Introduction: In our previous blog, we delved into the importance of creating a safe workplace…
Legal compliance is the process or procedure to ensure that an organization follows relevant laws, regulations and business rules right form the stage of incorporation followed by production, from inventory management to supply chain regularization, from availing loan, funding, investment to creating a repayment track, from customer enquiry to customer redressal and so on.
In simple terms – Compliance is a batch of processes an organisation facilitates to ensure that employees and the organisation abide by a set of rules of conduct as well as external rules and regulations. It may include the organization’s written values, its policy, the employee code of conduct, and policies for complying with legal obligations like taxes, corporate reporting.
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Why compliance is important ?
An organization, in everyday business has transactions with clients, vendors, customers as businesses have to actively engage in governance risks and compliance rules and regulations, it is vital for organizations to comply and conduct their business proceedings as per the rules, and regulations that govern every activity and transaction.
It is important to follow risk governance and compliance with the legislation by ensuring the standards set by laws are met. Absence of proper governance, risk and compliance according to the law, rules and regulations can affect business, also damage the reputation of the organisations. The act of abiding to legal compliance is vital in every business whether it is to the local market or to the foreign markets as failure to comply with the rules, regulations, policies there comes serious consequences.
Hence it is important for every organisation and Company to plan, strategize, manage, organise, and control the various business activities and transactions. The management and governance of risk and compliance can be done through the following:
- Understand top compliance risks and design a compliance risk assessment for organisations to prioritise risks.
- Build a channel for organisation compliance risk factors and methodology for risk assessment.
- Conduct the risk assessment to identify inherent risk to legal, financial, business and reputational impact.
- Provide both quantitative and qualitative measures for Effective risk mitigation as this will reduce the chances of an event going wrong and reduces possible threat to the organization.
Importance of legal compliance management policies and solutions:
For every organisation, Legal compliance is of immense importance. This is required if the organisation has entered into contracts with others such as vendors, clients. The company and the client sign and agree to the terms, conditions, and clauses of business in those contracts and agree to be bound by the legal requirements. They also agree to follow and comply with the rules, laws, regulations, and Standards set up in regard to a particular business.
In the absence of legal governance risk and compliance, there is every possibility of being sued. It also comes with accompanying damage to the reputation of the organisation and their business. Non-compliance could also make an entrepreneur land up in prison and be made to pay for the damages suffered and compensation be provided to the affected party. With proper and effective management of compliances, one can avoid all of these risks.
Standard Compliances: It is not only important to comply with the legislators’ rules, laws, bye-laws, standards and other regulations set up. It is also equally important to comply with the internal standards, policies, and Solutions set up by the organisation. This can be evident by establishing good standard operating procedures.
Why should you regularize compliance?
- It is a Company’s duty to employees, vendors and all others who have interest in the organisation to comply with the law by adhering and regulating the conduct of its employees.
- Compliance allows for innovation and continuous management as it helps to define what a company does. Codes of conduct and following compliances drive company growth.
- Compliance is the reference point against which values, policies and codes of conduct are measured, making the right decisions easy.
- Compliance reduces risk in your business by facilitating the right actions and clear understanding. An organisation is often challenged by internal threats and compliance exposes an unacceptable conduct.
So why is compliance management important in Companies?
Compliance demands expect to grow along with your organisation. Importance of compliance is seen, as issues become more complex when organisation has expanded responsibilities regarding workers, hiring, firing, discrimination, harassment, safety, wages, payroll and benefits, where compliances play a vital role.
The way an organisation makes and sells a product or service might fall under the purview of a government agency. There are so many different regulations and laws as to how a business should manage its staff, how stock is handled, how advertising is handled, the rules of engagement when buying and selling, and so many others.
When an organisation doesn’t meet some compliance requirements, then they might face costly sanctions. Failing to meet legal obligations, such as in manufacturing procedures or storing and sales methods, can attract legal complications.
Hiring a compliance expert to make sure one understands all of the legal obligations and how to comply with them. Values and organization rules and regulations can be a leverage point, and compliance focuses on driving values of an organization. There will always be set rules to make sure everything is safe & just for the organization, its staff, its consumers, and also its competing organizations.