Regulatory compliance

Practical Compliance Guide: How to ensure compliance across your organization

Introduction

Regulatory compliance is essential for the proper functioning of any organization, as it is not only a loyal obligation but also essential to protect the interests of the company, its employees, and its customers because non-compliance with regulations can have serious consequences such as financial penalties, reputational damage, and, in extreme cases, even loss of business.

Organizations must implement effective measures to ensure compliance across the enterprise. This guide will help readers understand the basics of observation, its importance, and how to implement effective measures to ensure organizational compliance.

Regulatory compliance 

Definition

Regulatory compliance refers to an organization's set of measures and actions to ensure compliance with laws, regulations, and standards corresponding to its specific activity. This includes ensuring the protection of stakeholder rights, employee safety, environmental protection, and financial transparency, among other aspects.

Therefore, compliance with the standard is intended to ensure scrupulous respect for the law and codes in the company. To ensure that the rules are not violated, a compliance department is usually appointed to prevent the commission of offenses. This compliance team is responsible for designing policies and procedures that must be respected in the company to avoid criminal actions and legal sanctions for breaking the law.

Compliance must be a fundamental part of the organization's culture. Those responsible for enforcing the law are not only the compliance team members but also all employees of the company who must ensure the proper functioning of their workplace.

Importance

Compliance is essential in a company because it fulfills three main functions: prevention, detection, and timely reporting.

Prevention helps to avoid any non-compliance because it allows timely identification of the risks that may arise, as well as the establishment of controls to mitigate their possible occurrence. 

Detection makes it possible to find failures or deficiencies in the controls designed to avoid risks related to regulatory compliance. Once the losses are detected, adjusting them and implementing new ones is necessary. 

Finally, the reporting function is responsible for informing the organization's managers promptly and permanently about all updates in regulations, possible risks due to non-compliance, and improvement measures.

Therefore, it is essential to have a regulatory compliance program or system in every organization, regardless of its size or sector. It helps to prevent and avoid bad practices, behaviors, and crimes because it is clear the external rules and laws and the internal policies, commitments acquired with third parties, and ethical codes must be complied with.

Relevant regulations

Organizations must identify the regulations relevant to their business to ensure compliance. Therefore, they must be aware of applicable laws and regulations, implement policies and internal controls to ensure proper compliance and ensure all employees are informed and trained on relevant regulations.

  • Labor regulations

Companies must comply with laws and regulations related to employment, including labor contracts, minimum wage, working hours, workplace safety, and equal opportunity. Some of these include the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Employment Discrimination Act (ADEA), and the Americans with Disabilities Act (ADA).

  • Tax regulations

Businesses must comply with tax laws and regulations, which include filing tax returns, withholding taxes, and paying federal and state taxes. The Internal Revenue Code (IRC) and the Tax Cuts and Jobs Act (TCJA) are major tax regulations that must be complied with.

  • Data protection regulations

Businesses must comply with data protection laws and regulations, which include the California Consumer Data Privacy Act (CCPA), the Consumer Online Privacy Protection Act (COPPA), and the Information Security and Breach Notification Act (SIN).

  • Environmental regulations

Organizations must comply with environmental protection laws and regulations, including the Clean Air Act (CAA), the Clean Water Act (CWA), and the Endangered Species Act (ESA).

  • Occupational Safety Regulations

Organizations are responsible for complying with occupational safety laws and regulations, including the Occupational Safety and Health Act (OSHA) and the Workers' Compensation Act.

  • Intellectual property regulations

Companies must comply with laws and regulations that protect intellectual property, such as the U.S. Copyright Act and the U.S. Trademark Act.

  • Financial Regulations

Organizations involved in the financial sectors, such as banks and insurance companies, must comply with specific regulations such as the Financial Consumer Protection Act (CFPA) and the Foreign Account Tax Compliance Act (FATCA).

It is crucial to remember that this list of regulations is only illustrative, so the relevant rules for companies may vary depending on the type of company and its geographic location within the United States. Therefore, companies must inform themselves to ensure compliance with all laws and regulations applicable to their type of business at the state and federal levels.

