How to Ensure Regulatory Compliance for SMBs
Small and midsized businesses (SMBs) are the cornerstone of the US economy. Today, there are over 33 million SMBs in the US, constituting 44% of GDP and around half of all employment. These are enterprises with less than 1000 full-time employees and under $1 billion in annual revenue. SMBs employ and do business with a large slice of America, so the employee safety, consumer data, and environmental impact of these businesses are regulated through state, federal, and international laws. Ensuring regulatory compliance for SMBs is crucial for the long-term health of your business.
Regulatory compliance is a company’s adherence to the laws and regulations relevant to its business processes that are designed to protect people and data. By following appropriate compliance standards, SMBs can protect and prepare themselves from data theft, cyber-attacks, and disasters.
Put simply, regulatory compliance means following the rules and laws that are put in place to protect employees, customers, information, the environment, and other factors covered by industry specific regulations. This may sound daunting, especially for companies lacking personnel dedicated to meeting compliance. Business owners may choose to prioritize areas such as branding, revenue generation, and expansion over regulatory compliance, but they may end up paying dearly down the line. Not following regulatory compliance can lead to fines of billions of dollars and, of course, loss of trust and business from customers.
This article will discuss how to ensure regulatory compliance for SMBs, examining the common types of compliance found in the US. Read on to learn more about recent developments in US and European compliance laws relating to data protection and privacy and other internet-related compliances that may affect SMBs. To wrap up, we will introduce how regulatory compliance software such as Microsoft Purview Compliance Manager can help you to stay on the right side of the law by managing your data compliance.
What, exactly, is regulatory compliance?
Regulatory compliance means keeping your business on the right side of the laws that govern how businesses operate. To ensure regulatory compliance, a business must first fully understand the rules it must follow, then disseminate this information to employees and take steps to ensure that everyone walks the line.
There is no one-size-fits-all approach to regulatory compliance, as individual organizations are typically required to follow local, federal, state, and often international laws. On top of this, various industry specific regulations exist. In healthcare, for example, the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act are both enacted to protect patient privacy. To comply with HIPAA, healthcare organizations must protect patient data to the required standards. More on HIPAA compliance later.
Staying compliant requires that businesses understand and stay up-to-date with the laws and regulations that apply to their industry. It is possibly a cliché, but when it comes to regulatory compliance, things really aren’t what they used to be. By this, we mean that when it comes to compliance, there is now much more red tape than there used to be. For example, the Occupational Safety and Health Administration (OSHA) has greatly improved workplace safety over the past fifty years. This is undeniably a positive outcome and requires both employees and employers to closely adhere to regulations.
Regulatory compliance management continues to grow in line with the evolution of laws and regulations. These include the Family Medical Leave Act, Americans with Disabilities Act, as well as Equal Employment Opportunity Commission laws, Fair Labor Standards, and wage and labor laws. In order to comply with increasingly strict and complicated regulatory compliances, many companies today have dedicated corporate and regulatory compliance managers on board.
What are the types of regulatory compliance?
As we touched on above, there are several different types of regulatory compliance that SMBs need to be aware of. It is important for you to research the regulations that apply to your individual business, but for the purposes of this article, we will now cover four types of compliance that most businesses have to adhere to.
When thinking of financial regulations, or lack thereof, the first image that flashes into many of our minds may well be of the Lehman Brothers, the Enron case, the Wall Street crash, or even Gordon Gekko’s motto: “Greed is good.” Banking and financial services regulations have gotten much stricter over the past decades. These are continually changing, complex regulations put in place in order to safeguard the interests of the US financial system, businesses, and customers. The most well known of these is the Sarbanes-Oxley Act (SOX). SOX is a federal law, enacted in 2002, requiring a high degree of transparency in reporting and financial record keeping for corporations.
