As your business grows, it becomes more imperative that you need to comply with the legal obligations. For the most part, compliance helps you avoid legal problems and improve public relations. However, compliance is complex, and it’s easy to miss some compliance requirements. This is why business owners are advised to formulate a compliance framework for a new business.
What is a Compliance Framework?
It’s defined as the methodology used to compile all regulatory requirements that are applicable to an entity, organization, or business. As a startup, your main focus is to grow your business and gain a foothold in the market. It is always easy to overlook compliance laws due to reasons such as ignorance or lack of funds.
Failure to adhere to regulatory requirements can impact your business negatively. Most startups find it hard to recover after breaching compliance requirements. Therefore, before you open your business, ensure that you have a comprehensive compliance framework.
How to Create a Compliance Framework for Your Business
The idea that compliance is a low priority objective for startups is flawed. In fact, the cost of non-compliance is much higher, which is why it’s better that you invest in compliance at the onset. As your business grows, your compliance requirements will also increase. However, you can create a compliance framework that helps you adapt to the requirements as the business grows. Here is how you do it:
1. Consult Upper Management
For any program to prosper, you need funds and approval of the individuals who run the business. The senior management and board of directors are responsible for risk oversight. Monitoring compliance is a part of risk oversight, and involving the board would set the tone for ethics and compliance.
2. Assess Risk
The idea behind a compliance program is to protect your business from risk. But before you achieve that, you need to understand the risks that your business faces. When evaluating your risks, be sure to incorporate lessons learnt from previous issues faced by your business or other businesses in your industry or geographical region.
When assessing your risk profile look at factors such as the location of your business, the industry sector, the regulatory landscape, use of third parties, etc. to ensure that you understand all the risks involved. For example, In the UK, if you have a business website and email, you’re required by the Companies Act to include certain regulatory information on your website and email footers. Failure to do so would result in a fine.
A successful risk assessment will help you address the organizational risks and guide you on ways to allocate resources based on the severity of the risks.
3. Perform a Compliance Audit
Compliance audits are typically performed by third parties to eliminate bias; however, in this case, a self-compliance audit is good enough. If you have the funds for an external audit, go ahead and hire an impartial party. The basic compliance requirements will revolve around the following issues:
- Health and safety
- Security of data
- Environmental impact
- HR policies
- Financial records
- Quality management standards
4. Establish Standards & Controls
Be sure to establish the standard operating procedure for your compliance program. In addition, establish a code of conduct that everyone in the organization will follow. This will ensure that your employees do not violate the compliance standards or the company’s policies. Put in place a system that allows your employees to report violations, whether anonymously or in person. Ideally, an anonymous system would empower employees to report violations. The system should also have a way to respond to these reports.
5. Hire a Compliance Officer
A comprehensive compliance program is ineffective if there is no one to enforce it. You can appoint a team such as your legal department to handle compliance, or hire a compliance officer. This officer should be provided with the necessities needed to run the compliance program, which includes staff and resources.
You have formulated a compliance program, established your standards and controls, hired a compliance team, but you forgot to train your employees. Everyone in your company should complete the training, including your senior leadership and entry-level employees. Ensure that the training is easy such that every employee can understand and remember.
Without proper training, your employees aren’t accountable for certain violations. The blame will fall solely on you as the business owner. In addition, implement a training program that’s tailored to a specific audience. For example, employees with a history of violations or misconducts should get additional training that informs them of the consequences of their violations. Employees that handle sensitive data must receive training that addresses issues such as risks involved.
If some employees are reluctant to complete the training, offer incentives such as bonuses.
Resist the urge to shelf compliance to a future day when you think your business will be ready. It’s an ill-informed decision that might end up crippling your business before it takes off.