Benefits of regulatory compliance for business growth

Why regulatory compliance matters – and its key benefits

The benefits of regulatory compliance go far beyond avoiding penalties. Many product owners and business leaders still see regulatory compliance regarding product safety as a cost or an inconvenient burden—or worse, a tick-box exercise. Their viewpoint is understandable to some degree, given that compliance is a legal requirement and regulatory frameworks and compliance effort can sometimes feel cumbersome.

Yet when managed strategically, regulatory compliance through a robust compliance program can be a genuine business growth enabler. Here is why it’s essential for businesses to recognize how adhering to compliance requirements can serve them.

Reducing risk and avoiding costly failures

Regulatory compliance is not just a ‘nice to have’. In general, regulations are in place, and companies are obliged to meet certain regulatory compliance requirements, for a reason. This may be to ensure employee safety, data protection, or to reduce the environmental consequences of the company’s operations.

Failure to comply may be catastrophic. Compliance risk is real. Consider the aftermath of the chemical leak at Union Carbide’s Bhopal plant back in the 1980s, or more recently, the Deepwater Horizon oil spill in 2010.

Both events resulted in deaths and billions in damages. Both companies had to pay substantial damages with BP’s costs estimated at billions of dollars by the time remediation was taken into account.

In highly regulated sectors, failing to meet compliance obligations can quickly escalate into serious legal and reputational consequences.

Not maintaining compliance is therefore a very costly choice, but there are also many reasons why businesses might make an active strategic decision to recognize the benefits of regulatory compliance for business growth.

In many industries, these risks are governed by strict regulatory frameworks and clearly defined regulatory standards that businesses must meet to remain compliant.

Market and brand benefits of regulatory compliance

Beyond operational benefits, regulatory compliance can drive advantages within the market by increasing brand reputation.

First, demonstrating a clear commitment to employee safety is a reputation-enhancer for businesses. Few customers, clients or potential partners want to engage with a business that is careless about its employees’ well-being. It follows that being able to demonstrate active compliance efforts can help improve reputation. This, in turn, can drive improved customer trust and loyalty, and also make it easier to attract partners with a similar approach to compliance.

Secondly, regulatory compliance can give businesses a competitive advantage. In some markets, and in some highly regulated industries, specific health and safety standards are the starting point for access. For customer facing brands or companies who distribute those brands, brand reputation regarding environmental safety and human health is paramount.

In fact, meeting or exceeding applicable regulatory standards is often a prerequisite for doing business in highly regulated markets.

In today’s information space, brand reputation expands beyond the jurisdictional operation of product or compliance regulation. Traditional news outlets, social media, and video services have closed the information gaps for consumers, but also have the power to amplify safety issues relating to human health and the environment across the globe. As such, a ‘non’ compliance issue – whether inadvertently or intentionally – in one country could trigger safety concerns and/or lower the company or brand reputation in the US, the EU or elsewhere. In this case, an established compliance process may not be enough to protect the business or to meet compliance standards elsewhere.

Conversely, examples of initiatives to improve or alleviate human health and environmental issues could enhance branding reputations among consumers, and supply chains.

By strategically positioning its compliance activities, a business could enable growth in several ways: by strengthening its existing markets; creating new market opportunities; and/or lessening the burden for new market entrance.

Strategic benefits of regulatory compliance for long-term growth

Companies that pivot their regulatory compliance from a cost center and an afterthought to one that is closely aligned with a business have consistently shown that such a strategy could lead to more innovation, strategic growth, and reduced long-term liability.

Whereas traditional compliance management is about completing checklists or ensuring that regulatory requirements are met – to satisfy regulatory bodies and to ensure baselines are met – strategic compliance requires closely monitoring and analyzing trends and regulatory landscape change to strategically prepare the business for such changes.

Keeping pace with regulatory change is now essential for companies seeking to scale globally and avoid compliance disruptions. Engaging proactively with regulatory authorities can also reduce uncertainty and ensure faster resolution of compliance matters.

These actions could cut down the costs of maintaining compliance, ensure continuing market access and market leadership and, in some cases, may lead the business in re-positioning or developing new business strategies.

Strategic compliance benefits the entire organization’s stakeholders, including board members, business units, operational leaders, customers, consumers and supply chain.

Regulatory compliance enhances overall business performance. It fosters a positive company culture, driving better employee engagement and innovation. It also creates opportunities for long-term growth through innovation and partnerships. By working with compliance colleagues and taking a long-term view on compliance business unit owners and product managers can drive long-term business growth.