What Is Compliance Risk?
At its core, compliance risk is the risk businesses take by not adhering to the laws of the land when doing business. These laws can include everything from health and regulatory guidelines to environmental and safety regulations.
Staying on top of risks means knowing the ins and outs of your specific industry’s regulatory landscape. Numerous different regulatory bodies manage different types of industry laws. When you’re first drafting a compliance plan, it’s vital that you get familiar with those rules and regulations to ensure your company is playing within the right frameworks.
What Could Happen if You Don’t Prioritize Compliance?
The risks of not following the laws and regulations in your area and in your business could be tremendous, depending, of course, on how egregious a violation might be. Below are four issues that could jeopardize your business should you choose to not make compliance a core pillar of your company:
You Could Pay Tremendous Fines and Go Bankrupt.
If you knowingly or unknowingly violate any of the laws or regulations governing your business, you could incur tremendous fines. Monetary fines are the most common type of punishment for businesses violating a law or regulation. Some of the biggest fines in history have hit some of the largest companies and organizations. In 2014, New York Presbyterian Hospital and Columbia University were forced to pay $4.8 million for violating HIPPA regulations. In 2017, Google was charged more than $2.7 billion for manipulating search results.
These fines can wipe out a business in no time. Even if the penalties are more than you can pay, you will still be required to pay them, even if the business goes under. Additionally, if you commingled funds—or “pierced the veil”—between your business and your personal accounts, you could be personally liable for the fees that are levied against the company. This could potentially personally bankrupt you.
You Could Go To Jail.
This leads me to the second consequence that could happen if you don’t prioritize compliance: You could be personally liable and go to jail. There have been myriad examples of company executives serving jail time because they violated everything from HIPPA laws to environmental laws. Jail time can last anywhere from a year to life, based on how egregious the violation is, so it pays to tread carefully and consider what could go wrong if you don’t make compliance a priority.
You Could Face a Significant Customer Backlash and Be “Canceled.”
Beyond the hard fines and jail time you could be facing, another risk of not making compliance a priority for your company is that you could face significant revenue loss and backlash from your customers. This is more than just a PR problem. People are now more aware of how their spending impacts the world; they actively abandon brands that they do not believe stay on the up and up when it comes to compliance and even good behavior. Getting canceled can significantly impact your bottom line, your ability to pay your employees, and your ability to sustain your business. You need to ensure that your company is behaving ethically and adhering to the important compliance laws and regulations that govern your work.
You Could Lose Valuable Employees and Money.
A business is nothing without its most valuable asset: its employees. Without employees, your business cannot run or function. One of the biggest risks for companies that don’t make compliance a priority is losing valuable employees that serve as a safeguard against unethical practices. A Gartner, Inc. study found that 59% of employees who witnessed non-compliant practices in the workplace began actively looking for new jobs. In other words, employees don’t want to work for a company that doesn’t do things ethically.
What’s the Bottom Line?
The bottom line on the risk you run if compliance is not a priority for your company is that you could completely lose your company, your income, your home and your freedom. Compliance is not something to be taken lightly, nor something to blatantly ignore. Business leaders need to understand just how important it is to follow the letter of the laws and regulations to continue to do business in this world.
From a logical standpoint, compliance must be a priority. If you want to ensure that your company continues to be successful and grows into the future, compliance is an absolutely necessary piece of the puzzle to consider and take seriously. Don’t risk it all by ignoring compliance.