The latter half of this article will deal with data security compliance in more detail. Here we will provide an overview of data protection regulations. The Payment Card Industry Data Security Standard (PCI-DSS) is a data privacy law that protects the security of customer information. General Data Protection Regulation (GDPR) is the world’s toughest privacy and security law. GDPR was drafted and passed by the European Union in 2018, protecting consumer rights over their personal information. GDPR compliance is required of any organization globally that targets or collects data related to people in the EU. The Health Insurance Portability and Accountability Act (HIPAA), mentioned above, is a privacy rule protecting the medical records and personal health information of Americans. HIPAA also specifies the responsibilities of healthcare providers in safeguarding patient information.
Since the Wage and Hour Division was created in 1938, various labor laws have been enacted at the state and federal levels to protect employees from unsafe working conditions, discrimination, termination of employment and eligibility for leave of absence. The Fair Labor Standards Act (FLSA) is federal law that established minimum wage, overtime pay eligibility, record keeping, and child labor standards affecting employees. As mentioned above, OSHA, founded by Richard Nixon in 1970, is tasked with protecting the health and safety of America’s workers by setting and enforcing regulatory standards, as well as by providing training and education.
The US Environmental Protection Agency (EPA) is responsible for developing regulations to protect the environment from various forms of man-made pollution and damage. Businesses in every sector must comply with regulatory environmental compliance. The EPA develops and enforces a range of environmental regulations including the Clean Air Act, the Clean Water Act, and the Toxic Substances Control Act. Businesses must ensure that they follow the latest environmental regulations and engage in reporting to remain in compliance. Through regular inspections, the EPA ensures that businesses are in regulatory compliance, further offering compliance assistance programs to help businesses and other organizations meet environmental regulatory requirements.
Why must my business comply with these regulations?
The laws and regulations listed above, as well as other industry specific policies, are designed to protect people, institutions, and the environment. Regulatory compliance ensures the integrity of business processes, mandating that companies maintain security and ethical standards. Think about the products and services that you buy on a regular basis in America— most likely you don’t have to worry about being sold snake oil when you just want an aspirin. Your rights and freedom are protected by regulatory compliance keeping businesses in line. It is worth noting here that regulatory compliance is not the same as corporate compliance, which is following internal regulations. Combined, the two types of compliance can ensure ethical conduct and accountability in an organization.
By following regulatory compliance, businesses can avoid steep financial penalties and protect themselves from damaging lawsuits. On top of this, what more does a business have but its good name? By complying with regulations, businesses provide customers with a sense of security and trustworthiness, building and maintaining a solid reputation. In the field of data protection, regulatory compliance increases customer trust: if they feel that their data is safe with you, they will continue to use your services. The points above can lead to increased profits and better overall health of SMBs.
These are laws like any other laws, and if they are not followed, the consequences can be severe. Many SMBs start because the owners are passionate about the products or services they provide. Often, owners may not have the time to take the steps to fully understand and comply with regulatory requirements. Alas, ignorance of the law is no excuse. By failing to invest the time and funds and managing the technology required to ensure regulatory compliance, SMBs may pay dearly.
What happens if businesses don’t comply?
Every year, businesses worldwide pay many billions of dollars in fines for failing to meet regulatory compliance standards. Take a deep breath because the numbers are staggering. Companies lose, on average, just over $4 million in revenue as a result of a single non-compliance event. Fines and penalties vary greatly, but the cost of non-compliance is estimated to be three times more than the cost of compliance. Non-compliance also leaves businesses open to lawsuits, regulatory audits, and even imprisonment. Whatever business you are in, chances are that a quick internet search will yield many examples of SMBs who fell foul of the law.
What are the latest compliance laws?
Compliance laws are constantly changing, adding to the challenge of staying compliant. Here we will focus on data protection laws, namely the GDPR, HIPAA, and CCPA.
“The right to be forgotten” is a key part of the EU’s General Data Protection Regulation (GDPR). This regulation, adopted in 2016, serves as a model for the majority of new laws worldwide regulating the protection of and movement of personal data. This guide will assist your business to GDPR compliance.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was discussed earlier in this article. The act created national standards, protecting patient health information. HIPAA regulations ensure the confidentiality and security of protected health information (PHI) when it is transferred, received, handled, and shared.
