Every industry — from financial to pharmaceuticial — needs to follow certain regulations in order to operate safely and efficiently. As those regulations change, the companies must adapt to those changes. This is to not only remain in compliance, but to also ensure they are operating legally. Poor regulatory change compliance can have a number of risks and impacts for organizations. These can include financial penalties, reputational damage, and operational disruptions. Poor compliance can also lead to increased regulatory scrutiny and more trouble obtaining licenses or permits. In some cases, it may even result in criminal charges, business loss, and the compromising of sensitive customer data (financial, identity, etc). Here are four risks and impacts of poor regulatory change compliance to watch out for at your business.
Data Security Issues
As the world becomes increasingly digitized, data security issues related to poor regulatory change compliance are becoming more and more common. This is especially true for companies that deal with sensitive information, such as financial institutions. Data breaches can be incredibly costly in terms of the financial toll they take on a company. In addition, they can also damage a company’s reputation irreparably.
In order to protect both their bottom lines and their reputations, companies need to ensure they are complying with the relevant regulations for their industry. When data breaches occur — sometimes through not following regulations and other times through hackers — companies have to follow several mitigation procedures. They need to stop the data loss, identify where the problem occurred, get a forensic team involved, and fix any vulnerabilities. The process of updating, monitoring, and enforcing regulations is similar. If you do not follow the proper data security regulations, you could be putting your customers’ data at risk. This could be quite costly down the road (and might result in some legal trouble).
Legal Problems
Speaking of legal problems, they can be big issues related to not keeping up with compliance measures. Legal trouble is not something you want to find your business dealing with at any time. So, why would you risk it by now following up with, implementing, and enforcing regulatory changes? A company that does not adapt to new regulations will likely find itself at a disadvantage. Poor enforcement of regulatory changes can result in hefty fine as well as legal problems. Statistics show that the cost of legal issues related to non-compliance can be significant. Costs and damages can go up into the millions of dollars, so companies need to be proactive about regulatory change compliance so they do not fall into any legal quagmires.
Business and Reputation Loss
No business wants to deal with reputation issues. A poor reputation at your business can be bad for anyone. It can negatively affect the bottom line, deter customers from coming in, and cause problems with getting partners in the future. It can also cause regulators to take notice and result in compliance issues. Not only is a bad reputation damaging to the company’s brand, but it makes it difficult to recruit and retain top talent as well. Recovering from a poor reputation is a lot of hard work and can be accomplished with the right processes. Not conforming to regulatory change compliance can put customer data in danger. Alternatively, it can cause legal issues that might lead to reputation loss. Avoid this by staying up to date with your regulatory compliance, enforcing changes, and addressing changes in real time.
Fees and Fines
Businesses that do not meet their obligations when a change occurs can face stiff penalties and finds. Imagine a price change occurred or there is a change in terms for a user agreement that involves customer data. If the customer is not informed of these changes, then the company is not complying with regulations.
This can open up the table to lawsuits, fees, and fines associated with non-compliance. According to the National Consumer Law Center, fines and fees related to not complying with regulatory change or enforcing it properly at your organization can cost consumers millions of dollars each year. That is not just bad for your customers. It is bad for business. In addition to fines, businesses might be obligated to pay for the cost of compliance, training employees, and implementing new procedures.
Keeping Up with Regulatory Change
A good regulatory change management system should be agile, efficient, and effective. In order for your company to stay on top of these changes, you need to be able to track them, implement them, and audit them. Otherwise, you are just going to be creating more work in the long run. Moreover, you will be running into some of the issues we have discussed in this article. Using a blend of artificial intelligence based regulatory change management software solutions and employees who are willing to take on the arduous task of monitoring and enforcement, you will be able to stay on top of regulatory changes as they happen and avoid any pitfalls over time.
