Compliance: It's Good for Business, Not Just a Necessary Evil

Because it is instantly connected to regulations, restrictions, audits, inspections, and fines for breaking the rules, compliance often has a poor rap.

The majority of businesses are aware of how crucial regulatory compliance is in preventing unethical behaviour and legal infractions. It is a necessary evil, but because it is required, it also consumes important time, effort, and resources from people who would much rather be working on innovative, inspirational, and motivating projects. When organisations think of compliance, they frequently think of what they have to do rather than what they want to accomplish. Furthermore, being morally upright isn't always enjoyable.

Establish brand loyalty and customer trust

Reputation is important. Customer loyalty and trust might be jeopardised if a firm develops a reputation for noncompliance. In fact, a recent AIIM poll found that reputational damage was twice as important a motivator for regulatory compliance as avoiding fines and penalties. Because reputational risk is so significant, being open and honest with your customers will enhance their impression of you and may encourage stakeholder participation.

It is obvious to stakeholders that compliance is a major concern for your business if you have a clear, effective compliance programme. It demonstrates your dedication to operating your firm in a moral and ethical manner. The best corporate social responsibility (CSR) firms, according to Deloitte, do not see ethical, social, and environmental efforts as extras that can be tacked on to the business. As an alternative, they incorporate sustainability into their brand to make it a central aspect of their business.

Many customers look for and want to do business with suppliers and providers who share their compliance standards and set of values. For instance, stakeholders are satisfied that a company is complying and will inspire confidence among suppliers when it can establish a supply chain that is devoid of conflicts.

Streamline Operational Procedures

Regulatory compliance shouldn't be seen as just a box to be checked; rather, it can have major, beneficial side effects on corporate operations:

Encourage best practices - In areas where there may be a tendency to cut costs and corners, like privacy protection, solid recordkeeping, and IT operations, compliance can be utilized to motivate organizations to adopt rigor and best practice. Nothing spurs a business to analyze and enhance its procedures like the prospect of an impending audit or a sizable fine.

Increased awareness of the supply chain - According to the 2015 Compliance Week Trends Survey, managing third-party compliance risk is the most difficult portion of a company's

compliance risk management programme. Regulations requiring compliance supply chains compel businesses to carefully examine their third-party communities, which is a positive thing. For instance, KPMG notes that the Dodd-Frank Conflict Minerals rule may provide considerable financial benefits for organizations that take advantage of the chance to manage their supply chain environment more effectively.

Enhance Information Governance -  An effective compliance programme relies heavily on good record-keeping. The proof of compliance for auditors, regulators, and the general public is provided through business records. Consolidation, categorization, and analysis of a company's information assets thanks to an efficient information governance programme facilitate improved strategic decision-making.

Bring in and Maintain the Right Talent-  An efficient compliance services programme can boost a company's capacity to draw in and keep higher-caliber, highly moral individuals while also boosting retention rates and employee morale. Employers who don't take ethics and compliance seriously will not attract many job candidates.

Increasing the Bottom Line -

• Businesses who had above average IT governance—that is, those that had controls, procedures, and processes in place to ensure that their staff and IT systems complied with privacy and security laws—saw a 25% increase in revenues.

• When Apple said that it was 100% conflict-free of tantalum, the media jumped on the issue right away, highlighting Apple on well-known tech blogs, the New York Times, and many other media sources. What did this imply for its financial situation? Apple's stock price was $535 at the opening bell and $544 at market close. Apple had 892 million shares in circulation at the time. As a result, the market cap increased by $8 billion (892 million x $9).

• Businesses that can connect business risks to their strategic objectives are more likely to post stronger three-year profit margin expansion and yearly profit margins of over 10%.

• Ten businesses with the highest returns over the last five years were compared to the S&P 500. (chosen as the benchmark). The top 10 organizations adopting compliance software had an average total return of 247% for the five-year period under review, which is equivalent to a 28% compound annual growth rate (CAGR). The S&P 500 returned 85% overall over the same five years, resulting in a CAGR of just 13%.

A firm should have more time to concentrate on efforts that enhance competitive positioning and aid in market share growth if it spends less time dealing with regulatory transgressions. Another, maybe more obvious, inference is that avoiding compliance fines simply results in a better bottom line.

For instance, it is projected that non-compliance costs 2.65 times as much as compliance does in the area of data privacy and protection. According to one study, the average cost of data privacy compliance services for an organization is $3.5 million, compared to the average cost of non-compliance-related problems, which includes fines, business disruption, lost productivity, and legal and non-legal expenditures, of $9.4 million.

Conclusion

For the majority of firms, it is all too obvious that maintaining regulatory compliance is not just a necessary need but also becoming more and more difficult. The regulatory environment is ever-evolving, and compliance standards are getting stricter.

Similar to a tight diet, keeping and adhering to a compliance programme can occasionally make you long for simpler (and tastier) times in the past. Compliance is not only important, but it can also assist guarantee the viability of the company for a variety of reasons. Because it appears that investing in a compliance programme can be the beginning of a whole new perspective on success, much like adopting a new diet regimen.