The California Consumer Privacy Act, is a state statute first introduced in 2018. The CCPA is intended to increase consumer protection and privacy rights, allowing any consumer in California to demand to view the information a business has collected about them, and exercise rights over what happens to that data. The California Privacy Rights Act (CPRA) followed in 2020, further expanding consumer privacy rights and creating the California Privacy Protection Agency to implement and enforce state privacy laws.
In addition to the CCPA, Virginia, Colorado, Connecticut, and Utah also have enacted state consumer data privacy laws, imposing similar obligations on businesses in regard to transparency and control of personal information.
The Cybersecurity Information Sharing Act (CISA) was passed by the US Congress in 2015. CISA is also short for Cybersecurity & Infrastructure Security Agency, America’s cyber defense agency. This act encourages businesses to inform CISA of cyber threats, providing liability protection for companies that share such information. With the goal of improving the sharing of cyber threat information between government and businesses, the Department of Homeland Security (DHS) both receives and shares threat information with American businesses.
How can you ensure that your business is compliant with new regulations?
With all of this information, how are SMB owners supposed to navigate these murky waters? Luckily for you, many companies have already jumped through the hoops of gaining GDPR and CCPA compliance, so here are a few tips to follow.
Identify the requirements that oversee your industry and business. Depending on your location and customer base, different laws will be applicable, and with research and preparation, you lessen the likelihood of non-compliance. Look into these laws and how they apply to your business, and identify any requirements that your company does not meet.
Document your business processes and consumer data. Understand the data, where it came from, who it is shared with, how it is stored and protected, and be prepared to meet consumer requests for their data.
Manage your data wisely by appointing a dedicated data protection officer to work with customer data and ensure regulatory compliance. Maintain policies and frequently review compliance plans. Invest in a compliance management solution such as Microsoft Compliance Manager.
How can Microsoft Purview Compliance Manager help my SMB stay compliant?
Thankfully, Microsoft has created a comprehensive compliance management solution to help SMBs meet HIPAA, Data Privacy, ISO 2700, ISO 27018, NIST 800-53 standards, and more, depending on licensing agreements. Available to organizations with Office 365 and Microsoft 365 licenses, Microsoft Purview Compliance Manager helps to manage your SMB’s compliance requirements including certification, inventory of data protection risks, regulation and certification changes, as well as measuring your compliance through a dashboard.
After inputting the compliance guidelines that your business is required to follow, Microsoft Purview Compliance Manager gathers data, identifies issues, and reports progress, helping you to stay informed and compliant. Microsoft Purview Compliance Manager consists of four main components: controls, templates, assessments, and improvement actions.
Controls define how you assess and manage people, configurations, and processes in order to stay compliant. The compliance manager assesses Microsoft-managed and shared controls, updating your activity on a daily basis.
Templates are available in a prebuilt form and customizable to your unique requirements. Microsoft provides over 35 prebuilt templates, including the Sarbanes-Oxley Act, GDPR, and HIPAA.
Assessments relate to the compliance template that you have specified. The score given illustrates the progress made toward addressing controls and achieving regulatory compliance.
Improvement Actions centralize your compliance activities and suggest actions required to align your business with the compliance regulations chosen in templates. When regulatory changes occur, users will be notified by an improvement action.
Check out Microsoft Purview Compliance Manager today, and witness how it can increase compliance for your SMB. However you feel about it, regulatory compliance, particularly in data privacy, is not going to go away. Whether you are just starting out in business or running an established SMB, the sooner you ensure that you are data compliant, the better! Hopefully, by using the information in this article, along with Microsoft Purview Compliance Manager, compliance can be smoothly integrated into your business. And, as we mentioned before, compliance looks good, so do your research, get ahold of data privacy, and the sky’s the limit.
Edmund is an English copywriter based in New Taipei City, Taiwan. He is a widely published writer and translator with two decades of experience in the field of bridging linguistic and cultural gaps between Chinese and English.