Non compliance… To worry or not to worry?
Compliance means following established guidelines, specifications, or legislation and non-compliance means just the opposite.
Non-compliance could be full or partial. But, it is important to draw a distinction between non-compliance and unethical business behaviour. With increased globalization, there is an ever increasing number of transactions between parties in various geographies. Hence, it is getting increasingly difficult to separate out inadvertent non-compliance from unethical business practices. Many times, prosecutions are initiated against corporations and individuals for acts that were deemed unethical and illegal only after the act, with the benefit of hindsight. So, it is better to be late in complying, if situation forces, than be non-compliant for ever.
As the famous saying goes, rules are made to be broken. But, is it really the case? Being a proud and law abiding citizen is everyone’s priority – Be it an individual or an organization, however small or large the company might be. Many get overwhelmed by the cost of compliance even though the cost of non-compliance is multiple times more than that. It is like a choice between regular exercise, balanced diet & healthy life style or going through the pain of falling sick & incurring medical expenses.
So, why is the risk of non-compliance still a major headache for organizations? Regulatory compliances are mandatory in nature. Hence, not complying with them can hurt the organization in the future as most of regulatory bodies may come back asking for compliance information which are years old. In fact, there are many such occasions when different governments across the globe have tried applying regulations in a retrospective manner.
Next, regulations themselves are getting more complex and dynamic. When companies operate from different locations, keeping tab of every applicable compliance for an organization is itself a huge task. On top of this, ensuring that the identified compliances are being closed on time is the next challenge.
Further, non-compliances not only attract penalties and potential imprisonment, it also dents the reputation of organization badly. Considering this, board members of companies across the globe are increasingly becoming wary of the risk of non-compliance and realising that effective management of compliance & reputational risk in an organization requires embedding ethical business behaviour in its culture and using a tamper-proof compliance management system.