Your Guide To Regulatory Compliance

By: Lauren Erdelyi | 6/16/2021 | 7 min read

Organizations today face enormous risks and challenges—which is why regulatory compliance is so important. By establishing best practices to abide to industry standards and government regulations, companies can help ensure they are better protected against security threats. The results? Their customers are less likely to be exploited, and they minimize the risk of exposing highly sensitive data.  

While compliance has long played a role in shaping how organizations operate, it really came into prominence in the early 21st century, after a whole raft of corporate scandals emerged and gave rise to new rules. These have proliferated since that time and today, companies have more legal rules than ever that must be followed, along with authority advice and industry recommendations. No doubt, keeping on top of these changes can feel overwhelming for business leaders.   

To help navigate this dynamic landscape, we’ve put together a useful guide that explains what regulatory compliance means, answered some of your most pressing questions, and offered practical advice to ensure you’re following best practices when it comes to keeping up with regulatory compliance.   

What is regulatory compliance? 

Let’s start with the basics. What exactly is regulatory compliance? In a nutshell, it’s defined as an organization’s adherence to laws, regulations, and guidelines that have been made by the government or an authorized body. These regulations exist to ensure that organizations operate fairly, and that the rights and safety of customers and employees are protected. And they touch virtually every aspect of a business. 

Why is regulatory compliance important, and what’s at stake? 

With an understanding of what compliance is, you might wonder why it matters to so many businesses and industries. To answer this question, it’s helpful to examine both the upsides of compliance—along with the costly repercussions of non-compliance. 

The advantages of compliance 

We’ll start with the good news: companies and organizations can see massive benefits when they ensure practices are in place to follow regulatory compliance guidelines. By  having measures in place to adhere to them, companies avoid hefty penalties and legal costs caused by non-compliance (we’ll touch on that in a second). 

Many organizations that prioritize compliance have a stronger reputation and more credibility. And when customers know that an organization is doing everything that it takes to keep them and their data safe, they are more inclined to show trust and loyalty toward it—leading to better outcomes. 

The cost of compliance 

Staying abreast of updates across industry standards is an enormous undertaking. In fact, mid-sized businesses deal with an average of 17 industry standards or government regulations, while larger, international organizations deal with more than 70 regulations. 

Organizations that are found to be in violation of regulatory compliance guidelines can face major fines, penalties, and even criminal charges. According to one Ponemon study, it’s 2.7 times more costly for organizations not to comply with regulatory mandates. The average cost of compliance is $5.47 million, compared to an average of $14.82 million for non-compliance, an average difference of $9.35 million annually.  

For some organizations, the fines of non-compliance can be astronomical. Take Capitol One, for instance. The bank was slapped with a $80 million fine for a 2019 security breach that exposed the data of 106 million customers. The cause? Failing to identify and manage risk as it moved its technical operations to the cloud.   

Financial penalties aren’t the only consequence. Perhaps an even greater repercussion of non-compliance is the damage it inflicts on one of a company’s most valuable assets — its reputation. Case in point: Facebook, which saw trust plummet after it failed to protect its users’ data through the Cambridge Analytica data leak. According to a 2018 survey by the Ponemon Institute, only 27% of respondents believed Facebook would protect their privacy and user data, an enormous drop from 79% in 2017.   

Business disruption and productivity losses are also steep risks that have lasting impacts. Companies that are found in violation of industry standards and regulatory mandates must spend vast amounts of resources and money to fix the issue, sometimes even having to close operations entirely while they do so.

What does regulatory compliance look like in different sectors? 

It’s crucial for businesses to have a solid understanding of what compliance looks like in their industry. And while most businesses are required to adhere to certain industry standards and government regulations, some industries are inherently more regulated than others. In the section below, we take a closer look at what compliance looks like within these heavily regulated industries. 

Healthcare 

It goes without saying that compliance plays a pivotal role in the healthcare industry—where a wide range of complex regulations exist to safeguard patient privacy, ensure high-quality care, prevent fraud, and more. In fact, the American Hospital Association found that health systems, hospitals, and post-acute-care providers collectively spend a staggering $39 billion a year on administration activities related to regulatory compliance.  

