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Why Compliance in Business Important

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Why Compliance in Business Important

Regulatory compliance is any company's adherence to regulations, specifications, laws, and any guidelines that are relevant to its business category. The regulations may cover a number of any compliance guidelines, either locally or internationally. Violation of these regulations often attracts legal action which includes fines, or in some cases, total withdrawal of the company's product from the market. Regulatory compliance is basically what assures your customers of quality services and products from your side. If such strict enforcement were not available, it would leave an open possibility of outlawed products or services into the market at meager costs, hence severely devaluing the significance of some the businesses in operation, which would consequently, lead to the closure of legitimate companies due to lack of business.


The definition of compliance in the dictionary highlights vast answers defining rules-following. In the IT industry, however, the description is more complicated. Compliance, according to IT professional field, identifies the regulations that govern any industry. Generally, for compliance to exist, it heavily relies on regulation.

If you ask any compliance officer about the importance of regulatory compliance, the first answer they will give you is financial security benefits. Regulatory compliance, however, goes much further than simple financial functionality. The terms also cover environmental legislation, business systems, health and safety, and a lot of other aspects of commerce and businesses.

There are three significant players in compliance regulatory:

1. Health and Insurance Portability and Accountability Act (HIPAA)

This act was introduced in the year 1996. It is responsible for governing PHI (personal health information) or PHR (personal health records) in a company or organization. Companies and businesses that fall under this act include hospitals, nursing homes, clinics, dentists, pharmacies, and psychologists. These regulations make sure that the rights of patients in reviewing the personal health information of any professional medical attendant are protected.

2. Sarbanes-Oxley (SOX)

This is a federal United States law act established in the year 2002 as an emergency response to numerous accounting and corporate scandals. Some of the companies that were involved in these corporate scandals include WorldCom, Tyco International, and Enron as listed in the New York Times. This law was established to help in governing an organization's corporate governance. Financial reports and audits so that such a scandal can never be repeated.

3. Payment Card Industry (PCI)

This act was formed to protect every citizen's card information. There is a set of data security standards (DSS, PCI) that every credit card company is supposed to abide by. These companies include American Express, Master Card, Discover, and Visa. They are all under this compliance act whose primary focus is minimizing card payment theft and fraud. These are universal standards recognized all over the world, as stated in the WSJ.


While the law is regulation, governance means to supervise or control using a set of rules and regulations. The Executive and legislative branches of the government are therefore in charge of establishing the law, but the fourth branch of government is the one that enforces these laws. There is an Agencies act that is set to act as a governor for industries by creating guidelines that help organizations meet all the compliance requirements successfully. The term governor also represents a shorthand for an external auditor usually sent by a governing agency to test a company's compliance.

Importance of Regulatory Compliance

  1. Quality systems are considered to be a part of any legal business these days. It is also very possible that most customers prefer dealing with companies that have accredited quality systems in place. This is the reason why of the internationally recognized standards, such as ISO 9000, are featured in most internationally operating businesses. You will find that a large number of international companies that are not operating under its umbrella are gradually dwindling.
  2. In the same way, ISO 14001 is used to show a company's dedication to the international environmental legislation standards. It also indicates that your organization is ready to operate under the local environmental legislation. We can call it attention to detail meant to win more sales.
  3. Although most of the regulatory compliance standards that need putting in place and maintenance will be relatively complex and expensive and require skilled personnel to install if your business has the necessary working legislation in place, your organization is qualified to operate at a global level.
  4. High-risk business, especially those that are under healthcare services and finance, know the importance of protecting the information they gather from their customers. Their base of operations is also continually being targeted by malicious industry actors. This might not be a very alarming issue to a non-profit organization. Regulatory compliance provides some added info security because they require guidelines to protect assets and information that would otherwise be at risk.
  5. Malicious attacks are ever on the rise. For these reasons, savvy clients and customers want to be assured that companies have put measures to protect their data and information. Additionally, clients who are looking at working with third parties have substantially invested in vendor management. Regulatory compliance in an organization will act as a safeguard to protect customer data.


Not operating under these regulatory compliance standards makes it very hard to entrust personal property and data to any new entry. The standards, however, will give you the confidence and comfort to do that.

Content provided by Media Monthly.