Regulatory compliance is a set of rules organisations must follow to protect sensitive information and human safety. Any business that works with digital assets, consumer data, health regulations, employee safety, and private communications is subject to regulatory compliance. Organisations that fail to comply risks being fined for violations and could lose important vendor relationships.
Why Is It Important?
Most organisations dread the many procedures necessary to ensure regulatory compliance, but these rules often benefit businesses in many ways. They help define the data that could be a target for hackers, and the standards define what must be done to protect this data from cyber-attacks. With proper compliance standards in place, an organisation can better protect itself from costly data breaches.
Following compliance regulations also helps with the integrity and reliability of data. While many regulations focus on data protection, some rules also ensure business continuity to ensure that your organisation can respond quickly to a disaster, both physically and virtually. In addition, the standards are valuable to employees and customers because they improve the ethics used to run the organisation and store data.
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.
If you don’t follow regulatory standards, it could cost your organisation millions of dollars in fines for violations. Not only are compliance standards necessary for data protection, but they should be followed to avoid impacting business revenue.
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:
- Financial security: Non-compliance can cost your organisation millions of dollars in fines after a data breach. For example, non-compliance cost banking organisations $11.39 billion in 2020, a significant sum for a single mistake.
- Avoid lawsuits: You leave your organisation wide open to future lawsuits after a data breach due to non-compliance. Any lawsuits filed against an organisation after a data breach could also be vulnerable to millions of dollars in settlements.
- Business continuity: Many regulations ensure that your organisation can recover and sustain operations through a catastrophe. Without regulations, just one major incident could bankrupt your organisation in fines, downtime, and lost revenue.
- Protect your brand reputation: Another major revenue impact is damage to brand reputation after a significant data breach. Your organisation could see a significant loss in subscription revenue (if it offers services) or a drop in product sales after customers lose trust in your brand and no longer want to buy from you.
- Defence against hackers: The digital side of regulatory compliance protects your sensitive data from a data breach. Cybersecurity standards protect your data from hackers, malware, misuse, and insider threats so that employees do not inadvertently disclose data.
Failure to Comply
When organisations ignore local, federal, and state regulations, they open themselves to numerous lawsuits and hefty fines. Significant negligence could mean jail time for people involved and permanent business losses. It could also mean bankruptcy and business closure. It’s well worth the effort to ensure that your organisation follows all necessary compliance regulations and implements the proper standards.
The average cost for a data breach in 2021 was $4.24 million per incident. A single incident may significantly impact your organisation’s finances, especially if it’s a small business trying to grow. Brand damage costs unforeseen loss in sales that stalls business growth and affects continuity.
The negative impacts of lost trust reach beyond customer retention and loyalty, impacting confidence from vendors and employees. It can harm your ability to obtain goods, services, and financing from vendors. Employees might leave after a significant data breach, especially if the data loss involves their own private data. Subsequently, brand damage may affect your organisation’s ability to attract additional talent.
For regulations such as HIPAA, non-compliance could mean the loss of insurance company support and the ability to take payments from patients that use these specific insurance plans. This penalty would impact your revenue by limiting the patients you can see. Many financial regulatory standards subject you to similar penalties and eliminate the types of credit cards you can bill for products and services.
After non-compliance penalties, your organisation must spend significant time to recover and remediate any issues. Redesigning infrastructure and changing the way you do business can be costly as well. It requires continuing to conduct business in a specific industry where you were found to be non-compliant.
Compliance Across Industries
As we’ve seen, your organisation’s specific industry informs the regulatory compliance standards you must follow. Several standards may oversee how you do business and store data, but you should always research the regulatory compliance requirements that directly impact your business or industry. Many organisations need outside consultation to help understand the regulatory compliance standards that affect their business and the business processes that must be put into place.
Here are a few regulatory compliance requirements and the industries they oversee:
- Sarbanes-Oxley (SOX): After the Enron scandal, SOX compliance was introduced to broadly oversee internal accounting for publicly traded companies. An internal audit may be necessary for organisations unfamiliar with SOX to ensure accounting practices are up to standards.
- Health Insurance Portability and Accountability Act (HIPAA): To improve the safety and management of patient data, HIPAA oversees the way healthcare organisations store, view, manage, and disclose patient data.
- Health Information Technology for Economic and Clinical Health (HITECH): HITECH controls how healthcare organisations work with digital patient data, including the ways data is collected, stored, and transferred.
- Payment Card Industry Data Security Standard (PCI-DSS): As credit card fraud continues to rise, PCI-DSS helps merchants and payment processors properly store financial information and transfer data across the Internet.
