Industry regulation on a global scale
Each country, state, and local government can enact laws and operational guidelines affecting multiple aspects of business operations: worker pay and safety, manufacturing processes, financial practices, data privacy, and so on. Many regulations came into force in response to abusive, monopolistic, and or fraudulent business practices. Others have come into being to address social concerns, such as worker rights, pollution, privacy, and accessibility.
Regulation innovations in one country may lead to similar regulations elsewhere. For example, the European Union’s General Data Protection Regulation (GDPR), first published in 2016 and then enforced in 2018, addresses electronic data privacy rights for its citizens. It has directly inspired 16 countries to adopt similar regulations, in part to maintain trading alliances. The California Consumer Privacy Act (CCPA 2018) is similar in scope to the GDPR, and other states have or are in process of enacting privacy legislation.1
Regulations affect all aspects of life in the US
In the United States (US), the modern era of regulation came into being at the beginning of the 20th century. In 1906 the Pure Food and Drug Act was created to address increasingly fraudulent practices in the industry and create national standards for manufacturing and sales practices. This landmark legislation eventually led to the creation of the Food and Drug Administration (FDA) we know today.2
Agencies are often granted the right to issue regulations that have the force and effect of law. Regulations are created to interpret and enforce Congressional legislation or codify standards of practice.3 The Federal Register maintains the regulations archive for 457 agencies. Most documents are available in draft form during an open comment period before final rules are published and they are grouped into six distinct areas of focus: Money, Environment, World, Science & Technology, Business & Industry, and Health & Public Welfare.4
Regulatory compliance is risk mitigation
The costs of noncompliance to regulations can be substantial. Fines, business disruption, and loss of reputation are all possible risks. For example
- In the 2020, US federal intervention costs associated with IT noncompliance is an estimated $1.9 trillion5
- In 2019, the US Department of Health and Human Services resolved 10 cases of HIPAA noncompliance and imposed than $12 million in penalties6
- GDPR fines exceeded more than $215 million (€182 million) in 2020
- 14 market days after a breach, average share price bottoms out and underperforms the NASDAQ by -3.5%. After six months, the average share price performance falls -3.0% against the NASDAQ7
Planning for regulatory compliance is essential
Recognizing and adhering to regulatory compliance is now and will remain essential in all departments, all verticals, and all operational workflows.
Successful businesses address the discipline of regulatory compliance as a strategic opportunity to mitigate risks and develop competitive advantage. C-suite compliance leaders and their staff to oversee critical initiatives like:
- Creating frameworks to ensure current business practices are legal and ethical
- Vetting third parties and evaluating contracts for compliance related expenses
- Setting up organized, transparent systems that monitor work and maintain vital records
- Using data analytics to identify areas of high risk and apply resources proactively8
For any business that wants to thrive on an international scale, a strategic approach to handling industry regulations must be baked into the foundation of every process and platform development, implementation, and growth initiative. New tools and resources must be incorporated with an eye for how they affect evolving regulations. Employees must have a comprehensive understanding of how their workflows are impacted by and affect compliance.
Regulatory change is inevitable and can be planned for. Awareness and a proactive approach can affect whether your business deals with compliance as a burdensome challenge or one of the best opportunities you can leverage in decades.
- 16 Countries with GDPR-like Data Privacy Laws (securityscorecard.com), July 2021 Security Scorecard
- A Brief History of Administrative Government | Center for Effective Government
- U.S. Federal Regulations – United States Federal Government Resources – Library Guides at University of Washington Libraries (uw.edu)
- Federal Register: Agencies
- New Ten Thousand Commandments report evaluates the sweeping hidden tax of regulation; Provides definitive assessment of Trump deregulatory legacy – Competitive Enterprise Institute (cei.org) June 2021
- How data breaches affect stock market share prices – Comparitech February 2021
- Compliance Can Make Or Break Your Company’s Reputation (forbes.com) July 2018