Dealing with regulatory requirements (rules designed and imposed by governing bodies that businesses and organizations must follow) is a vital aspect of every organization’s operational blueprint. Regulatory compliance ensures that you adhere to laws, regulations, standards, and guidelines that govern the organization or industry that you operate in.
Regulatory requirements function as guardians of compliance and, in that particular role, also shape business practices in several ways. In this blog article, we are going to take a closer look at the connection between regulatory requirements and business practices. In today’s fast-paced business environment, understanding and adhering to regulatory requirements is not just a legal obligation but a strategic necessity. Regulatory requirements shape the way businesses operate, ensuring that they adhere to laws and standards that protect consumers, employees, and the market.
What is the exact relationship between regulatory compliance and business processes? What are the challenges when it comes to fine-tuning both? And how do you manage regulatory compliance effectively in a highly globalized and digitalized world and business landscape? Read on and find out!
The relationship between regulatory compliance and business processes
Regulatory requirements shape business processes in several significant ways. Let’s take a look at the major factors that determine the relationship between regulatory requirements and business processes.
Impact on workers
Almost every worker in a job has to follow some form of regulatory requirement. Especially finance, legal, healthcare, construction, trade and logistics and food are heavily regulated. Working in one of these industries and performing your daily tasks in a safe and legal manner means that you always have to take regulatory requirements into account.
Safety and ethics
For instance, in the financial sector, regulatory requirements ensure that institutions operate transparently and ethically, protecting consumers from fraud and ensuring market stability. Similarly, in the healthcare industry, compliance with regulations ensures patient safety and the confidentiality of medical records.
Woven into the fabric of business operations
Regulatory requirements influence almost every aspect of business operations. They determine the legal, ethical, and safety space in which your organization can operate. From financial reporting and data protection to environmental standards and labor laws, compliance is woven into the fabric of daily business activities.
To give you an example:
- Companies must adhere to the General Data Protection Regulation (GDPR) to protect customer data and avoid fines. This requires implementing robust data security measures and regularly auditing data handling practices.
- The same goes for international and regional trading regulations and restrictions. Non-compliance can lead to hefty fines or might even force you to put certain trading activities to a temporary or permanent halt.
Strategic decisions
Regulatory requirements also affect many strategic decisions your organization makes. Mergers and acquisitions are good examples, since these require due diligence to ensure that all regulatory requirements are met to avoid future liabilities. Failure to comply can result in legal actions, financial losses, and damage to a company’s reputation.
Safeguarding regulatory compliance in business processes: the challenges
Safeguarding and upholding regulatory compliance in business processes is an operation that comes with its own set of challenges. First of all, the regulatory landscape is constantly evolving, with new laws and amendments regularly introduced. Keeping up with these changes can be daunting, especially for businesses operating in multiple countries and jurisdictions.
Secondly, information on regulatory requirements is often scattered. Laws, rules, and company policies are spread across different documents, formats, and languages, making it challenging to keep policies continuously in sync with the important regulatory requirements that largely govern your business processes.
Regulatory requirements are also rarely cast in stone. They regularly change or evolve in time and space. These changes directly affect your business processes and require swift action on your behalf. If you want to grasp the true spirit and impact of a law or regulation and measure its impact on your business processes, you have to know how the rules and regulations came into place and have evolved over time. Without a clear historical record, it’s often very difficult to tell if rules are still applied in the correct manner.
Global technological innovation has intensified the importance of digital technology and IT in daily business operations. This digitization of the workplace has created new regulatory challenges regarding cybersecurity and data protection. Managing a highly complex IT and data landscape makes regulatory compliance modern style a potentially tricky business. Rapidly emerging technologies, such as the newest generation of AI-powered tools and blockchain, have the potential to further complicate existing compliance challenges and even create new ones. Because many regulators are still catching up when it comes to dealing with these relatively novel technologies, the danger exists that you get caught off-guard by sudden legislative changes.
Last but not least, the increased global presence of many companies requires them to deal with an often complex patchwork of regional and country-specific regulations that directly affect their daily business processes. In some cases, these regulations are conflicting or contradictory, making regulatory compliance a challenging affair. The sheer volume of regulatory requirements can also be intimidating. For instance, a multinational corporation must navigate different regulatory frameworks that encompass several continents, countries and regions.
Managing regulatory compliance effectively
Luckily, there are several best practices and high-quality tools that can help you manage regulatory compliance effectively.
Identify risks and regulations
Start out with identifying all the regulations and laws that apply to your organization. Consider not just the well-known regulations and compliance standards, but also regional and lesser-known regulatory requirements.
Design and implement a compliance plan
Once your organization has a clear picture of the current state of its regulatory compliance strategy and the regulations and risks that shape it, you can begin to draft and implement a proper plan and regulatory framework. This plan should be created among stakeholders from IT, compliance, and upper management and include which regulations you’re expected to comply with, to which processes they apply, and how you plan to achieve compliance.
Provide employees with training
Properly dealing with regulatory requirements is a responsibility of the entire organization and every member of your workforce. That’s why it’s important that your employees are kept up-to-date on the latest industry regulations and security issues related to their job and organization. Without this information, they may not understand their responsibility in ensuring regulatory compliance and unknowingly violate laws and regulations that apply to your key business processes.
Use the right RegTech tools
Achieving regulatory compliance that covers all your business processes becomes a lot easier with the right RegTech tools. These allow you to automate, simplify and streamline a lot of the manual work (collecting evidence, monitoring control performance, conducting risk assessments) and make regulatory compliance processes a lot less error-prone.
Be Informed has an advanced and comprehensive RegTech platform. It allows you to:
- Take control of your compliance sources by interpreting and translating regulations into machine-readable formats. This ensures complete traceability to the origins of regulations that govern your business processes.
- Develop models that define your business, map interpreted regulatory requirements, and develop rule-based services to gain profound insights for compliant operations.
- Creating end-to-end compliant applications for all your major business processes.
