The consequences of non-compliance are different for every industry. Some laws and regulations apply to organisations in a specific industry, and some apply to all businesses. GDPR, fraud and corruption are threats that are relevant to all companies. Consequences may include penalties and other fees, criminal proceeding, sanctioning and imprisonment.
All clear motivations to justify compliance efforts, right?
But this is only the tip of the iceberg – the potential impact goes far beyond your bottom line. To understand the true cost of a non-compliance event, you have to consider hidden costs that come from business disruption and damage to your company’s reputation.
• Reputation damage: This is one of the most overlooked costs of non-compliance. Repairing a damaged reputation is difficult and often hard to accomplish in a timely fashion.
• High employee turnover: Employees witnessing non-compliant workplace practices are more likely to actively begin searching for a new job.
• Business disruption: businesses are often forced to implement compliance changes before they can resume operation. And if new processes need to be introduced to ensure compliance, further disruption can occur while these are implemented.
• Productivity/Revenue loss: the opportunity cost associated with the downtime of systems and human capital expenditure to non-core business activities.
You will find that the cost and work involved in compliance may be high, but rest assured, the cost of non-compliance is far higher. As the saying goes, “the best defense is a good offence.” Being proactive in your compliance program goes a long way. When you consider the time it takes to rebrand and regain customer trust, solid compliance practices can save your business.
External Compliance refers to regulatory compliance i.e. the rules, regulations and industry standards set by the law. These are mandatory guidelines you must follow to stay in business e.g. Anti-Money Laundering / Countering the Financing of Terrorism.
Internal Compliance, on the other hand, refers to following the rules, protocols and codes of conduct set by your business. Having your own compliance program can help your business avoid internal conflicts and maintain high operating standards.
• Keep track of changing laws and regulations
• Ensure you have strong Policies and Procedures and keep them updated
• Ensure you take a comprehensive approach to governance, risk and compliance in all its form.
• Schedule regular internal audits
• Train your employees to be compliant
• Invest in the right compliance management software
You may find that looking at compliance regulations as a value creation exercise instead of a cost cutting one and bringing compliance onboard will be one of your greatest assets as opposed to liability.