Ever wonder what exactly regulatory compliance is? You have little idea about regulatory compliance, in it? But I’m sure that you want to know more about it. Without delay, let’s grasp some fair knowledge about regulatory compliance.
What is regulatory compliance?
Let’s start with the definition first.
To define regulatory compliance, you must have some idea about compliance.
Semantically, compliance means conforming to a rule, such as a spec, policy, pattern or law. Regulatory compliance outlines the goals that organisations want to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws, policies, and regulation.
The number of rules and the need for operational clarity is rising. So, organisations are willingly adopting the use of consolidated and tuned sets of compliance controls. They use this approach to assure that all necessary governance requirements without the useless replication of effort and activity from resources.
Functions of Regulatory Compliance
So what are the roles of regulatory compliance?
Regulatory compliance portrays a vital role in managing risk and hazards. Typically there are five key areas of responsibilities.
Monitoring and Detection
Regulatory Compliance in the United Kingdom
The United Kingdom has noteworthy regulations. Many of these come from the European Union laws. Institutions like the Financial Conduct Authority (FCA), Environment Agency, Scottish Environment Protection Agency, Information Commissioner’s Office, Care Quality Commission, etc. also control some regulatory compliance domains.
Financial compliance of the United Kingdom
The Financial Reporting Council (FRC) issues U.K. Corporate Governance Code (formerly the Combined Code).
All publicly listed companies should give specific content in the core financial statements. The statements must include:
The roles of ISO are
Some local or international specialised organisations, for instance, the American Society of Mechanical Engineers (ASME) also promote standards and regulation policies. They provide a wide range of rules and instructions. Thus, they ensure compliance of the products to safety, security or design standards.
Regulatory Compliance Risk
Regulatory compliance risk is the damage that a change in regulations or legislation will affect security, company, or industry. It has ranked 5 among 20 business risks.
If you fail to comply with rules and regulations, your business will give penalties. It is evident in it? Are you well aware of the risk factors regarding regulatory compliance? Let’s have a closer look in it.
1. Environmental Instability
Environment and human beings are intimately related to each other. Some organisational activities may harm living organisms and the environment. So you have to keep this point always in your thoughts.
2. Health and Safety
It implies the risk associated with all aspects of the health and safety of your workplace. If any accidents or injuries take place, you have to pay a significant loss.
3. Social Sanity
In school, we have learnt that humans are social beings. You are a part of society, so as your business. Your business operation always is at risk if it harms the community people or the workers operating with you.
Corruption is a curse. Corrupt practices are those which are related to fraud, bribery, manipulation, or compromising with the quality. Your organisation may or may not be associated with these manners, but it is you who is usually blamed for the actions of your employees or agents.
5. Operation Risk
This type of risk occurs when your process will dash customers’ hopes. It includes:
6. Increase in cost
As an honest person, you always prefer quality over quantity. Again, as per the businessman’s view, you also want the volume to make a profit. An ideal business tycoon always tries to maintain a perfect balance between these two. And sometimes this balance increases the production cost, which is a risky part to some extent.
7. Tariffs and trade policies
Regulatory changes like tariff and trade policies will affect your company vigorously. Are you thinking of investing in foreign goods? Do you want to start an export or import business? You should keep this risk in your mind, I insist.
8. The bottom level of wages
Hiring a large group of low skilled labours or employees can substantially impact your company. The extended amount of minimum wages per person can be a critical regulatory risk for you.
9. Mandated holidays and sick leaves
It impacts a company’s bottom line very notably. Alteration in vacation and ill days means to give employees more time off.
Moreover, any pandemic situation like COVID-19 alone can make a giant company bankrupt. So you can’t deny the risks and always have to be prepared for this. As you know, anything can happen anytime.
Regulatory or Compliance Burden
Compliance or regulatory burden or cost is the administrative value of regulation in modes of money, time and complexity. It is the expenses that a company uses up to abide by the government regulations. Compliance cost is one of the outcomes of local, national or international laws like GDPR (for European Union countries).
Compliance cost includes the following :
Why So Important?
The term regulatory compliance is a crucial point for your business. We know that regulations are indispensable to maintain the proper functions of economies, hence societies. So you can’t nullify its weight.
Let’s point out now.
Blimey! It holds a high level of importance! Now you see why regulatory compliance is such a big deal.
Top 5 Challenges of Regulatory Compliance in 2020
The world is continuously evolving, and regulation is also increasing. The companies are the most significant witnesses of this phenomena. As for 2020, the year is full of drama and trauma!
Three-quarters of firms expect the amount of regulatory information published by regulators and exchanges to increase within the next year.
I have listed the most significant challenges for you.
In the UK, the number one topic is still Brexit! Yes, the UK has a government with a clear majority and an “oven-ready” scheme. But there’s plenty of devils hiding in the details. It is only eleven months long now, so what will be the scenario after the transition period is a bit shady right now.
The challenge arises about what will be the level of equivalence given to the financial services firms. Also, what political moves are brewing in Scotland and Northern Ireland that might hinder the whole process.
2. Artificial Intelligence
There are waves of continual legal and regulatory alterations and expectations. Firms struggle to know what is right and how best to achieve compliance. Also, they try to satisfy the internal stakeholders who hold the purse ropes and balance the books.
Majority of ‘dynamic’ compliance officers are using technology to monitor employees’ policy compliance. Indeed these systems are worthy as they allow instant entry to data and reports at the click of a button.
3. Senior Managers and Certification Regime (SM&CR)
SM and CR are like a time loop similar to some regulatory groundhog day. It was set after the 2008 financial crisis. It was the result of the outcry from the public. It is related to their perception of the lack of accountability and punishment of those running and controlling banks and other financial sectors.
4. Data Protection and Cyber Security
We live in an increasingly sophisticated world. In this state of the art world, data protection is one of the vital areas for attention. Keeping customer’s data well-protected and secure has become a more indispensable commodity than ever.
Nowadays, cyber-attacks are frequently happening. In banks, they are almost doubled in numbers within a year as a result of the overconfident officials.
You see, it’s a significant challenge that you have to face and overcome. Otherwise, you will be doomed!!
5. Email Frauding
It is a real threat! People are tricked into sharing their private info and money status now and then. 90% of data crimes have a phishing component to them. Moreover, phishers are undoubtedly resourceful and well aware about the security measures.
As per the email, phishing is very easy going. People are likely to trust emails and go to the links which the emails provide. And then the actual hoax begins! With that one click, log in details, passwords, and bank details will be collected. All these happen under the guise of a legitimate reason.
In this blog, I intend to elevate your knowledge about regulatory compliance, and it’s importance. Also, I attempted to provide some basic terminology about regulatory compliance.
I believe now you have a clear concept about regulatory compliance. If you want to start your business or join in any company as a compliance officer, you should not avoid the terms and regulations regarding this. Take it as a piece of advice from me to you as a well-wisher. Because, why not?
So, what is your thought about regulatory compliance?