An Ultimate Guide to Regulatory Compliance
Cyber Sierra
Trust is your ultimate currency. We help you unlock trust by simplifying compliance.
What is Regulatory Compliance?
Regulatory compliance refers to the process of adhering to laws, regulations, and guidelines relevant to a business or industry. It involves implementing policies, procedures, and practices set by governments and respective regulatory bodies to ensure that an organization operates within legal boundaries. By complying with these compliance requirements, companies can avoid penalties, legal risks, and reputational damage. Effective regulatory compliance also helps organizations build trust with stakeholders, maintain operational integrity, and support long-term business sustainability.
Regulatory compliance management and regulatory compliance requirements vary significantly depending on the industry, vertical, jurisdiction, and business geography. For organizations with a global footprint, it becomes increasingly important to comply with regulatory compliance requirements across the wide range of geographies they operate. Also, certain industries, such as financial services, information technology, and healthcare, include more complex regulatory risk management. The reason is simple: the impact of these industries on aspects of the economy, business, and infrastructure is significant.
According to Navex Global’s 2023 Definitive Risk & Compliance Benchmark Report, 76% of risk and compliance professionals stated that ensuring their organization builds and maintains an ethical culture of compliance was a very important or absolutely essential consideration in its decision-making processes.
Importance of Regulatory Compliance
Regulatory compliance has become more important than ever, as businesses are now more susceptible to cybersecurity breaches. Moreover, the significance of regulatory compliance is indispensable for the following reasons:
In a nutshell, be future-ready to manage and mitigate risks when regulatory compliance management is in place.
Challenges in Regulatory Compliance
Adhering to regulatory compliance is not that easy. Going back to the Titanic example, even when the rescue team wanted to help, they faced many challenges. Rose jumped back onto the deck (she was crazy and in love, of course!), passengers grew agitated, clashes broke out, and more. Similarly, regulatory compliance management comes with its own set of obstacles.
Just as the Titanic crew had to navigate tumultuous situations amidst the sinking ship, businesses must steer through turbulent waters to achieve and maintain compliance. Changing regulations, complex requirements, data management issues, and resource constraints can all act as icebergs threatening to derail your compliance efforts.
However, just like the bravery of the Titanic crew inspired hope, a comprehensive plan can guide your organization safely through compliance challenges. With the right map, tools, and expertise, you can chart a course towards fully adhering to all relevant rules and standards governing your industry.
1. When Regulatory changes keep changing
Regulatory compliance requirements have experienced a surge in recent years, posing significant challenges for compliance teams across various industries and regions. Major regulations worldwide have undergone substantial revisions and upgrades, such as Singapore’s Compliance Code of Practice (CCoP) 2.0, Hong Kong’s Hong Kong Monetary Authority (HKMA) guidelines, the United States’ Federal Trade Commission (FTC) regulations, and Australia’s Comprehensive Income and Risk Management Program (CIRMP).
These evolving regulatory requirements demand continuous adaptation from compliance professionals to stay abreast of the latest standards and requirements. As regulations become more stringent and complex, compliance teams face mounting pressure to maintain comprehensive knowledge and effectively manage their organization’s compliance obligations. Failure to keep pace with these changes can result in substantial risks, including financial penalties, reputational damage, and potential legal consequences.
2. When finance and technology joined hands
The integration of technology into financial services brings undeniable benefits, but it necessitates increased collaboration between fintech and traditional institutions. This collaboration is essential to address potential overlaps and gaps in regulatory compliance requirements. Regulatory authorities face the challenge of understanding and regulating the combined characteristics of these entities from both financial and technological perspectives. As a result, there’s a growing need for new regulatory guidelines, particularly concerning anti-money laundering (AML) and privacy, to safeguard consumer security.
3. When cybersecurity and data privacy risks became common
Increasing global footprints and digital transformations have made all of us heavily rely on third-party technologies. There is a rise in cyber-attacks and data privacy issues when there is a third party involved. Third-party risk management is one of the top things to achieve in regulatory compliance management for every regulator. Proper data management and cybersecurity practices are the need of the hour.
4. Cost of compliance management
Besides the significant fees and penalties of non-compliance, budget constraints are a very important challenge for many businesses when it comes to regulatory compliance. While the costs associated with compliance are undeniable, it’s crucial to recognize that a strategic, enterprise-wide approach can not only mitigate these expenses but also unlock long-term benefits.
5. Building a proactive compliance culture
Establishing a strong culture of compliance is crucial for promoting good employee conduct, especially with the rise of remote and hybrid work models after the pandemic. Amidst these changes, the growing importance of culture and conduct risks highlights the need for compliance teams to encourage proactive reporting. However, achieving this goal presents numerous challenges. From effectively communicating regulatory updates to instilling a sense of caution regarding compliance management risks, compliance teams face the difficult task of ensuring that every employee is well-informed and engaged. Overcoming these obstacles and emphasizing the significance of regulatory compliance across the organization emerges as a formidable challenge for compliance teams.
Regulatory Compliance by Industry
The nature of regulatory compliance management and regulatory compliance requirements vary depending on different industries. Certain industries require heavy regulations compared to others.?