One of the industry’s most important regulations is the Health Insurance Portability and Accountability Act (HIPAA). The act—which was first proposed in 1996 and implemented in 2003—outlines the lawful use and disclosure of protected health information (PHI). The objectives of HIPAA are to ensure confidentiality, integrity, and availability of PHI. More specifically, HIPAA strives to create a common approach for addressing cybersecurity and privacy for covered entities and their business associates; achieve an appropriate maturity level of cybersecurity controls for covered entities and their business associates; and ensure cybersecurity risks are properly managed throughout covered entities and their business associates.  

To help ensure HIPAA compliance, the U.S. government passed a supplemental act, the Health Information Technology for Economic and Clinical Health (HITECH) Act, which raises penalties for health organizations that violate HIPAA Privacy and Security Rules.  The HITECH Act was put into place due to the development of health technology and the increased use, storage, and transmission of electronic health information.   

Education

The education sector has a vast array of regulations aimed at protecting the privacy of students, as well as also ensuring their safety while using technology.   

One of the most well-known regulation in the education sector is the Family Educational Rights and Privacy Act (FERPA), which was passed in 1974 to protect the privacy of student education records, such as report cards, test results, and disciplinary records. It essentially spells out what schools can and can’t do when it comes to student data and applies to all schools that receive funds under programs through the U.S. Department of Justice.   

Other regulations, such as the Children’s Online Privacy Protection Act (COPPA) and the Children’s Internet Protection Act (CIPA), establish guidelines when it comes to students accessing the Internet. COPPA was enacted in 1998 to give parents more control of what online information is collected from their children under the age of 13. Essentially, it requires operators of websites, mobile apps, and digital learning products to notify parents and obtain consent before collecting any personal information on their children.   

CIPA, on the other hand, was enacted in 2000 to promote student privacy and security by ensuring K-12 schools and libraries have measures in place to protect minors from accessing harmful and inappropriate online content. Compliance is required for schools and libraries that receive the E-rate discount.

Financial Services 

The financial services industry faces some of the most stringent, complex regulations in the world—with most firms having to comply with hundreds of regulations. One of them, the Sarbanes-Oxley Act of 2002, establishes strict standards for financial reporting by U.S. public companies. SOX Section 404 mandates an annual assessment by an independent auditor of the effectiveness of a public company's control procedures. As a result, IT departments, who are usually tasked with managing these audits, need to ensure that systems holding financial data can be accessed only by those whose job function requires it, that privileges are limited just to those required by the job, and a record off all activity is kept. 

Another regulation, Monetary Authority of Singapore Technology Risk Management, also known as Singapore MAS, provides a comprehensive set of IT security requirements not only for financial institutions based in Singapore, but for any financial institution that does business in Singapore. The MAS guidelines for Internet Banking and Technology Risk Management identify security and risk management issues in a comprehensive manner, covering everything from identity assurance and access controls to accountability and audit.    

Although not exclusive to the financial industry, another industry standard affecting the sector is the Payment Card Industry Data Security Standard (PCI DSS). First launched in 2004, PCI DSS ensures that any company that processes, stores, or transmits cardholder data maintain a secure environment with requirements like firewalls to protect data, anti-virus software, and encryption of cardholder data. This can include hospitals, government agencies, retailers, restaurants, and so on.   

Government 

In addition to overseeing compliance standards across a host of other industries, government agencies also have many regulations and practices they must adhere to in order to protect the data and health of citizens, prevent corruption, and secure public trust. 

The Continuous Diagnostics and Mitigation Program by the U.S. Department of Homeland Security is a dynamic approach to fortifying the cybersecurity of government networks and systems. It provides federal departments and agencies with capabilities and tools that identify cybersecurity risks on an ongoing basis; prioritize these risks based upon potential impacts; and enable cybersecurity personnel to mitigate the most significant problems first.  

