Importance of legal compliance for businesses
Compliance in business is the act of following the rules, standards, awards, regulations and ethical practices that apply to different industries and businesses determined by law or any governing body. For every company and business, legal compliance is of prime importance. This is especially necessary if the company has entered into contracts with clients.
The act of legal compliance plays a major role in every business whether it is a big one or small. With every failure to comply with the rules, regulations, policies and to live up the standard set, come serious consequences. For this reason, it is important for every business and company to plan out, strategize, manage, organise, and control the various business activities and transactions.
The main purpose of compliance is to identify and avoid possible red flags in business or company. Failure to comply seriously could result in costly fines or penalties in the future.
Aside from the fact that legal liabilities can be a big blow to a company reputation, they can also be an instant financial loss. Court hearings and appearances can be colossal trouble to businesses operations. To be legally compliant involves not only learning essential legislation applicable to your business but also applying them at all costs.
As a rule of thumb, building a reputable public image is one way to successfully promote a business. If your company gets into trouble due to non-compliance, the general public might doubt its credibility.
In a 2020 survey conducted by Globalscape and the Ponemon Institute, it was found that:
- Hiring and utilizing in-house legal expertise saved saved businesses 2.27 million on average.
- Implementing regulatory monitoring to ensure they were keeping up with regulatory changes saved companies $1.03 million on average.
Why is Compliance Important for Businesses?
The cost of non-compliance can be high. A company may lose customers and clients, and potentially lucrative partnership deals. Companies could also lose investors and potential buyers if their reputation is severely tarnished.
No-compliance can open a business up to potential lawsuits that could otherwise have been avoided. A compliance program addresses all areas of compliance, including safety, to at least cover you should such an event happen.
Past studies have proven that businesses with solid compliance programs in place perform better than their equivalents. All in all, Compliance reduces risk in businesses by facilitating the right actions and clear understanding.