No matter what industry you operate in, all organizations must comply with laws and regulations which are relevant to their industry. Particularly in today’s global marketplace, the sheer volume of laws, regulations, and standards is vast and can be overwhelming.
What Is Regulatory Compliance?
Your business must adhere to state, federal, and international laws and regulations. This is called regulatory compliance. These laws can differ based on the industry you operate in or the size of your business, although some laws will apply to all companies.
Most businesses will need to comply with laws in the following categories:
- Employment laws
- Licensing laws
- Health and Safety laws
- Tax laws
- Privacy and Data Protection laws
What’s more, regulations are constantly evolving. This can make measuring your regulatory compliance difficult. You might have worked hard to ensure your operations comply fully with the relevant laws and regulations, to discover shortly afterward that there has been a change. Regularly adapting your operations can ensure you are fully compliant.
Why Is Regulatory Compliance Important?
Maintaining regulatory compliance is essential. When you fail to comply, you run the risk of costing your business a lot of money in fines or even lawsuits. Although it can seem complicated and the regulations are there to make your life more difficult.
The true purpose of regulations is to protect your customers, employees, and ultimately your business.
Measuring regulatory compliance can protect your business by ensuring you avoid those costly fines and lawsuits, as well as protecting your reputation!
How To Measure The Effectiveness Of Regulatory Compliance In Your Business
Ensuring you have a comprehensive and effective approach to measuring your regulatory compliance is of the utmost importance. Below are five ways to ensure you are effectively measuring regulatory compliance in your business.
Carefully measure your KPIs
Like in many aspects of business, it’s easy to become overwhelmed with data. But companies often prioritize data in other areas of their business and overlook data related to compliance.
You would track and analyze data in other departments, for example, tracking employee expenses using expense reporting software. So why not track your performance when it comes to regulatory compliance?
Gathering and analyzing data is essential, but it is important to ensure you choose the metrics that matter when it comes to measuring the effectiveness of regulatory compliance in your business.
Choose the key performance indicators – or KPIs – that will most effectively measure how well your operations comply with relevant laws and regulations. These KPIs may differ from industry to industry, but generally speaking, you may want to consider the following:
- How often does your business review and update policy documents
- The number of policy violations and their nature
- How often is compliance training offered to employees
- How much do compliance violations cost your business each year
- Number of employee complaints of misconduct
Complete a compliance audit to establish a baseline for your regulatory compliance and identify any problems or areas for improvement. Once you identify areas for improvement, ensure you tackle them and review your progress over time.
You may want to consider using dedicated compliance management software, which can provide you with the data you need on a single platform. These can give you the full picture of compliance across your organization and make reporting on key compliance metrics much more effective.
Ensure you have effective policies and procedures
As part of your compliance audit, you will want to review your policies and procedures and ensure that they are fit for purpose. They need to address the specific laws and regulations your organization is bound by and set clear guidance for those affected by them.
It’s not good enough to just ensure your policies and procedures are in place though. They need to be regularly reviewed and updated, and they need to be used properly! One of your KPI metrics for compliance should be how often employees are required to read and review these policies.
To protect your business, ensure you track when employees have read and reviewed policy by asking them to sign their name and date your document, for example. Tracking protects your business by ensuring that if an employee violates a policy later down the line, you can prove that they read the relevant policy, which reduces your liability.
The best way to reduce violations from employees is to create a positive compliance culture in your organization. A compliance culture is when all members of your organization value integrity, and complying with company policy is something they want to do, not just something they have to do.
Hire a dedicated team for compliance management
The sheer volume of laws and regulations that must be complied with may cause you to consider employing a dedicated compliance management team. Depending on the size of your business, this may be just one person. For larger organizations, you could have a whole team dedicated to compliance.
This team would implement and oversee all aspects of your compliance. The tasks can include creating policies, dealing with violations, and delivering employee training.
Hiring another team might sound costly, unnecessary, or simply like too much hard work. Plus, how will you know that the team is productive and effective? Using workforce management solutions can provide meaningful data to ensure that your team has the desired effect on your business outcomes.
Alternatively, you may find it beneficial to work with an outside agency that specializes in compliance management. They can work with you to find a system for compliance that works best for your organization.
Develop regulatory compliance training
Your employees need to have thorough training and development opportunities to ensure they understand the importance of regulatory compliance. Without this training, employees may not realize how these regulations impact their day-to-day jobs.
This training should be linked closely to your policies and procedures and reinforce the behavior you require from your employees. You should regularly review your compliance training program and consider using a test system to ensure employees retain the information.
As with your policies and procedures, you need to ensure your training programs are up-to-date and relevant to your industry. A robust and effective employee training and development program can greatly benefit your business overall, so it’s definitely worth investing in.
Continually monitor progress and improvement
The importance of continually monitoring progress and improvement cannot be stressed enough. Regulatory compliance is not something you tackle once and then move on from. It is an ongoing process that needs to be continually reviewed.
Ensure you regularly build in time to review and audit your compliance procedures. Track changes in regulations and laws you are bound by and ensure your organizational operations are compliant.
Those KPI metrics you identified earlier – track them over time. Measure the effectiveness of your training programs, and identify your compliance strengths and weaknesses. Use a hosted contact center solution to reach out to your customers or other external stakeholders.
Your regulatory compliance has an impact on your reputation after all, so it may be worthwhile tracking their opinions too! It is only then that you can identify the next steps and move forward with improvements to regulatory compliance in your business.
The Importance Of Regulatory Compliance
By now, you should understand what regulatory compliance is and why it is so important. Take the steps set out in this article to ensure you effectively measure regulatory compliance in your business and take steps to improve it continually.
Doing so not only protects your customers and employees but protects your business and your reputation too.
Jesse Liszka is the Senior Communications Specialist at Paylocity, a leading provider of cloud-based payroll and human capital management software. She is a highly experienced communications, client marketing, and content specialist with more than 12 years of experience. You can find her on LinkedIn.