Regulatory compliance management is the set of procedures that are necessary for every organization to follow. It helps in bringing accountability to the organization. Moreover, a practical compliance plan helps in reducing the risk associated with a company. As it prevents the events that could have adverse effects on the organization. Not only this complying with the regulations can help in enhancing the efficiency and contribute to the growth of the business.
Compliance management is the key to a successful business. It not only helps in building a better business strategy but also helps in timely compliance. There are various automated compliance management tools that make sure to send a reminder. This saves time for the organization and they never miss any deadline. It also helps in building a business reputation. Furthermore, it helps in gaining the confidence of the customers.
The regulations keep changing, and regulatory bodies implement and enforce more and more regulations. Organizations need to be agile and stay up to date on the changing regulations adhering to compliances comes with a lot of benefits. Similarly, its non-compliance has repercussions as well. Non-compliance comes with a risk of financial losses, security breaches, license revocations, business disruptions, erosion of trust, a damaged reputation, and so on.
A compliance program helps organizations comply with regulations and act responsibly. Compliance helps them follow regulations regarding labor, work safety, finance, operations, and accounting. Let us have a look at the effects of its non-compliance.
Effects of Non-compliance of Regulatory Management
Fines, Penalties, and Settlement Cost
The most obvious consequences of non-compliance are fines and penalties. To pay off these regulatory fines, businesses have to waste a lot of money. Government bodies can impose huge fines and penalties for non-compliance in any organization. The percentage of these fines varies depending on the severity of non-compliance. Non-compliance with regulations can lead to huge one-time payments or can accumulate over a period of time. GDPR fines can cost an organization up to 4% of its revenue.
Loss of Business Reputation
Non-compliance with regulations can lead to a loss of reputation for any organization. It is a difficult task for any organization to build a reputation and trust among its customers. Not adhering to regulatory compliance can cause negative publicity in the media. Furthermore, customers will start to lose confidence in the business, which will ultimately hamper its growth.
Recovering from a legal breach is not easy. The damage can last forever.
Loss of potential employees
It becomes difficult for employees to build trust in a company that is not adhering to regulatory compliance. Therefore, the potential staff keeps on switching. Employees don’t prefer to work for a company that has violated employment or another human rights law. This can cause delays in project timelines and reduce the efficiency of a business. Moreover, losing a potential employee can impact the growth of the business.
Loss of Revenue
Companies has to cease their operations when they are prosecuted for non-compliance with certain regulations. They have to wait until their errors are rectified. Hence, this leads to the loss of production. The loss of confidence by a customer in a company can cause a loss of revenue in the long run. Furthermore, the company may also be subject to stricter compliance, which could result in increased compliance costs.
Legal actions & imprisonment
Non-compliance with regulations by any organization can also lead to legal action and imprisonment. There is imprisonment for up to six months in the Magistrates’ Courts and up to two years in the High Courts for an individual. Regulatory compliance makes sure that organizations are taking the necessary measures to protect their customers. Whereas, non-compliance can lead business owners and directors to go to prison for criminal negligence.
Shutting down the company
The penalty is not the only consequence of not complying with regulations. It has some other severe consequences as well. Failure in compliance with regulations is illegal and government bodies can take severe actions against the organizations. On top of that, government authorities can also pass orders to shut down the company. It requires a lot of time and effort to start a business. Therefore, it is important to adhere to certain regulations to keep it going.
