Why Compliance is Crucial for Small to Medium-Sized Businesses

What comes to mind when you think about business compliance? Maybe you have a vague awareness that there are regulations to adhere to, but you're a little fuzzy on the details. Perhaps tackling compliance is on your to-do list, but your (lack of) enthusiasm for it keeps pushing it back...kind of like taxes. Or, worse, you feel it's not a big priority or it doesn't really apply to your organization. Large, well-known companies know they have to maintain compliance to avoid legal problems, but smaller organizations often fail to prioritize it. Compliance is crucial for small to medium-sized businesses (SMBs), though, for a number of varied reasons. Here's what compliance encompasses and why you should be paying attention to it.

What is Compliance, Exactly?

Compliance for companies generally refers to adhering to laws and regulations that pertain to their industries. These are often related to consumer privacy. Some well-known standards that many organizations need to align with are the Health Insurance Portability and Accountability Act (HIPAA), the California Consumer Privacy Act (CCPA), and Europe's General Data Protection Regulations (GDPR). (Here's a list of new regulations in the U.S. this year that affect different industries.) Making sure to follow these regulations keeps companies in good legal standing while helping avoid data breaches.

Compliance can also describe internal processes, referring to a company's own policies and stated values. Company code lets employees know what kind of conduct is expected of them at work, allowing the organization to run more smoothly and in line with its ideals.

Managing compliance is generally the responsibility of the organization's executive leaders and human resources.

Why Compliance is Crucial for Small to Medium-Sized Businesses

Why is this so important for all companies, and SMBs in particular, to stay on top of? There are so many reasons.

Ethical Responsibility

Every organization has an ethical duty to follow the law and operate under the standards for their industry and location. You owe it to your customers and community to operate a clean business and keep their private information safe. Thinking about compliance also gives you a chance to focus on your own values and use your organization as a way to do good. For example, maybe you want to commit to environmental sustainability and therefore implement a company-wide policy that addresses the resources the business uses, recycling practices, food items offered at work, etc.

Trust & Reputation

When you stay true to your values and respect your customers' best interests, you gain trust from them. Today's consumers want more than just high-quality products or services. This is especially true for Gen Z consumers, who say that brand authenticity, transparency, and sustainability also play a big role in which companies and brands they choose. Whatever your industry, you can build a good reputation and stand out from competitors by being the one who leads in responsible practices. On the flip side, a mistake that happens due to non-compliance can greatly damage your reputation very quickly.

Streamlined Internal Processes

When expectations have been laid out ahead of time, there's less confusion if or when an issue comes up. A company codebook and employee training can outline processes both routine and incidental. Having those policies and training can also deter problems from arising: employees know not to open suspicious links, say, or they're aware of what constitutes sexual harassment and what its consequences are.

Minimized Risk ➡ Money Saved

Aside from doing what's right, you might also be interested in protecting your pocketbook. Last year the average cost of a data breach was $4.35 million. Breaches at organizations with fully deployed security AI and automation ended up costing $3.05 million less than those at organizations without these security practices. Maintaining compliance along with good security is the best way to drastically reduce your costs if you do fall victim to an attack.

A Foundation for Innovation

Finally, organizational leaders often don't realize that safe compliance sets the strongest foundation for more risky ventures as well. If you want to try bold ideas or forge a new path in your industry, you can't be worrying about whether you're going to get sued or hit with heavy fines for non-compliance. You need to know that your data and your legal standing are safe, so that you can afford to shoot for the moon in other areas of your business.

If you've been putting off compliance for too long, or you'd rather apply yourself elsewhere while someone helps take care of this for you, have a look at our Compliance Accelerators.