Let’s face it: regulatory compliance is not a phrase that makes most companies happy when first encountered. After all, it usually comes with a host of new rules and details that must be incorporated into your business; both for practical reasons and to avoid legislative issues that may arise from not adhering to them.
The truth, however, is that seasoned professionals understand that compliance is an overall benefit to their company if the regulations are taken seriously and implemented correctly. Your first manner of business, in a bid to reach this level of acceptance, is finding a regulatory compliance officer. It’s an issue that warrants the dedication of a competent operator, since there’s a direct correlation between business success and regulatory guidance in the c-suite.
By Ken Lynch, Reciprocity
What Is Compliance and How Does It Help?
Simply put, compliance means adherence to a set of regulations. This is especially important in the IT sector and the healthcare industry, where sensitive business and consumer data can be very costly to put at risk – especially when that risk can be mitigated. The details of compliance is specific to the particular set of regulations, which is just one of the reasons why having a knowledgeable compliance officer is such a valuable asset to the company.
Regulation as the Basis of Compliance
It follows that in order to have compliance at all, you need a set of rules to follow. This is where regulation comes in; experts convene to derive the best ways to protect the consumer and business from both internal and external threats. Once these are written out and approved, various regulatory agencies are tasked with the enforcement of the rules. For example:
- HIPAA: This is the Health Insurance Portability and Accountability Act, established in 1996; it regulates the protection of patient information and is overseen by the US Department of Human Services (HHS).
- PCI DSS: This is the Payment Card Industry Data Security Standard, and it is administered by Payment Card Industry Security Standards Council; it involves internal or external qualified security assessors.
- SOX: This is the Sarbanes-Oxley Act of 2002, which oversees the laws concerning the documentation of financial compliance as set by the Security and Exchange Commission; the Public Company Accounting Oversight Board (PCAOB) is tasked with enforcement.
Regulators are the agencies that provide access to documents and resources that helps businesses and organizations meet the requirements for compliance. For the more comprehensive regulations, external auditors are available to test your company’s compliance and suggest a rating that can then be used to market your products and services to consumers (to your benefit).
Understanding the Parameters of Risk Management
The first order of business for your compliance manager is to assess the viable risks that are facing your company. This is very important, because it is unlikely you’ll actually be able to protect against them all – or, in fact, that you’d even want to. Risk assessments are all about discerning the ones which are cost-effective to actually combat; if, for example, there’s a remote chance that a specific vulnerability is exploited, and the damage done is minimal if so, then it could be a risk you have to live with. Again; if only in the interest of cost-effectiveness.
Hence, a crucial part of the risk management discernment process is identifying the ones that are too costly to mitigate. Of course, there’s must be a commensurate property: the impact must not be exorbitant – just in case the vulnerability is exploited.
The reason that many of these regulations apply in tiered fashion is because risk rises with the amount of business that a company conducts. If you own a small shop, for example, then the low volume of trading you do is unlikely to be targeted for a cyber attack, for instance. For reasons such as this one and others, then, it doesn’t usually make sense to implement end-to-end encryption inside the office space, since this comes at great cost that is usually assuaged by the economies of scale that dominate the enterprise level.
The Protection Afforded by Regulatory Compliance
At its root, regulatory compliance stems from first making a risk assessment; the former cannot even be effectively broached until you have an assessment of the likely risks to which your business network is exposed. This entails first defining risk, and then categorizing the ones that your company faces:
Risk: The probability of a threat to your business (external and internal), multiplied by the resulting impact of said threats.
As you can quickly discern, by this definition, different industries would have different amounts of risk – all other things being equal (company size, etc). Healthcare, since it deals with confidential patient information that is protected by HIPAA, for example, would have higher inherent risk because of the value of the information to malicious actors. This also covers the damage that accidental release could render.
Regulatory compliance is intended to provide companies with guidelines that shore up other aspects of their business that they might not naturally pay as much attention to, but which nonetheless presents security risks.
Regulatory Compliance Helps Profits
The manner in which compliance helps improve your company’s bottom line is straightforward. With large corporations such as Target and Equifax suffering breaches in the past few years, consumers are very much on alert for companies that take data protection seriously. They are, in a sense, voting with their feet as they shift their business to those that can market the safety precautions they take, along with their services and products.
The way to do this is to use audit reports. These, more than anything else, help other businesses and consumers know that you are up to speed with protective regulatory compliance. With you, they know that their data will be secure; which helps consumer acquisition and retention rates. Outsource your auditing for best results, unless your company is large and robust enough to conduct it internally.
Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT. Learn more at ReciprocityLabs.com.
This is a guest post and does not necessarily represent Compliance Consultant’s view or approach and should not be seen as an endorsement or recommendation.
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