The True Cost of Non-Compliance in Business
The cost of non-compliance is more than twice that of compliance costs. Although some companies might be tempted to continue running the way they always have, rather than changing to meet new compliance requirements, this can have significant financial – and reputational – impacts. According to a study by the Ponemon Institute and Globalscape, being compliant can actually save you money, thanks to the onerous cost of fines, business disruption and loss of revenue.
Compliance is a big business, no matter what industry you work in. As your operation begins to expand, compliance costs will too. It’s also important to realise that expanding into new markets all over the world will incur much higher compliance costs than operating solely in one location.
What are compliance costs?
Compliance costs encompass everything that goes into keeping a business compliant with relevant regulations.
In addition to local and national industry regulations, compliance costs can be incurred as a result of international regulations. As a company begins to expand its global operations, these costs will naturally increase as the company moves into new jurisdictions.
Data security has the highest compliance cost to all businesses. However, in the vast majority of cases, the reason to invest in data security is because of laws and regulations and not a drive to improve business security.
As you expand internationally, compliance costs can be a significant burden that requires dedicated professional staff to curtail risk and allocation of legal and non-legal penalties for non-compliance.
In order to reduce potential compliance costs, more and more businesses are looking to third parties to ensure that compliance is achieved on their behalf.
Cost of Non-Compliance
The cost of non-compliance can include fines settlements, business disruption, productivity loss, and revenue loss. What’s more, it’s getting more expensive every year.
The average cost for organizations that experience non-compliance problems is now around $14.82 million, a 45% increase from 2011. While it’s easy to ascribe this increase to the high–profile fines, the real cost of non-compliance is much more serious.
I appreciate the focus on helping regional banks specifically. Often, the advice out there is geared towards larger institutions and doesn’t address the specific constraints and opportunities that regional banks face. I think exploring strategies like M&A to achieve operational scale and offset regulatory compliance costs is critical for these banks1. Also, as mentioned in another article, developing or expanding niche capabilities to open up new opportunities could be a game-changer.
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