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Regulatory compliance assessment

The assessment consists of conducting a detailed analysis of the company's status concerning compliance with its obligations, which may be legal, regulatory, statutory, civil, criminal, or contractual. Such an assessment requires adopting a holistic approach to help identify the obligations applicable to the organization under rules, laws, standards, and agreements.

Failure to perform the corresponding assessment exposes the organization to the consequences of non-compliance, the most frequent of which are sanctions, fines, reparations, and reputational damage.

Among other objectives, the compliance assessment seeks to identify the gap between what is done to ensure compliance and eliminate threats. The procedure requires five steps to be followed:Regulatory compliance assessment

  • Identify risks

Each area, department, or organization's location must inform about its compliance obligations in each field, legal, regulatory, and contractual. When identifying new risks, it should be considered that not all obligations are based on a regulation or law that obliges the organization to do or refrain from doing something. 

Some obligations are voluntary, such as those assumed by adopting a management standard or contractual agreements. But, for obvious reasons, some areas, such as Human Resources, Finance, or Quality, are critical to the search for potential risks. In addition, it is essential that the task is documented, and relevant records are kept.

  • Mapping potential risks

A complete list of obligations provides a clear idea of the areas where compliance gaps can be detected. But to identify the specific points, you need to map the potential risks; this is done by following up on all processes and workflows to establish where the threats are.

  • Prioritize risks in order of importance

The criteria are the same as those applied for any risk assessment: the probability of occurrence and capacity for adverse impact. Compliance with this step is essential for proper management. 

Resources are not unlimited, so focusing on the risks with the highest probability of occurrence and most damaging to compliance is essential.

  • Implement controls and verify their effectiveness

Compliance management is only as good as its ability to prevent risks. For that reason, it is necessary to design and implement controls, and it is also required to verify that those controls are adequate. 

However, more than resources may be required to control threats on all fronts. Therefore, resources are likely to be focused on high-risk areas before those that can be acted upon when the situation is fully controlled.

  • Update and reassess compliance risks

The compliance program is an essential part of the company's organizational management. As the organization grows, regulations increase, employees change, new technologies are adopted, risks increase, and new threats arise. 

For these reasons, compliance risk assessment is a task that must be performed on a cyclical basis since the continuous improvement of the system depends on it. For this purpose, these five steps must be repeated repeatedly with a focus on constantly improving the system. In addition, employee training and education are vital to achieving this continuous improvement.

Implementation of compliance measures

The actions to ensure regulatory compliance are necessary to protect the interests of organizations working in highly regulated sectors. Failure to comply with applicable regulations can result in civil and criminal penalties and damage your brand image.

To implement a compliance program correctly must be followed essential steps to meet the organization's specific needs.

In addition, it must be clear that to implement this program; the company members must be involved. Stakeholders, experts, and competent authorities must be identified to ensure their participation and leadership in the project from the beginning. Everyone must fully understand the importance of the compliance program, what must happen for its successful implementation, and its alignment with the proposed objectives. 

Although it may be a little anticipated, at this point, it is necessary to choose a compliance officer who does not need to be someone in senior management but must be a reliable and respectable person with extensive knowledge of the specific rules, regulations, and legislation to which the organization is subject. 

Authority is an essential factor within the compliance program, so the project cannot be acephalous from the beginning. Consequently, it must have a clear mandate to be able to operate correctly, and for this, you only have to follow the five steps that we will explain below:

  • Gather all policies and procedures in one place

Conducting a policy audit and taking an inventory of what exists is an excellent starting point. This helps establish a baseline for the work that comes next.

For example, compiling existing policies may reveal that they are outdated, out of context, or out of scope, or it may uncover a gap that requires a new procedure.

In some cases, all policies and procedures will include an employee handbook. In other cases, they must be compiled throughout the organization, as different departments have different operating systems.

  • Review policies and establish a plan

After everything is compiled, policies and procedures must be reviewed to stay consistent with current regulations, system objectives, or leadership expectations. This will identify any duplicate or conflicting documents or processes.

