How regulatory compliance enables business growth

The strategic benefits of regulatory compliance are often overlooked, but they are essential for business growth. Enhesa Product Chief Analyst Nhat Nguyen explains more.

Nhat Nguyan

by Nhat Nguyen

Product owners and business leaders often see regulatory compliance regarding product safety as a cost or an inconvenient burden—or worse, a tick-box exercise. To some degree their viewpoint is understandable given that compliance is mandatory, and requirements can sometimes feel cumbersome.  

Yet when managed strategically, regulatory compliance can be a genuine business growth enabler. Here is why it’s essential for businesses to recognize that.

 

Why compliance?

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

Failure to comply may be catastrophic. 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. Both companies had to pay substantial damages with BP’s costs estimated at billions of dollars by the time remediation was taken into account.  

Non-compliance is therefore a very costly choice, but there are also many reasons why businesses might make a strategic decision to treat regulatory compliance as an active bringer of benefits. 

 

Operational benefits

In the first place, compliance with health and safety regulations helps to mitigate operational risks. This reduces the likelihood of workplace accidents, and therefore any associated legal or financial consequences. Regulatory compliance also minimizes the chances of workplace or operational disruption, and therefore the opportunity costs of being unable to operate. 

There are clear advantages of having a workforce that feels—and is—safe.  

A healthy and safe work environment can increase employee satisfaction and productivity. When people feel unsafe at work or are concerned their employer is taking shortcuts, they are less likely to be engaged at work. Conversely, when employees feel secure and valued, they are more likely to be engaged, motivated, and focused on their work. 

Operationally, initial investments in health and safety compliance measures may seem high. However, they often result in long-term cost savings. An upfront investment in safety can prevent accidents and occupational illnesses further down the line. And this in turn can reduce the expenses associated with medical care, legal fees, and compensation claims arising from accidents and problems. Lower employee turnover rates and therefore recruitment costs are a further advantage.  

So, too, are the benefits of compliance in terms of operational efficiency and innovation. The process of ensuring compliance often involves adopting new technologies and best practices, leading to increased efficiency. Engaged and motivated employees are also more likely to produce innovations.  

Ultimately, a proactive approach to regulatory compliance will contribute to better products and business growth, and businesses may well find themselves in a stronger position to adapt to industry changes and technological advancements. 

 

Regulatory compliance within a market situation

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 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 today’s information space, brand reputation expands beyond the jurisdictional operation of the 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, non-compliance issues – 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. 

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 functions and 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.     

 

Recognizing regulatory compliance as a strategic choice

Companies who pivot their regulatory compliance from a cost center and an after thought to one that is closely aligned with a business have consistently shown that such a strategy could lead to more innovation, strategic growth and reducing long term liability for the companies.  Whereas traditional compliance is about completing check lists or ensuring that regulatory requirements are met – to satisfy regulators and ensure baselines are met – strategic compliance requires closely monitoring and analyzing trends and shifts in the regulatory landscape to strategically prepare the business for such changes.  These actions could cut down compliance costs, 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 is a way to enhance overall business performance. It fosters a positive company culture, driving better employee engagement and innovation. It also creates opportunities for growth in the long term through innovation and partnerships. By working with compliance colleagues, and taking the ‘long view’ on compliance, business unit owners and product managers can drive long-term business growth. 

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