What is Compliance?

A brief look at the most commonly used compliance standards around the globe

Compliance stands as a core company attribute, regardless of the size of the venture or sector. Whether you want to start a new business venture or are going to start one, you will often come across compliance terms in your daily vocabulary. This is an area that business owners cannot ignore and must tackle persistently. However, many business owners are either unaware of what compliance is or are unsure about its impact on their business’s health. If you are also one of them, don’t worry; we’ve got you covered!

In this blog, we’ll talk about compliance and why it is gaining the attention of businesses. Moreover, we will have a brief look at the most commonly used compliance standards around the globe.

What is Compliance?

Generally, compliance means adhering to a specific set of rules and regulations. In order to make your business function legally, you need to abide by a specified set of industry standards, rules, regulations, and ethical conduct that are applicable to your business. These laws may include some country-specific laws, regulations from regulatory authorities, or the internal directives of the company. These standards were established to guarantee data privacy, security, financial reporting, and environmental sustainability, which are different characteristics of business operations.

Importance of Compliance

In this modern era, compliance is no longer an option; it’s a necessity. Investing in compliance will benefit you in the following ways

• Complying with laws and regulations helps enterprises meet legal requirements and avoid penalties.
• Compliance develops trust and brand loyalty.
• Proper compliance programs diminish the risks and enrich organizational resilience.
• Ethical compliance builds trust, transparency, and accountability inside the organization.
• Compliance is a differentiator that builds trust, which is an advantage in competition.
• Following accounting standards and regulations ensures financial integrity.
• Compliance is very important for managing laws and for sustainable growth.
• Complying with regulations is the hallmark of an ethical and responsible culture.
• Compliance is essential for organizations to match any changing dynamics of regulatory requirements.
• Complying with regulations results in attaining a good reputation in the marketplace.

In conclusion, compliance helps organizations comply with ethics, responsibility, and laws. These help organizations with risk management and maintain relationships with stakeholders. We will next see what kind of compliance applies to any organization or company.

Kinds of Compliance

External and internal compliance refers to two different kinds of compliance in an organization.

External Compliance

External compliance is obeying the laws, orders, and rules imposed by external bodies on businesses in a specific industry. These bodies include the government, regulatory agencies, and business associations. Examples of external compliance standards include government regulations (e.g., GDPR and HIPAA), industry standards (PCI DSS and ISO 9001), and contractual agreements between clients and vendors.

Internal Compliance

Internal compliance compiles internal policies and procedures that a company applies within itself. The purpose of this kind of compliance is to conform with the company’s standards, guidelines, and regulations. Also, they focus on being the building blocks for ethical behavior, operational efficiency, and risk management within the organization.

We now have a general idea of what kinds of compliance exist and how important they are for businesses. We will now take a look at different standards of compliance around the globe.

Compliance Standards Around the Globe

There are so many compliance standards and processes implemented all over the world to ensure that all businesses comply with ethical, secure, and responsible behavior. Here are some of the different standards of compliance commonly observed around the globe:

Compliance Standards Around the Globe

If your organization provides goods or services to European citizens or processes their data, then you need to comply with GDPR. Enforced since May 25, 2018, GDPR applies to all businesses that handle personal data in the EU, regardless of the location. Lawfulness, fairness, transparency, purpose limitation, data minimization, accuracy, storage limitation, integrity, and confidentiality all define the main concepts, while the principle of accountability stands as an umbrella for implementing these concepts. GDPR entails obligations like recognition of an individual’s consent as a legal ground for processing personal data, empowering data subjects, reporting breaches of data within 72 hours, DPIAs, giving powers to DPOs, and establishing the same protection level for international data transfers.

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA covers healthcare providers, health plans, and healthcare clearinghouses and can therefore be said to address the use, disclosure, and protection of Protected Health Information(PHI). The HIPAA assures different rules, which are, the Privacy Rule, Security Rule, Breach Notification Rule, and Omnibus Rule. These rules together build the foundation for security practices, such as confidentiality, integrity, and the availability of PHI.

HIPAA, the Health Insurance Portability and Accountability Act, is a US federal law that was proposed in 1996. The purpose of HIPAA is to protect the privacy and security of PHI, which is held by covered entities and their business associates. HIPAA ensures the privacy rights of patients and protects confidential health information. This creates an atmosphere of security and trust among healthcare providers and the public. Not following HIPAA can result in penalties, corrective steps, and reputational damage.

Payment Card Industry Data Security Standard (PCI DSS)

PCI DSS, or the Payment Card Industry Data Security Standard, is a group of security standards that, purposefully, are established in order to protect the data of payment cards during the process of transactions. It applies to organizations that process cardholder data, and it consists of the specified controls on networks, data encryption, access controls, and compliance monitoring.

Compliance involves audits and vulnerability scans to assess adherence and impose fines or restrictions for non-compliance. PCI DSS forms the last line of defense against data breaches, fraud, and identity theft. Hence, it is a crucial commodity in the preservation of electronic payment systems’ integrity and public trust.

International Organization for Standardization (ISO 27001)

ISO 27001 is developed by the International Organization for Standardization (ISO). It is an internationally recognized standard for management systems of information security (ISMS). It is a methodical process that manages sensitive data and ensures the confidentiality, integrity, and continuity of information assets. ISO 27001 demands that organizations mitigate risks, provision security measures, adjust compliance, and regularly update their ISMS. Compliance with ISO 27001 proves a strong intent to follow information security best practices. This assists in building trust and credibility between clients and partners.

California Consumer Privacy Act (CCPA)

The CCPA is a civilian privacy law in California, USA. This law provides Californians with certain rights over their personal information entities. CCPA implies the companies that process, collect, or sell customers’ data of California residents. Also, if the company meets certain revenue or data processing thresholds, CCPA involves giving consumers the following rights:

• The right to know what kind of personal information is being collected.
• The right to opt out of the sale of personal information.
• The right to demand the deletion of their personal information.

An organization not complying with CCPA may be subject to penalties, fines, and private lawsuits by individuals.

International Traffic in Arms Regulations (ITAR)

International Traffic in Arms Regulations (ITAR) is a set of U.S. government rules that apply to the export and import of defense articles. The ITAR is being administered by the U.S. Department of State. This department intends to safeguard security interests, by managing the exchanges of defense-related articles, services, and technical data. Companies involved in defense-related industries are obliged to observe ITAR regulations; which include getting export licenses, creating security measures, and keeping records. Non-compliance can lead to penalties of a very serious nature. Apart from that, ITAR is a key element in technology protection and upholding the security of the whole world.

These are some of the diverse compliance standards that are observed around the globe. International businesses need to comply with the complex landscape of laws and regulations. But which entity handles compliance in an organization? Let’s discover.

Who is Responsible for Compliance in the Company?

The responsibility of complying with different standards and regulations does not lie on any single individual within an organization. It majorly depends on the size of the organization and the structure of the organization. But generally, it is the responsibility of a compliance officer, who is the senior executive of the company. Organizations have compliance officers to ensure that their company and each individual within the company comply with industry standards, laws, and ethical values.

Other than that, the compliance officer is tasked with the development, implementation, and monitoring of the company’s compliance program. He makes sure that all verified rules, regulations, and internal policies are being adhered to. The compliance officer is the point of contact for compliance-related work. Hence, he or she may need to interact with regulatory authorities if required.

In conclusion, corporate compliance practices are important in navigating a company’s regulatory operation. Organizations can strategize their compliance activities by setting particular objectives, using available tools, conducting audits, and offering different pieces of training. Through this proactive approach, we can not only mitigate risks, but we can also create a culture of integrity and accountability, that keeps an organization credible in the long run.