Ignorance of law is no excuse and that means all businesses have to find out which regulations apply to them, and then learn how to comply with these. Compliance management is costing billions of dollars every year for US businesses, and is no more just an incidental issue.
Business Regulations
The range of business regulations can be truly amazing to the new entrepreneur. Right at the start, the businessperson has to find out whether the business can operate from the location he or she is planning to set it up. Zoning regulations might not permit the business to operate from residential areas.
Next will usually come the issue of the licenses, permits and clearances that the person might have to obtain. Considerations such as public hazard, environmental pollution, national security issues and government policy might require that certain types of businesses have to get a license or clearance in advance.
Though highly distracting, the above requirements are insignificant compared to those imposed by Sarbanes Oxley Act (SOX) and the Health Insurance Portability and Accountability Act (HIPAA).
SOX generally applies to bigger businesses such as listed companies. Compliance is a big issue, with top managers made personally responsible to ensure that the financial statements published by the company are accurate. In a large enterprise, this is possible only through rigorous control systems and continuing audit. Audit requires the preservation of practically every kind of document that a business originates or receives, which is usually a hugely expensive proposal.
HIPAA says that a business is responsible for maintaining the confidentiality of all personally identifiable information about individuals that comes into its possession. This is no simple task as employees of the company typically become aware of the information and the company has to ensure that the information does not go out through them.
Document discovery, which means electronic discovery in these days of electronic documents, is another requirement all businesses have to worry about. It involves the legal obligation to produce documents required by the parties to litigation. If required documents are not "discovered," it can mean summary and adverse judgments against the defaulting company, leading to huge financial losses.
The nature of compliance requirements is thus varied and burdensome.
Compliance Management Program
The starting point of compliance is becoming aware of the laws that apply to the business. There are Web resources that can provide invaluable help in this matter. In the US, there is the Business Gov website maintained by the Small Business Administration. This website focuses on the issue of business-government interactions, including the numerous regulations that apply to business.
Next comes the issue of managing the compliance at a reasonable cost. Organizations like Information Systems Audit and Control Association publishes the best IT practices to help compliance. There are also training programs that can equip an organization's employees with the awareness and skills needed to ensure regulatory compliance.
The critical issue is that management must be conscious of the need to pay specific attention to compliance, in addition to running the business. Non-compliance has big costs, much beyond the obvious fines and penalties that may be imposed by enforcement authorities. Failure to comply can lead to employee terminations (including senior managers), lawsuits, public censure, loss of supplier contracts, and even bankruptcy.
It might be worthwhile to retain the services of third party compliance services providers, who have the necessary specialized expertise and experience.
Regulatory compliance is a critical business management issue, as it has the potential to destroy a business. And compliance is becoming an increasingly complex. Conscious and sustained attention is needed to ensure that all the varied requirements are met.
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