The Homeland Security Presidential Directive 12 (HSPD-12) is a strategic initiative intended to enhance security, increase government efficiency, reduce identity fraud, and protect personal privacy. It requires the development and implementation of a government-wide standard for secure and reliable forms of identification for federal employees and contractors.  

The NIST Special Publication 800-Series is a set of documents (NIST SP 800-53, SP 800-171, SP 800-63) that describe U.S. federal government computer security policies, procedures, and guidelines. In many cases, complying with NIST guidelines and recommendations will help state and local government agencies ensure compliance with other regulations, such as HIPAA and FISMA. 

When it comes to state and local government regulations, the Critical Security Controls (CIS) for Effective Cyber Defense by the SANS Institute is a recommended set of actions for cyber defense that provide specific and actionable ways to stop today’s most pervasive and dangerous attacks.  

The Criminal Justice Information Services (CJIS) Security Policy are policies for protecting sensitive information like fingerprints and criminal backgrounds gathered by local, state, and federal criminal justice and law enforcement agencies.  

And there’s Minimum Acceptable Risk Standards for Exchanges (MARS-E), which defines a minimum set of standards for acceptable security risk that the Health Insurance Exchanges must address and aims to facilitate compliance with the myriad of potentially applicable federal requirements under FISMA, HIPAA, HITECH, ACA, Tax Information Safeguarding Requirements, and state requirements.    The Federal Information Security Management Act (FISMA) is a U.S. legislation that defines a comprehensive framework to protect government information, operations, and assets against natural or man-made threats.    

How can organizations maintain regulatory compliance?  

When it comes to staying ahead of compliance, there are important steps that every organization and company can take. We’ve outlined some of these below.  

Stay informed 

First and foremost, companies need to gain a solid grasp of the compliance laws and requirements that apply to the industry they operate in. Since compliance requirements are constantly being updated, it’s important to keep the pulse of these evolutions. Devote the time to scan laws, follow industry news, sign up for alerts, implement policy changes when necessary, and continually make compliance a priority. 

Make a plan 

Once you understand which regulations and laws apply to your business, the next step is to ensure plans and policies are in place to comply with them. For instance, do you need to invest in new equipment or software to ensure your data is secure? Do new procedures and policies need to be developed to mitigate risk?  

Automation and analytic tools can play a role in strengthening compliance posture, too. With Absolute, you can get alerts when essential security applications are removed, absent, or corrupted and enable them to reinstall themselves.  

Engage your employees 

Unless all employees are involved in your compliance efforts, your policies won’t mean much. So, promote a culture of compliance by ensuring employees at all levels fully understand the importance of following policies and practices—no matter their role or seniority.  

That means taking the time to train teams across the organization and ensure every employee sees how their role contributes to the bigger picture. Check in with your team on a regular basis to ensure they know where to turn to keep pace with evolving company policies. 

Be audit-ready 

All too often, compliance measures are treated as merely a box-checking exercises—but failure to assess effectiveness is a major reason why many compliance programs aren’t as successful as they should be. And when the time comes to be audited, companies can face steep fines and penalties as a result of not following the regulations that apply to their industry. With Absolute, companies can assess cyber threats and risks on an ongoing basis, respond immediately, and ensure they’re prepared to prove that they are protecting sensitive data when asked.   

The future of compliance  

Regulatory compliance plays a profound role across many industries—and is critical in minimizing the cyber risk exposure of companies, employees, and consumersAs the landscape becomes increasingly complex, it’s more important than ever for organizations to ensure strategies and solutions are in place to adhere to these rules.  

When it comes to maintaining and proving compliance, there are a number of important capabilities that companies should look for in a technology solution. Businesses need tools that enable them to detect and respond to potential threats from anywhere. When it comes to audits, businesses should look for solutions that generate on-demand compliance reports to prove they are protecting sensitive data. With a wide range of solutions, Absolute can help do just that.

Discover how Absolute can help you stay compliant - book a demo now.

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