Modern businesses face a myriad of risks daily — from signing new contracts, to dealing with regulatory changes and entering unexplored markets. This is why corporate compliance comes to the fore in many companies, regardless of their size or industry.
The world of compliance may seem overwhelming at first, but it deserves attention both from top managers and regular employees. Staying legally compliant is not only needed to avoid fines and legal actions against the organisation, but it is a matter of reputation and credibility.
In addition, there are several non-obvious advantages. Having relevant procedures in place, a company can increase ROI, because it prevents corruption and fraudulent activities. It also ensures transparent communication within the organisation and prevents employees from being scared to report violations to management.
What is business compliance? How to create a top-notch compliance program? Why is it needed? This article will help you navigate the issue.
What Is Compliance in Business?
Corporate compliance — from the perspective of an organisation — has two different meanings. It may be seen as an action or as a policy.
In the first case, business compliance should be understood as steps that the organisation takes to meet the requirements. Companies operate in highly regulated environments under international and domestic laws, health and safety regulations, and data processing policies. Thus, to comply means to act under the law.
To follow its legal obligations, the company needs internal standards. In this case, corporate compliance means rules and frameworks that have been put in place. It should be noted, however, that a compliance program is not a cure-all if not enacted properly. Enforcement procedures and the nature of the organisation are some aspects to consider along with effective policies.
What Does Compliance Mean for Small Businesses?
Corporate compliance applies to businesses of various sizes, including private entrepreneurs and small-sized companies. As large players, they are obligated to comply with international and domestic legislation. By way of illustration, UK businesses follow the Companies Act 2006 as the main regulatory document.
Business compliance aims to prevent illegal activities and — in case of occurrence — respond to them promptly. Given the finite nature of resources available to small businesses, corporate compliance might appear challenging. However, it’s a worthwhile endeavour. A compliance program ensures reliable protection for you as a business owner, your staff, and your assets.
Being legal by nature, compliance also has a reputational and ethical dimension. A business that follows legal obligations, proves its credibility to clients and partners — and hence attracts a larger audience and new partnerships. This is particularly relevant for small businesses that are sensitive to market changes.
The Importance of Corporate Compliance
Corporate compliance may seem like a mundane task at first glance, but in the long run, it breaks new ground for business. Here are some benefits of adopting and upgrading your compliance program:
Scaling a business
Business compliance is getting more complex as your company grows. For a sole proprietor, it might be something as easy as obtaining a licence from the city, whereas big corporations must follow international regulations and operate in many jurisdictions. To be able to scale your business, you must understand regulations in your industry and adapt accordingly.
No legal issues
Compliance in business entails mandatory obligations under the law. Violations are fraught with high fines, litigation and sabotage by competitors. A company can mitigate such risks by following legal requirements.
Safer and better operations — better employee satisfaction
Many rules are concerned with the safety of employees and creating a healthy working environment. The latter includes, inter alia, fair wages, anti-discriminatory, and anti-harassment policies. Paying attention to those issues will help the company to keep valuable workers.
Positive public image
Customers are increasingly paying attention to the ethics of business. It crosses the path with corporate compliance because many requirements are fixed at the legislative level. A transparent company that is following the law will have a better image in the public eye and can use it as an advantage in promotional materials.
What Are the Main Business Compliance Areas to Consider?
Corporate compliance covers all business operations. It is not attached to a single department and involves, in one way or another, all employees. The most common types of compliance across industries include:
- Regulatory compliance, which concerns obligations under domestic and international law.
- Human Resources compliance, which concerns the recruitment process and working conditions of employees.
- Financial compliance is related to the financial sector and regulations.
More issues to include in your compliance program are discussed in the following sections.
GDPR Compliance as a Part of Corporate Compliance
The General Data Protection Regulation (GDPR) is one of the most important pieces of legislation for European companies and those who operate in the EU.
This law is relatively new. It came into force in 2018 as a replacement for the 1995 Data Protection Directive. As of now, the GDPR is the most extensive data privacy law that sets the tone at the global level.
Following the GDPR requirements is mandatory in all Member States. Thus, companies keep this law in mind in their corporate compliance procedures and compliance programs.
Business compliance requirements under the GDPR stipulate how businesses must handle individual data, giving EU citizens more autonomy and awareness about how their information is used.
Corporate Compliance in Health and Safety
Health and safety matters are key components of corporate compliance since all business owners and companies must take measures to ensure the safety of their staff. Each country has regulators, defining security requirements for different industries.
Health and safety compliance at work depends not only on management, but on all employees. As in other aspects of business compliance, introducing rules and programs are not effective without proper monitoring of implementation, and the way each employee is following their obligations.
Compliance meaning in business can hardly be overestimated. As this involves many risks, companies must adopt procedures that prevent violations, to avoid fines and checks by authorities.
How to Make Corporate Compliance Work?
Many business owners ask how to approach corporate compliance.
The solution, at first glance, may seem like a no-brainer. If the company has a comprehensive compliance program and monitors the implementation of the rules and regulatory requirements, what may fail?
The reality is a bit more complex. To make business compliance work, management must communicate the importance and benefits to the staff, rather than demand following the rules “under the lash”.
Several recommendations to follow are:
- Encourage transparent communication within a company regarding the state of legal compliance, make sure it’s easy for staff to share their feedback.
- Aim to organically fit compliance in all business operations, rather than treat it as a “third wheel”.
- Provide the employees with filtered information, and leave the routine to automation solutions.
Corporate compliance — while being the essence of daily tasks of compliance officers and consultants — in the end, is supervised and enforced by the board. However, each employee adjoins business compliance:
- Management invests and develops frameworks and strategies within the company.
- The project lead can prioritise and communicate the importance to the team.
- The team takes time for training and follows the requirements.
This article explained why compliance is important for organisations of all sizes. An effective business compliance program is a key to success, and here are steps it should consider:
- Developing internal policies, guides and procedures.
- Assigning your compliance team, i.e. those people who will lead and oversee the process.
- Organising staff training.
- Encouraging trust-based communication to collect feedback.
- Running audits and monitoring the implementation regularly.
- Reacting promptly to any violations.
Business compliance can be time-consuming and costly without the use of automation solutions. This is due to the volume of information that has to be analysed and monitored in compliance daily.
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