- California Consumer Privacy Act of 2018 (CCPA): To better protect consumers in California, the state passed CCPA regulatory standards to ensure that any business working with California consumer data must openly publish how businesses work with consumer data and remove it from its system per consumer request.
- General Data Protection Regulation (GDPR): Similar to the CCPA, GDPR is the European Union (EU) version. GDPR is a strict set of regulations that give EU consumers more control over the way corporations store and use their data. Any organisation that uses EU consumer data must have controls in place to allow consumers to have their data deleted upon request.
- Family Educational Rights and Privacy Act (FERPA): For education institutions that collect student data, FERPA requires schools to properly protect student data and put controls in place to stop attackers from stealing educational records.
- North American Electric Reliability Corporation (NERC): State-sponsored attacks on government infrastructure are on the rise, and NERC aims to protect utility and energy companies from being victims of cyber-criminals. The standards help utility organisations reduce the risk of a compromise and potential impact on residents.
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. It usually takes outside help if you do not have the internal resources to help guide you in the right direction. However, here are a few ways that you can get started with compliance strategies to ensure that your organisation meets regulatory requirements:
- Identify the regulatory requirements that oversee each industry: With some research, you can determine which laws affect your organisation based on location and your business industry. Ensure that you also cover regulatory compliance requirements for taking credit card payments if you allow customers to pay for products and services online.
- Determine requirements for each law: Each law has its own compliance requirements depending on your business and how you do business. Identify where you currently meet and do not meet requirements.
- Document your procedures: You may be audited in the future, so good documentation lays out how your business procedures follow regulatory compliance standards to avoid fines.
- Review and monitor standards regularly: As the cybersecurity landscape changes, so do regulatory requirements. It’s important to monitor changes in compliance standards to ensure that you continue to comply.
Regulatory Compliance in Cybersecurity
One major aspect of compliance is the protection of digital assets. Cybersecurity is a critical component of compliance, but it’s one of the most difficult for organisations and their operations people to understand. Organisations such as the National Institute of Standards and Technology (NIST) help with this confusion so that administrators and other key stakeholders can follow standards to meet compliance requirements for digital assets and data.
It’s not uncommon for organisations to focus on other aspects of regulatory compliance and ignore the importance of the cybersecurity standards set out for infrastructure. Cybersecurity compliance focuses on consumer data protection and privacy, infrastructure to stop external and internal threats, and education of employees to ensure they are aware of the importance of data privacy. Monitoring and auditing logs are often a part of requirements and help ensure that data is properly handled. Still, you must have several cybersecurity controls in place to bring your organisation to compliance.
Some simple methods can be used to keep your organisation compliant. For example, installing antivirus software on all desktop computers and mobile devices meets the requirements for several laws. Having the proper cybersecurity infrastructure (e.g., firewalls) to stop external attacks also helps with compliance. These two strategies are not a complete method for staying compliant but help get you started.
Always review standards for cybersecurity controls, and if you don’t understand these strategies, employ the appropriate vendors and outside contractors to help. These professionals will review your current setup and design a plan to update your current controls so that you can stay compliant and avoid hefty fines.
How to Implement a Plan
Before you start implementing compliance standards within your organisation, you first need a plan. Training is usually part of a plan, but compliance experts will create a strategy that you can then implement.
Here are a few steps to implement a compliance plan:
- Audit your current environment: Assess risks, identify components that could be at risk, and find the weaknesses in your current environment so that you can design future cybersecurity controls.
- Hire a compliance officer: For ongoing compliance, you need someone who knows how to review current and future compliance regulations and audit your organisation for any mistakes so that you can bring it back to compliance before suffering a data breach.
- Maintain policies: After policies are laid out, employees must follow them to stay compliant. Policy management and employee training are often needed to ensure that everyone knows how to maintain compliance.
- Training: Employees can’t ensure compliance if they don’t know what’s involved in data protection and privacy. It’s important to have a plan to train employees, both current and future.
- Continual improvements: With many plans, any weaknesses can be discovered through lessons learned after major issues. Your compliance plan should be reviewed frequently to improve it and update it with the latest changes. Should your organisation suffer from a data breach, use lessons learned to drive improvements so that the same mistakes are not repeated.
How Proofpoint Can Help
Designing, planning, and implementing compliance programs require the help of someone who knows how to assess risk and put the proper controls in place. Proofpoint can help you plan compliance strategies to better avoid hefty fines and data breaches. We offer solutions that help you meet several compliance standards and give you better control of data and business continuity.