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1. Regulatory compliance for financial services
The financial services industry demands a tailored approach to compliance management due to the comprehensive and complex nature of regulations it is subject to. These regulations are designed to uphold stability, transparency, and consumer protection within the sector.
Regulatory bodies such as the Securities and Exchange Commission (SEC) , the Federal Reserve in the US, the Federal Information Security Management Act (FISMA), and the Financial Conduct Authority (FCA) across geographies, oversee compliance.
Regulatory compliance requirements mandate anti-money laundering (AML) regulations, know-your-customer (KYC) requirements, data security standards, including Payment Card Industry Data Security Standard – PCI DSS), and other financial reporting, regulatory standards such as Generally Accepted Accounting Principles – GAAP).
Furthermore, specific jurisdictions like Singapore (Monetary Authority of Singapore – MAS), India (Reserve Bank of India – RBI, Securities and Exchange Board of India – SEBI), Australia (Australian Prudential Regulation Authority – APRA, Australian Securities and Investments Commission – ASIC), and Hong Kong (Securities and Futures Commission – SFC, Hong Kong Monetary Authority – HKMA) have their own unique regulatory frameworks governing the financial services industry.
2. Regulatory compliance for energy suppliers
Regulatory compliance in the energy suppliers industry mandates regulations for safety and environmental protection. Regulatory risk management for this industry aims to ensure safety, environmental protection, and efficient operations. These include compliance requirements related to environmental regulations (e.g., emissions standards, waste management), safety standards (e.g., Occupational Safety and Health Administration – OSHA in the US), and industry-specific regulations governing energy production, distribution, and pricing.
3. Regulatory compliance for government agencies
Government agencies are subjected to strict compliance regulations. This mandate helps in achieving equality for everyone and encourages ethical staff behavior. Compliance management for the government sector includes federal, state/provincial, and local laws, as well as regulations specific to the agency’s mandate. These can be budgetary regulations, procurement laws, and administrative procedures acts. Ethical standards are indispensable, and regulatory complaint requirements here foster avoiding conflicts of interest, maintaining transparency and accountability, and adhering to codes of conduct and ethics guidelines.
Since government agencies deal with sensitive information, such as citizen data, financial records, and classified materials, compliance with data security and privacy regulations is crucial to protect this information from unauthorized access, disclosure, or misuse. For example, in the United States, you are expected to comply with laws such as the Privacy Act, in the European Union, you are expected to comply with the General Data Protection Regulation (GDPR).
They are also required to ensure accessibility and non-discrimination in the delivery of their services and programs. This includes compliance with laws such as the Americans with Disabilities Act (ADA) in the United States, which mandates accessibility accommodations for individuals with disabilities.
4. Regulatory compliance for the healthcare sector
Healthcare companies require strict compliance laws. This is obvious as they store a lot of sensitive and personal patient data. Hospitals and other healthcare providers are built majorly on trust and reputation. This requires them to exhibit the necessary steps that they have taken to comply with certain regulations, such as patient privacy rules, including providing adequate server security and encryption.
How Does Regulatory Compliance Work?
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Regulatory compliance works as a systematic process. It enables organizations to adhere to relevant laws, regulations, standards, and guidelines that govern its operations. Here’s an overview of the process it entails:
1. Identify applicable regulations:
The organization first identifies the necessary regulations, laws, and standards relevant to its industry, jurisdiction, and activities. This process requires thorough research and understanding of the regulatory landscape.
2. Assessment and analysis:
?Now that the applicable regulations are identified, it’s time to conduct a comprehensive assessment to understand the specific regulatory compliance requirements and implications for its business operations. This is usually done by analyzing the regulatory provisions, assessing current practices, and identifying any areas of non-compliance.
3. Developing a compliance framework:
The assessment is done and the findings are ready; now the organization develops a compliance framework that clearly outlines compliance management policies, procedures, controls, and measures that will ensure adherence to regulatory compliance requirements. Now, the roadmap for achieving and maintaining compliance is ready.
4. Implementing controls and processes:
Kudos! The compliance framework is in place now, and the organization implements the necessary controls, processes, and systems to operationalize the outlined compliance requirements. This is usually executed by establishing protocols for data protection, implementing safety procedures, conducting employee training, and integrating compliance into everyday business operations.
5. Monitoring and review:
One thing that needs to be understood is that compliance is an ongoing process. It requires continuous monitoring and constant review to ensure that the controls are effective, that the regulations are being followed, and tracking any changes in requirements are promptly addressed.
6. Documentation and reporting:
Every organization should maintain detailed documentation of its compliance efforts, including policies, procedures, records, and reports. Regulatory compliance documentation not only serves as evidence of adherence to regulatory requirements but will also be required for regulatory inspections, audits, and reporting obligations.
7. Adapting to changes:
Regulatory requirements will keep changing due to new legislation, updates, and evolving industry standards. Here, the organization stays informed about changes in regulations relevant to its operations and immediately adapts its compliance efforts accordingly.
How to Implement a Regulatory Compliance Plan?
Congratulations! You’ve made the wise decision to establish a robust regulatory compliance plan for your organization. Navigating the complex landscape of industry regulations can be daunting, but fear not – Cyber Sierra’s proven 8-step framework will guide you through the process, ensuring an effective and rewarding implementation.