The next step is to develop a plan for updating what needs to be updated. It would help if you defined who will make those updates, who will approve them, and in what order the number and complexity of documents requiring updating will depend on the size of the project schedule.

  • Conduct a risk assessment

The main reason for implementing a compliance program is to protect the organization against the risk of non-compliance. To do this, it is essential to obtain a complete picture of the dangers facing the organization after defining the legal framework in which you operate. This, of course, involves performing a risk assessment.

Risk analysis is similar to other scenarios, such as quality or environmental management. It may be easier since the consequences of non-compliance are predictable and quantifiable. The same rule, law, decree, or regulation indicates sanction.

  • Communication

MaintCommunicationaining transparent, open, and consistent communication is vital to make the compliance program effective and efficient. From the outset, all employees must understand the importance and benefits of the program. Otherwise, it will be just another set of rules to follow.

A critical aspect of the program focuses on communication at the beginning and changes and policies that will be updated in the future. If they understand why and it is clear what the organization expects of them, employees will be willing to accept the changes. 

Therefore, an integral part of communication is training. It is not enough to update a policy; employees must understand how it applies to their daily work.

  • Ongoing monitoring and review

For the compliance program to be successful, employee compliance must be monitored, and periodic policy reviews and updates must be incorporated. Establishing a monitoring and review process from the outset ensures that the program remains relevant and becomes more efficient daily.

Review and monitoring activities lead to the identification of non-compliant employees. Accountability should be built into the program, including clear disciplinary guidelines and protocols that are actively and consistently enforced.

In addition, employee recognition and training related to the program will need to be documented. In this way, you can prove that they have had access to all the resources and training to do what is expected and the opportunity to correct their mistakes.

 

Ensuring compliance across the organization

It is essential to ensure that companies comply with the regulations applicable to their industry to avoid potential negative consequences. To achieve this, it is necessary to consider senior management, assign individual responsibilities and establish effective communication to develop a culture of compliance throughout the organization. 

  • Top management involvement

An organization's top management has a fundamental role to play in ensuring compliance, which is why it must be involved in the process from the beginning. This requires establishing a culture of compliance throughout the organization, establishing clear policies and procedures, allocating adequate resources, and regularly monitoring compliance.

  • Defining the responsibilities of each member

A key point to ensure compliance within the business organization is to attribute competencies and responsibilities to each employee at all levels and in all areas. Each individual within the company must understand their role. Their role is to achieve effective regulatory compliance and to be active participants in fulfilling the internal rules and policies in each of the activities they perform and the processes they are involved in. 

To apprehend individual responsibilities, the company must set clear objectives and competencies in each area and implement a continuous monitoring system and alerts in case of non-compliance. 

  • Reporting

Establishing continuous and assertive communication between the different levels ensures that team members are on the same page, that compliance with standards and protocols is effective, and that each individual in the business organization can report irregular situations, non-compliance or flagrant violations of internal and external regulatory standards.

To achieve this, the company must create a work environment based on transparency and accountability, in which individuals feel committed and safe to report non-compliance without fear of future consequences.

Regulatory compliance challenges and how to face them

For companies, full compliance with all regulatory standards can be a complex and overwhelming task due to the diversity and difficulty of the applicable regulations. In addition, compliance requires meticulous monitoring of all activities within each area of the organization. 

To better illustrate the obstacles that can hinder effective compliance, we present the most frequent challenges and possible solutions to overcome them.

Changing standards

International standards such as ISO standards, for example, are constantly being updated to include, permit or prohibit new situations that arise within a business organization. 

How to meet this challenge and stay caught up? This requires companies to pay attention, supported by their legal assistance team, the audit department, and any other department that allows them to know which standards apply to their internal procedures to ensure compliance. 

Difficulty of regulations 

Complying with each of the regulations applicable to a work organization can be complex, especially when the rules can be confusing or difficult to understand. Individuals need to understand the intent or objective of the law to be able to put it into practice. To address this challenge, companies must create specific policies and procedures and effective training programs for their staff to comprehend and appreciate the significance of the imposed regulations.

