Business success depends on many factors. Among these are innovation, customer satisfaction, operational efficiency, and revenue performance. It would seem odd to include compliance in this list, but this widely overlooked factor also plays a crucial role in the marketability and growth of an organization.
According to PWC, many organizations often need to pay more attention to associating compliance with rules and regulations, overlooking its potential as a strategic advantage. By embracing best practices, an organization can establish trust with customers more effectively. A disciplined company is better equipped to achieve its business goals. Understanding the intricacies of industry standards enables a company to overcome challenges in its operations. When a company goes above and beyond to achieve compliance, it demonstrates accountability and a commitment to excellence.
Everyday Evidence Linking Compliance to Business Success
The following examples illustrate how adhering to compliance can result in favorable business outcomes.
- A company that can readily present a positive SOC 2 report to a security-conscious prospect already outshines competitors who have yet to undergo a SOC (System and Organization Controls) assessment.
- An organization with ISO 27001 certification has removed a significant roadblock to conducting business globally.
- A merchant or service provider that complies with PCI DSS (Payment Card Industry Data Security Standards) reduces the likelihood of experiencing data breaches and credit card fraud, thereby protecting its customers and avoiding significant financial and reputational damage.
- Achieving CMMC (Cybersecurity Maturity Model Certification) allows a company to engage in contract bids within the exclusive defense ecosystem of the United States. This certification is a gateway to participating in lucrative opportunities within the defense sector.
- An enterprise keen on achieving its ESG (Environment, Social, and Governance) goals implements a comprehensive sustainability program (e.g., go paperless, use energy-efficient power sources, etc.), positively impacting the bottom line.
Business success rarely happens as a result of haphazard strategies and moonshot campaigns. For the most part, true success is the culmination of activities and efforts that are guided by purpose. Companies who take compliance seriously aim for specific outcomes that benefit their business.
These intentional outcomes include:
- Meet regulatory standards. That is the common goal for the majority of compliance activities. Innovative companies go beyond this baseline objective and aim to maximize compliance benefits. Many organizations even proactively adhere to voluntary frameworks such as SOC 2 and HITRUST CSF (Common Security Framework) to further bolster their regulatory posture and achieve other business goals.
- Enhance reputation and trust. By adhering to strident compliance frameworks, an organization demonstrates its commitment to good governance and best practices, which fosters trust among customers, partners, and investors. A company with a good compliance profile has a greater likelihood of attracting business opportunities, leading to sustainable growth.
- Improving risk management is crucial for companies as they face a wide range of legal, reputational, operational, and financial risks. Natural disasters like earthquakes and floods can cause disruptions, while human-instigated attacks such as data breaches and financial fraud can have serious consequences. Compliance with regulatory standards like GDPR, CCPA, and HIPAA is essential, as non-compliance can lead to severe legal consequences and financial penalties. Companies can effectively assess risks, address vulnerabilities, and demonstrate their commitment to transparency and best practices by proactively complying with multiple frameworks, including voluntary standards. Overall, compliance enhances a company’s resilience and ability to respond to disruptive events.
- Open door to funding and investment opportunities. By nature, investors and lenders are among the pickiest players in the business world, adeptly balancing risk and reward as they scrutinize a potential asset or debtor. They would never greenlight an entity with a questionable compliance profile. In contrast, companies with an excellent GRC (Governance, Risk Management, Compliance) culture are more likely to attract fresh capital investment or secure favorable credit terms.
- Drive brand reputation and competitive advantage. Compliance is a key differentiator, especially in sectors where businesses place a premium on good governance, information security, and best practices. In such marketplaces, companies that can provide evidence of their dependability and trustworthiness are more likely to attract customers and thrive.
- Expanding into new markets becomes easier when companies comply with international regulations and regional standards. That allows them to operate in exclusive oversight environments or cater to specific customer demographics. For instance, businesses that adhere to GDPR can legally serve EU residents, while non-compliant companies serving California residents face legal consequences and financial penalties under CCPA. Tech-intensive organizations can secure global operations with an ISO/IEC 27001 certification, ensuring business is conducted securely across borders.
The Favorable Side Effects of Compliance
While less intentional than the key benefits, these desirable side effects provide additional advantages to organizations that take compliance seriously.
- Improved operational efficiency. Compliance frameworks require companies to establish robust internal controls, processes, and systems. These generally enhance many business functions’ efficiency, accuracy, and transparency. For example, well-designed policies and procedures help reduce errors, streamline operations, and elevate productivity, which can result in significant cost reductions and better profit margins.
- Improved employee satisfaction and retention rate. Ethical governance, as detailed in ESG frameworks, recognizes the importance of the human element in corporate success, often setting benchmarks on how best to manage and reward workers. Compliance with ESG standards helps establish safe, respectful, and fair work environments, factors that drive employee satisfaction and loyalty. Note that even security-focused compliance frameworks such as SOC 2 generally include a set of ethics-related standards. As a result, organizations with excellent compliance profiles generally attract and retain the best human talent in their industry.
- Improved environment for innovation. The commonly held belief that regulatory compliance hinders innovation is only sometimes accurate. In truth, the opposite can occur when compliance necessitates the abandonment of cumbersome and error-prone practices in favor of embracing new technologies, processes, or mindsets. In such instances, compliance strengthens an organization’s capacity to adapt to disruptive changes and serves as an incentive to develop novel and superior approaches.
Complex and challenging, compliance requires the full engagement of the organization — from the C-suite to the teams directly running the back offices and the customer-facing aspects of the business. Compliance also requires significant resources to uncover weaknesses and a steadfast commitment to effect painful but positive change. Indeed, maintaining a comprehensive and ongoing compliance program can be costly and time-consuming.
However, the benefits of compliance far outweigh the costs.
Successful companies understand the risks of complacency. Data breaches, lawsuits, fines, and reputational damage can occur when companies neglect compliance. On the other hand, proactive compliance leads to growth, trust, risk reduction, and customer attraction. Embracing best practices drives efficiency and cultivates a productive culture.
Start your compliance journey with a trusted advisor’s honest self-assessment and guidance. Build a tailored compliance program and view it as a strategic investment for long-term business success, not just a regulatory burden.