These industries are regulated for many reasons, some of which I’ll cover in this article, the first of two blogs about regulatory compliance.
Organizations in regulated industries face economic challenges and changing expectations that require them to attempt to integrate risk assurance and advisory programs that will allow them to improve different processes and ensure regulatory compliance on a continuous basis.
These organizations are trying to achieve regulatory compliance management (RCM) by integrating governance roles within their management structure, such as across risk and internal audit, compliance, and legal. Proper analysis of these requirements through constant review of data and its usage is critical to a complete compliance strategy, which these articles intend to help you achieve.
What is Regulatory Compliance?
Compliance refers to adhering to certain rules, policies, and laws of a state or a region. Therefore, businesses must identify existing and upcoming regulatory frameworks and standards for their industry before defining organizational goals, policies, objectives, and projected revenues.
For instance, the Occupational Safety and Health Administration (OSHA) defines guidelines to ensure a secure and safe working environment for the employees of any organization. Similarly, the Equal Employment Opportunity Commission (EEOC) set regulations to guarantee a transparent hiring process without discrimination based on race, color, gender, or region.
Companies ensure regulatory complaints are reduced by following the state and international laws and other regulations applicable to the business operations they conduct in each of the regions. Organizations can protect their reputation and other essential resources by ensuring regulatory compliance. Not only that, but they can also build trust with vendors, corporate clients, and other customers.
It’s essential here to understand the difference between regulatory compliance and corporate compliance. Regulatory compliance refers to adhering to government laws, while corporate compliance outlines different internal policies and procedures. Companies can ensure safety, transparency, and integrity by implementing both compliance policies.
Failure to Comply
You must be wondering what happens if the companies fail to comply with regulations. The answer is simple, and that is that they can face potential lawsuits and other financial liabilities.
For example, Hilton Hotels paid a fine of $700,000 to state regulators due to a massive data breach in 2017. Target paid a significant $18.5 million fine to settle claims and other regulatory actions in another incident.
The Health and Insurance Portability and Accountability Act of 1996 (HIPAA) offers comprehensive guidelines to the healthcare industry regarding penalties for noncompliance. Violating HIPAA regulations can lead to losing access to different insurance companies.
Goals of Regulatory Compliance
Regulatory compliance is sometimes referred to negatively as a “checkbox” exercise. Properly implemented, however, companies can achieve the following objectives by complying with relevant industry regulations, helping ensure customer safety and privacy, business efficiency, and greater profitability:
- Implementing and regulating controls and quality assurance within the organization
- Assess the organization processes that comply with the laws and policies
- Proper documentation and reporting of the compliance steps implemented by the organizations.
As I mentioned before, some regulations apply to companies operating within specific industries. Other federal, state, and local standards apply to organizations across many or all industries, including:
- Labor and employment laws
- Business and tax code
- Contract laws
- Product safety and consumer protection
- Technology and data protection
Looking inside the organization, workplace and corporate compliance apply to the following processes:
- Hiring process
- Code of conduct
- Workplace safety
- Working hours
- Employee retention
- Employee discipline
Regulations by Industry and Implementing Regulatory Compliance
In part 2 of this series, I’ll expand on the regulations pertaining to some of the highly regulated industries I’ve established in this article, as well as how to implement regulatory compliance practices within your organization.