Compliance is an essential aspect of running a successful business. It refers to the processes and procedures that a company must follow to meet regulatory and legal requirements. To achieve compliance, a company must have adequate policies and procedures and maintain precise record-keeping systems to document those procedures and relevant audit trails. These measures are necessary to ensure that the company operates within the law and follows best practices.
Effective compliance relies on strong corporate governance, the framework of rules, regulations, and company practices administered by senior leaders. It is the foundation upon which the company makes its decisions and ensures they are accountable, fair, and transparent to stakeholders. Corporate governance also ensures that the company is responsible for identifying which laws and regulations apply to their business and taking the necessary steps to comply with them.
To further illustrate the importance of compliance, let’s examine two regulatory standards that have a specific application but affect a wide range of companies: the Health Insurance Portability and Accountability Act (HIPAA) and the General Data Protection Regulation (GDPR).
HIPAA is a US law that requires healthcare providers and insurance companies to maintain the privacy and security of patient information. It requires covered entities to have administrative, physical, and technical safeguards in place to protect patient information and policies and procedures for reporting data breaches. Failure to comply with HIPAA can result in substantial fines and legal action.
GDPR is a European Union regulation that governs personal data collection, processing, and storage. It requires companies to obtain explicit consent before collecting their data and gives individuals the right to access, correct, and delete their data. Companies that fail to comply with GDPR can face fines of up to €20 million or 4% of their annual global revenue, whichever is higher.
In conclusion, compliance is critical for companies to operate within the legal and regulatory framework and follow best practices. It requires companies to have adequate policies and procedures and maintain precise record-keeping systems to document those procedures and relevant audit trails. Effective compliance relies on strong corporate governance, ensuring companies make accountable, fair, and transparent decisions. Non-compliance with regulatory standards, such as HIPAA and GDPR, can have significant financial and reputational consequences for companies. Therefore, companies must prioritize compliance and take the necessary steps to meet regulatory requirements.