When you engage in business, there are many forms of compliance that your company and its employees must uphold. “Compliance” refers to sticking to the rules. Rules may refer to legislation, regulations and standards.
Not sticking to rules can lead to damage to both the company and its customers. You would certainly want your employees to work in a way that protects your clients.
Regulatory Compliance means making sure your company meets your industry rules, regulations, legislation and standards.
In Nigeria today lawlessness is the order of the day because people don’t value compliance. However, because Nigeria operates within a global economy we cannot avoid steaming up the effectiveness of the implementation of our regulations and legislations. This we have seen in the use of technology by some of the government agencies that are saddled with implementing some of the legislations. For example, the FIRS now operates an electronic platform that generates a Tax Identification Number (TIN) for all taxpayers and this has been connected with the Corporate Affairs Commission E-platform to ensure all company’s registered by the commission get a Tax Identification Number (TIN) immediately. This and many more are some of the things that are being put in place to monitor compliance. It becomes important for all businesses to take compliance seriously because technology is closing the gap in the Nigerian system fast.
Why is compliance important?
Compliance helps to ensure that an organization operates within the law and stays true to its ethical principles that are important to the company’s business and identity.
1. Reduced Legal Problems: The most obvious benefit of compliance is that it decreases your risk of fines, penalties, work stoppages, lawsuits, or a shutdown of your business. When you don’t meet some compliance requirements, such as paying and filing your VAT returns, you might get penalties and interest. In other situations, you might face costly sanctions. Failing to meet your legal obligations, such as filing annual returns or payment of taxes, can also help someone suing you strengthen his case. Hire a compliance expert to make sure you understand all of your legal obligations and how to comply with them.
2. Compliance enhances consistency: Without a compliance function, decisions are ad hoc and made in a vacuum. Articulated values, ethics policies, and codes of conduct provide reference points for making decisions a matter of routine. As Peter Drucker explained, “All events but the truly unique require a generic solution. They require a rule, a policy, a principle. Once the right principle has been developed all manifestations of the same generic situation can be handled pragmatically; that is, by adaptation of the rule to the concrete circumstances of the case.”
3. Compliance can reduce unforced errors: Unforced errors are the most common risks to organizational performance, and compliance helps prevent unforced errors. Unforced errors are errors that are not as a result of external influence but generated internally.
Too many people think about risks in terms of outside forces that can affect an organization. They worry about crooks and scam artists, customer demands, funder and stakeholder demand, natural disasters, and broad economic trends and forces. Yet most threats and opportunities are generated internally.
4. Improved Operations and Safety: Many business rules and regulations can help you more than harm you. For example, rules regarding discrimination and harassment help you create a better working environment for your employees, which can lead to more worker productivity. Following safety and security rules helps prevent injuries, fires, or building evacuations that hurt your profitability.
5. The driver of change and innovation: Some people also view compliance as inherently conservative. They think the purpose of compliance is to rein in conduct. Again, that’s not true. Compliance instead can serve as a powerful tool for long-term change. If everyday behavior stems from training and codes of conduct, and codes of conduct stem from values, articulation and modification of values over time can profoundly influence organizational behaviour. In the words of system theorists, values can be a leverage point, and compliance ultimately focuses on the driving values of an organization.
In conclusion, when an organization structure its operations, policies and procedures to embrace compliance a compliance culture is birthed and this enhances both organization’s profitability and corporate governance.
Author: Funmilayo Majolagbe
Human Resource Manager
SO&C Compliance Services