Why is compliance essential? In any business, compliance refers to conforming to a rule, regulation, standard or law. Compliance functions make sure that an organization adheres to external rules and regulations, as well as internal policies and procedures.
An effective compliance program can protect your company from legal penalties, damage to its reputation and loss of customers or funding.
It can also help you avoid compliance risks in the first place by ensuring that your business practices are up to date and meet industry best standards.
Compliance is essential for businesses in heavily regulated industries, such as healthcare, finance, energy and manufacturing. These businesses need to comply with a range of compliance standards, set by government agencies, professional bodies and other third-party organizations.
The most common compliance standards include:
- Healthcare: HIPAA, HITECH, Joint Commission
- Finance: Sarbanes-Oxley, Gramm Leach Bliley Act, Basel Accords
- Energy: North American Electric Reliability Corporation Critical Infrastructure Protection Standards
- Manufacturing: International Organization for Standardization, Occupational Safety and Health Administration, ANSI/ASQ Z1.9
Your business may need to comply with one or more of these compliance standards, depending on the industry you operate in.
The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that requires healthcare organizations to protect patient health information. HIPAA compliance involves implementing physical, technical and administrative safeguards to protect patient data.
Organizations that fail to comply with HIPAA can be subject to civil and criminal penalties of up to $1.5 million.
The Sarbanes-Oxley Act (SOX) is a federal law that requires publicly traded companies to implement internal controls and procedures to prevent fraud and financial misrepresentation. SOX compliance involves implementing processes and controls to ensure the accuracy of financial reporting.
Organizations that fail to comply with SOX can be subject to civil and criminal penalties, including jail time for executives.
The North American Electric Reliability Corporation (NERC) is a not-for-profit organization that oversees the electric grid in North America. NERC compliance involves meeting a set of critical infrastructure protection standards designed to protect the electric grid from physical and cyber threats.
Organizations that fail to comply with NERC can be subject to fines of up to $1 million per day.
The International Organization for Standardization (ISO) is a global body that sets standards for a wide range of products and services. ISO compliance involves meeting the requirements of ISO 9001, a quality management standard.
Organizations that fail to comply with ISO can be removed from the ISO Register, which could damage their reputation.
The Occupational Safety and Health Administration (OSHA) is a federal agency that sets safety and health standards for the workplace. OSHA compliance involves implementing policies and procedures to protect employees from workplace hazards.
Organizations that fail to comply with OSHA can be subject to fines of up to $70,000.
The American National Standards Institute/American Society for Quality (ANSI/ASQ) is a national organization that sets quality standards for a wide range of products and services. ANSI/ASQ compliance involves meeting the requirements of the ANSI/ASQ Z1.9 standard, which covers quality management in the manufacturing industry.
Organizations that fail to comply with ANSI/ASQ can be removed from the ANSI/ASQ Quality Register, which could damage their reputation.
So, which compliance standards does your company need to follow? It depends on the industry you’re in. Make sure you do your research and find out which compliance standards apply to your business. Failure to comply with the applicable standards could result in hefty fines or even jail time. That’s why it’s so important to make sure you’re in compliance with all of the standards that apply to your business.