Most small and medium-scale business owners do not take compliance with regulatory requirements seriously. This is wrong and can be a big and costly mistake.
What is Regulatory Compliance? As with human beings, businesses do not operate in isolation. They need to operate in a ‘society’ if they are to survive and thrive. Societies protect us and make it possible for us to do the most we can do and be the best we can be. This can only be possible if the society is ’empowered’ to regulate and control what happens within it. Governments at local, state and federal levels therefore enact legislations that are meant to protect both producers and consumers fairly and equitably.
Benefits of Regulatory Compliance: There are several benefits of compliance with business regulations, such as:
- It can be a criminal offence (by both the business and individuals involved) not to comply with a regulations. Complying with regulations eliminates this risk,
- Certain opportunities are only available to companies that can prove compliance with general or specific regulations. Compliance therefore makes it possible for you to obtain clearance, if required, and bid for such businesses,
- Compliance can also increase your productivity as employees are protected, safer and highly motivated,
- Empirical observations suggest that compliant companies have a much better public reputation, with consequential business benefits, and are actually more resilient to distress.
Depending on the society within which your business operates, different regulations might apply. It is your responsibility to establish exactly what is expected of you and your business. It is strongly recommended that you work with your lawyer and accountant to do this. For convenience and our purposes here, I have classified regulations principally into three groups as follows:
- Structural and Financial Regulations
- Employee Regulations
- Environmental Regulations
Structural and Financial Regulations: In most countries, you are required to legally register your business. There are different forms of registrations, from simple sole proprietorships to partnerships, cooperatives and limited corporations. The business form you adopt should normally depend on several factors including but not limited to your preferences as well as the business demands and expectations. Other than meeting legal requirements, business registration has its several benefits. It is important you therefore register your business appropriately. Regular updates may also be required by your local authority. Be aware of what these requirements are and ensure full and timely compliance.
Other than legal registration, your business will need to meet various other regulations generally classified under the following:
- Company law requirements,
- Tax requirements,
- Product and Quality Standards.
Employee Regulations: Employees are a very critical resource to your business. Governments at various levels are therefore keenly interested in their wellbeing, safety, as well as the income tax they can collect from them. Several regulations are particularly applicable to your business on employee issues, ranging from engagement process down to their disengagement and everything in between. Business regulations on employees may cover several of the following and more:
- Engagement and disengagement,
- Workers’ compensation,
- Wages and Hours,
- Employee census,
- Workplace safety and health,
- Medical leaves,
- Youth engagement and wages,
- Staff cooperatives, etc.
Environmental Regulations: As production capacities, and consequential wastage increase, environmental management is becoming more critical and important than ever. This trend will continue for the next several decades as businesses and governments struggle to find sustainable ways of increasing production whilst keeping environmental degradation to the barest minimum. Irrespective of size, all businesses in several sectors like agriculture, chemicals, mining, etc., have legal environmental obligations that they must meet. Generally, a risk assessment should be carried out to establish the overall impact of the business on the physical environmental. This can also serve as an opportunity to identify ways to improve your overall environmental performance through reduction of energy costs and wastage. Specific environmental regulations may cover the following:
- Clean Air/Water permits,
- Safe drinking water,
- Waste management,
- Pollution and contamination controls,
- Toxic substances control,
- Radiation Management,
- Resource conservation and regulation, etc.
In addition to the above broad categories, there are a number of several other regulations you should be aware of, such as:
Industry-specific Regulations: Many regulations are industry specific. Such specific regulations may only apply to Mining, Fisheries and Forestry, whilst others may be specific to only Pharmacy, e-Selling or Aviation. No matter your business sector, it is important you are aware of what are the specific regulations to your industry and ensure compliance.
Location-specific Regulations: Certain regulations may also apply only to certain locations irrespective of industry. Businesses operating within ‘Free Trade Zones’, Airports and Seaports may, for instance, have to operate within certain regulations that are not applicable to their counterparts operating outside those locations.
Product/Service-specific Regulations: Sometimes, regulations also apply specifically to certain products or services. For instance, if you use radioisotopes in any part of your business, there will be regulations on exposure to them as well as keeping, transporting, and disposing of them.
Time-specific Regulations: As with location-specific regulations, businesses operating within or outside certain times might have different or additional regulations applicable to them. For instance constructions at night may require different regulations from daylight operations.
Changes in Regulations: It is very important to realise that regulations change from time to time. This is both necessary and understandable. What is key is for you to have a system of keeping abreast of such developments as they occur. Failure to comply can not only be costly to as mentioned above, but it does not put your business in the good light you may require to also benefit from the society.
Create a Monitoring and Compliance System: The best way to ensure continuos compliance is to create a system of identifying all regulations applicable to you. No matter your business size, you should have a team that reviews the regulations that apply to your business and ensures timely compliance. Quite frequently, and as mentioned above, you have to engage and liaise with external professionals and consultants. Whatever system you adopt, what is key is that you are able to stay on top of what is expected of you and your business.
No matter your business, compliance with regulations will bring numerous benefits. Whenever a specific regulation seem to be counterproductive, it is best discussed and reassessed with the appropriate regulator, possibly through trade groups. Non-compliance is never a solution.