Learn the Difference Between Regulatory & Corporate Compliance
No matter the industry, your business operates in there are bound to be rules and regulations set forth by the government that you have to follow. For example, if you run a rental car company, the Environmental Protection Agency (EPA) may require you to only rent out cars that meet minimum emission standards.
This example falls under what is known as regulatory compliance. Let us look at what regulatory compliance is and why it is different than corporate compliance.
Regulatory Compliance Definition
Regulatory compliance is the set of rules and regulations set out by the government that organizations must follow to operate. These rules and regulations are not the same for all industries or even all businesses, so it is important you know what guidelines your organization must follow to be in compliance.
When a business is in regulatory compliance it means all the rules and regulations set forth by a local, state, federal, or even international government for that organization or industry are met.
An Example of Regulatory Compliance
One of the best-known cases of regulatory compliance is the Sarbanes-Oxley (SOX) Act of 2002.
The SOX Act came about because of the general distrust in the financial world after some high-profile fraud cases. Many people called for a change in the decades–old regulation that was running the financial industry.
The act made many changes to existing regulations and set forth strict punishments for those who broke the rules.
The Sarbanes-Oxley Act is a notable example of regulatory compliance because, for corporations to operate and be in compliance, they must assure they are following the guidelines set out by the government.
Why Regulatory Compliance is Important for Your Business
By not following regulatory compliance standards, your business is exposed to potential lawsuits and fines.
To protect your business from these risks you need to make sure you stay up-to-date on regulatory rules and regulations to keep your organization in compliance. Not only does staying in compliance save your business money, but it also protects you from some unforeseen dangers of business.
For example, if we go back to our rental car example, following the rules set forth by the EPA will keep you out of trouble when it comes to environmental protection and will keep your customers happy. If you have environmentally conscious customers, they will feel satisfied doing business with you knowing you are doing your part to not only follow the rules but also protect the environment.
What is the Difference Between Regulatory & Corporate Compliance?
Now that we have talked about regulatory compliance, let us look at how it is different than corporate compliance.
Corporate compliance is compliance set by an organization; this is the compliance your business is responsible for tracking. Corporate compliance often has the goal of making sure those who they work with are following the rules set forth on them.
For example, if you own a rental car company, you work with vendors. These vendors could be car cleaning services, car pickup services, or mechanics. When working with these third-party vendors, you want to make sure they carry the right insurance coverage so in the case of an accident they have coverage and you are not left liable.
Making sure these vendors comply falls back on you since your organization is setting the rules.
As you can see, corporate compliance is different from regulatory compliance because in the case of corporate compliance you are responsible for setting the rules and assuring they are followed. With regulatory compliance, the rules are imposed on your organization, and the government body who sets the rules makes sure they are being followed.
How to Consolidate Your Corporate Compliance Program
There is nothing easy about regulatory compliance, but when it comes to day-to-day business activities, corporate compliance can be difficult to handle.
To make this process easier, most businesses use a certificate of insurance (COI) tracking software to track which of their vendors are in compliance and which ones are not.
If your organization does not have software to track compliance, now is the time to start. Schedule a free product demo with SmartCompliance to see how this software will help you increase your organization’s compliance.