Poor compliance culture and ethics

The absence of an organizational culture based on ethical values that enhances employees' sense of belonging and commitment can hinder compliance. How to create such a culture? To do so, the company needs to implement policies and practices that encourage transparency of activities and employees' duty of responsibility. The focus should be on enhancing compliance because good compliance ensures a better image, trust, and the organization's growth.

Limited resources 

If the company does not have the resources to provide regular training, equipment, or technological support for all areas of compliance, it may be uphill. However, this is possible as the organization continues to grow and obtains the necessary resources; it could delegate oversight and assurance of compliance to a dedicated team.

A complex supply chain 

A complex supply chain can be an obstacle to compliance; in this case, the focal point is on the suppliers. To successfully overcome it, the company must track the activities of its suppliers and define the scope of its responsibilities. 

Finally, in the face of these five challenges, it is necessary for each organization to: 

  • Keep up to date with applicable standards.
  • Establish clear policies. 
  • Develop an ethical culture. 
  • Establish the essential resources. 
  • Monitor its supply chain.

Pirani: technology for regulatory compliance

Pirani is an innovative technology solution with a compliance module that enables business organizations to simplify, streamline and ensure compliance with internal and external laws, protocols, policies, and codes of conduct. How does the dedicated module work? It helps companies identify, manage and mitigate the consequences of non-compliance with regulations, which expose the viability of the company, its image, and the trust of partners, staff, and customers by incurring fines or penalties. 

This reliable tool allows organization members to control potential risks and monitor operations and internal procedures from a single place. Through an intuitive platform that involves and brings all members in all areas and levels in sync, for their participation in the compliance of regulations, through the decentralization of operations, and finally consolidate a culture of compliance. 

To this end, the events module allows individuals to communicate from any connected devices, including their cell phones, any irregularity, incident, or risk that may arise. The company can rely on the software to know in real-time the potential threats to which the company is exposed.

The critical point of Pirani is that it is a versatile tool that adjusts to the requirements of all types of companies regardless of their size, industry, resources, or time in the market. It can be configured and periodically updated to comply with applicable standards for effective risk management, such as ISO 31000, Basel II, and COSO ERM. 

In addition, the IT solution helps to strengthen and consolidate the trust and credibility of shareholders, partners, employees, and customers, through the implementation of well-documented policies and best practices, based on the applicable mandatory regulations, which can become a competitive advantage to gain more significant market share. 

The platform can be an ally in verifying compliance with other regulations. It centralizes company information, makes it available to members, and provides transparency and maximum visibility to internal actions and processes, making them more transparent, more accessible, and understandable to each individual. Discover how to create an easy, organized, agile compliance methodology that helps your organization grow.

Take advantage of all the benefits of Pirani!

Normative compliance Pirani

Conclusions

A company's regulatory compliance is nothing more than the actions and processes that a business organization establishes to ensure that its operations are carried out within the framework of the regulations applicable to its industry and business activities. Effective compliance ensures the company's continuity and prevents it from facing legal sanctions, financial losses, or reputational damage. It is also vital to protect your customers and drive growth through trust.

 This framework includes different regulations, such as labor, health, tax, safety, etc. Still, compliance must be the responsibility of all individuals at all levels, from executives to lower-level personnel, who must understand the importance of the practices and guidelines that govern their performance. The company's members must know why it ensures long-term sustainability. 

For its effectiveness, it is vital that the company knows how to identify the norms applicable to its activity and, based on them, can implement transparent internal processes that promote ethical values, such as equality, a supportive work environment, environmental awareness, etc. In addition, the role of the employees is vital to achieving this, so continuous and adequate training becomes necessary. Consolidating it requires follow-up and regular reviews of procedures and practices so that the company can see what it is doing well or where it is failing. 

Finally, compliance has multiple benefits for a company, as it reveals its commitment and responsibility to its partners, suppliers, and customers, thus helping to create a good reputation. It also prevents its profitability, income, and continuity from being affected by fines or sanctions. It significantly improves the relationship with workers by respecting and protecting labor rights and implementing healthy work environments.

Bibliographic references

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