No matter the size or the industry, every organisation must follow certain laws and regulations. Regulatory compliance describes the actions an organisation takes to comply with those rules and policies as part of its operations.
When it comes to data, there are rules for handling sensitive information. To be in regulatory compliance, organisations set up internal processes to keep data safe and secure. Otherwise, they can be fined, sued or even face criminal prosecution.
Why Is It Important?
Regulatory compliance isn’t just for certain sectors—it touches every industry and is a vital part of operations. While some laws for managing digital assets may add complexity to business processes, they also provide multiple benefits. For starters, they help prevent costly breaches by defining what data is most likely to be the target of a cyber attack and what must be done to protect it.
While many regulations focus on data protection, others work to keep data accurate and consistent. The benefit of better data is that it helps organisations with business continuity when disaster strikes. Some regulations also outline internal processes for managing and accessing data, which ultimately keep business practices ethical.
In short, data compliance standards are important for data safety, accuracy and consistency. This means they also affect the bottom line. If you don’t follow every law relevant to data storage and access, you could face severe penalties.
Typically, organisations must follow several federal, state, and local laws, but some regulations are specific to an industry. For example, The Health Insurance Portability and Accountability Act (HIPAA) is specific for healthcare organisations. If you store health care information, your organisation is subject to HIPAA regulations, but if it doesn’t, then it’s not subject to HIPAA compliance rules.
Although your organisation might not be subject to one regulatory standard, it likely follows compliance for at least one. It’s the organisation's responsibility to identify all the industry regulatory standards that oversee its data storage and access.
Why Is It an Important Part of Business?
Business and regulatory compliance are not the same, so it’s critical to understand why your business must stay aware of the different laws surrounding your industry. Following regulatory standards has more benefits than simply avoiding fines. They also bring financial stability and help with business continuity.
Here are a few reasons why you should focus on regulatory compliance as you build infrastructure and design corporate standards around your digital assets and data:
- Safeguard financial security. After a data breach, your organisation can be fined millions of dollars. In 2020, banks paid $11.39 billion in fines for non-compliance.
- Avoid lawsuits. A data breach leaves your organisation wide open to lawsuits, which can cost you millions of dollars.
- Maintain business continuity. Many regulations help you get through a catastrophe. Otherwise, a single major incident could cost you fines, downtime and lost sales.
- Protect brand reputation. If you lose customers’ trust, you could lose subscriptions or see a drop in sales.
- Defend against data theft and cyber attacks. Regulations can protect your sensitive data from threat actors, malware, misuse and insider threats.
Failure to Comply
It’s well worth the effort to comply with all data regulations. Non-compliance can have far-reaching effects that extend beyond financial penalties. You could even face jail time, bankruptcy and business closure.
In 2021, the average cost of a data breach incident was $4.24 million. If you run a small business, a single incident could ruin your finances and cause brand damage that impacts sales and stalls business growth. You may also lose vendor confidence, which can impact your ability to obtain goods, services and financing. Employees may even leave, especially if their own private data is lost. You may also find it difficult to attract new talent.
Plus, there are many unforeseen consequences. For example, if you violate HIPPA rules, you could lose your insurance coverage and the ability to take payments from patients on certain insurance plans. With a smaller patient roster, your revenue will decline. When it comes to non-compliance with financial regulations, you might lose the ability to accept credit cards, which would prevent you taking payment from many or all of your clients.
After you have been penalised for violations, it takes significant time to recover as you remediate any issues. During this process, you may need to redesign your entire infrastructure and change the way you do business—a scenario that can be quite costly.
Compliance Across Industries
Not only are there federal, state and local standards for how you should protect data, but there are also industry-specific regulations. It can be complicated to identify all these laws and set up internal processes for compliance management. That’s why you may want to hire an outside consultant to help.
Here are some industry-specific regulations:
- Sarbanes-Oxley (SOX). This law was passed after the Enron scandal to broadly oversee the internal accounting practices of publicly traded companies.
- Health Insurance Portability and Accountability Act (HIPAA). HIPAA defines how health care organisations should store, manage and share patient data.
- Health Information Technology for Economic and Clinical Health (HITECH). HITECH lays out how digital patient data should be collected, stored and transferred.
- Payment Card Industry Data Security Standard (PCI-DSS). This law tells merchants and payment processors how to properly store financial data and transfer it across the internet.
- California Consumer Privacy Act of 2018 (CCPA). The state of California passed this law to protect its residents. It requires any business that handles consumer data to disclose how data is used and to delete it when asked.
- General Data Protection Regulation (GDPR). GDPR is the European Union (EU) version of the CCPA. It is a strict set of rules that give EU consumers more control over how their data is stored and used. Any organisation that collects EU consumer data must honor requests for data to be deleted.
- Family Educational Rights and Privacy Act (FERPA). FERPA is for institutions that collect student data. It requires educational records to be protected from cyber attackers.
- North American Electric Reliability Corporation (NERC). State-sponsored attacks on government infrastructure are on the rise. NERC aims to protect utility and energy companies from being victims.
How Companies Ensure Regulatory Compliance
It’s a long, complex process to identify the regulatory compliance laws that oversee your organisation and control business processes. If you don’t have internal resources to get this done, you’ll need outside help. Here are some general steps:
- Identify your industry’s requirements. With a little research, you can find the laws that pertain to your organisation and its practices. For example, if you accept credit cards, look for regulatory requirements for accepting those payments.
- Learn each law’s requirements. Each law has its own compliance requirements, which vary by industry and business type. Honestly assess how well you follow these rules.
- Document your procedures. One day you may be audited. Good documentation proves your business procedures follow regulations.
- Review standards regularly. Regulations are constantly changing. It’s important to monitor updates to stay in compliance.
Regulatory Compliance in Cybersecurity
Laws to protect digital assets and sensitive data often include cybersecurity standards for infrastructure. Unfortunately, many of these standards can be difficult to understand. As a result, organisations often ignore them. If you need assistance, the National Institute of Standards and Technology (NIST) can help clear up any confusion so you can comply with the law.
Many standards outline what’s required to keep data safe, like controls for monitoring and auditing data. But cybersecurity standards don’t always require a lot of effort. Sometimes, they’re fairly simple. For example, if you install antivirus software on all desktops and mobile devices, you can meet the requirements of several laws. Also, if you install a firewall, you can prevent external attacks, which helps with compliance. These two strategies are just a few examples to get you started.
Just remember to review compliance standards for cybersecurity controls. And if you don’t have what’s needed, you can always ask vendors and consultants to help. Industry professionals can review your current setup and design a plan to get you compliant and avoid hefty fines
How to Implement a Plan
To get compliance right, you need a plan. Here’s an overview to get you started:
- Audit your environment. Assess your current risks and find the weaknesses in your environment so that you can design cybersecurity controls.
- Hire a compliance officer. You need someone who knows industry compliance regulations, stays on top of changes in the laws, and regularly audits your organisation for any mistakes.
- Provide training. Employees can’t stay compliant if they aren’t informed. Make sure to have a plan to train employees now and in the future.
- Maintain policies. After policies are created, employees must follow them.
- Continual improvements. With many plans, any weaknesses can be discovered by tracking lessons learned after a major issue. Your compliance plan should be reviewed frequently and updated with the latest changes. If your organisation suffers a data breach, use lessons learned to drive improvements so that you don’t repeat the same mistakes.
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