Compliance means a state of being as per the established guidelines, law or policies. A company has to comply with both industry regulations and government legislation. It generally means that a company sticks with the laws, guidelines, and policies provided and as well as any external standards that have been provided.

Why is Compliance important?

The government has laid down various laws, policies, and guidelines for any company to follow, and following them keeps the companies accountable so they stay in check. Not complying with the laws can lead to various offences committed by the company, that offences can sometimes be done intentionally or unintentionally. Compliance helps a company to act according to the law. It often leads to:

1. Higher employee retention- if a company has safety, employee benefits, and compensations, a positive work environment is developed. This positive work environment attracts the employees to work and add to the value of the business.
2. Better public relations- when an organization starts facing court cases or any government interventions, the market or customers start losing trust in it and this will lead to a negative financial impact reduced legal penalties, fines, and lawsuits.
3. Not complying with it can lead to various suits imposed on the company which can lead to long-overdue legal procedures. Big amount of penalties or a temporary injunction can be imposed on their business. This can lead to a consumer or any third party engaging with them losing their trust.

Types of compliance

There are two types of compliance which include:

1. Statutory and Regulatory Compliance: It relates to the various labour, company and taxation laws prevalent in India. These laws change on a State and National level, and companies must obey them. Non-compliance with these regulations can land a company into legal trouble such as penalties, fines, or worse. This is why companies spend a good deal of resources to ensuring statutory compliance.
2. Internal Compliance: It refers to an internally designed set of rules and regulations which the owners, employees, traders, customers follow to maintain the quality of the services or products provided by the organization. An organization will comply with external requirements only when it is working in line with the internal rules and regulations. Some of the broad-heads can be categorized as preventive policies, corrective procedures, and detective controls.

Compliance Management

Compliance management is a process making sure a company or people stay as per the rules defined by the law. Such rules are applied as the compliance standard or compliance benchmark, whereas its process is what manages the compliance. Compliance management can take several forms. It can be a mix of policies, procedures, documentation, internal auditing, third party audits, security controls, and technological enforcement. 

Indian laws have been designed to implement risk and compliance management. While there is no specific law or regulation in India that defines ‘risk management’ and ‘compliance management’, the same has been widely recognized under various statutes.

Compliance Risk

Compliance risk is also known as integrity risk. Business and financial regulations are continually evolving, compliance regulations standardize business practices so that corporations act fairly and ethically. Companies that fail to comply with industry-related codes of conduct, internal policies, best practices, and laws and regulations pose damaging threats to risk compliance such as financial loss, material loss, fines, and voided contracts. Besides the risk of economic loss, companies stand to lose future business opportunities and their good standing and reputation. Compliance risk is also sometimes known as integrity risk. Many compliance regulations are enacted to ensure that organizations operate fairly and ethically. For that reason, compliance risk is also known as integrity risk. 

The impact of legal compliance risk on an organization is that the organization is protected from lawsuits, fines, and penalties, for not complying with the WHS laws and regulations. The workers of an organization are impacted by getting a safer place to work, fair wages, workers compensation for injuries they receive on the job, and ways to report abuses they might suffer, like bullying, or sexual abuse.

Compliance ought to be a part of the culture when it comes to an organization; it is not just the responsibility of specialist compliance staff. Nevertheless, a company will be able to manage its compliance risk more effectively if it has a compliance function in place that is consistent with the “compliance function principles”. The principle structure of legal compliance risk is as follows:

1. The organization educates themselves on the relevant laws, regulations and business rules that apply to their type of organization.
2. The organization determines what practices they need to implement to make certain that employees are safe, that ethical concerns are addressed, and that each employee knows their rights as an employee, and how to report incidences they think are unfair.
3. The organization sets up a system of checks and balances to make sure that they stay in compliance with all relevant laws, regulations, and business rules. This may include establishing a committee of employees that speak for the entire group of employees when there is going to be a change in policy or procedure within the organization 

Conclusion

Before starting a company, a person should be aware of what rules, laws and policies will apply to it and should always have an idea of how to start a business without disrupting any area and health. One shouldn’t avoid engaging with employers so their interests are not ignored on. This is why Compliance should be done on a monthly or a yearly basis, so a company can be aware as to what is lacking in their business and help to improve it.