Compliance checklists are a way of regulating businesses by governing bodies in the industry. They can be related to the government of the state where your business operates, or they can be a regional regulation such as General Data Protection Regulation or California Consumer Privacy Act.
These regulations are severe, and companies can be persecuted if they don’t adhere to them. With 27% of companies spending more than half a million dollars trying to comply with them, you can tell their importance.
There are different types of compliance audits and checklists, and they are usually related to the field in which a business operates. The main division of compliance checklists is whether the checklist is internal or external. Companies in different industries will have to comply with external laws that are specific to their field.
For example, a car wash needs to use cleaning products that aren’t harmful to wildlife. The strictness of such regulations depends on local laws. Whether you are running a carwash or a software company, understanding compliance checklists can help you protect your business and save a significant amount of money.
Compliance audit explained
A compliance audit is a set of rules and regulations designated by a governing body. It can be established by a government or a governing body of the related field, such as a certain ministry or a department.
As mentioned in the previous section, specific regulations are regional or global. Online businesses usually need to worry about rules related to internet privacy. The common regulatory standards that are imposed on companies are related to the following:
- Privacy
- Health and Safety
- Security
- Regulations regarding labor
Even though compliance audits seem tiring and complicated, they are there to protect both the company and its workers. For example, these regulations prevent workplace injuries, incidents, or security breaches. If any of the accidents happen, the company’s reputation will suffer.
With a compliance audit, you can identify risks, monitor them, and prevent any unfortunate situations. While they don’t necessarily boost productivity at the workplace, they can avoid downtime that might occur if the regulations aren’t followed.
Compliance checklist explained
A compliance checklist is a checklist that serves the purpose of confirming that the company is functioning according to the related laws and regulations. If all the required boxes are ticked, then your company can proceed with operating in general or with the task at hand.
Compliance checklists will help you identify your company’s shortcomings and policies and help you improve them. Many regulations are related to the type of workers your company hires and the tasks they need to perform. A construction company and a software development company will have very different compliance checklists.
There are third-party solutions that can help you with compliance checklists, both internal and external. If a checklist isn’t entirely confirmed before an inevitable process is started, it’s a sign that the company isn’t ready to undertake that particular task.
Checklists ensure every step of a process is thought through and planned. While certain inadequate procedures can lower productivity or performance, others might cost you in reputation or money.
External and internal compliance requirements
Both of these compliance requirements are there to help you improve the efficiency of your company. While external requirements are there to hold you legally accountable, internal compliance checklists should be there to standardize the company’s procedures and deliver better results.
External audits
External compliance checklists will help you understand whether your business satisfies the law requirements. Many companies are using third-party checklists to perform a more objective evaluation of their business. Third-party experts performing these audits are the best solution as they are professional and objective.
Before doing a compliance audit, performing a self-audit for your company would be preferable. External compliance regulations are more tricky as they are constantly updated. Certain changes in laws and regulations can be overlooked, that’s why it’s important to be up-to-date, and the best way to do this is to perform periodical self-audits.
Internal audits
Internal checklists are set in place by the management of a business to establish a certain workplace culture and ethics. Internal compliance is referred to as HR compliance but can also be related to other aspects of the organization.
A healthcare company that performs surgical procedures would want a checklist confirming all the required measures are taken before a surgical procedure takes place. Similar examples can be seen in software companies related to privacy guidelines.
Some useful third-party checklists, such as Seon’s checklist for aml, can help protect your business from being targeted by fraudsters. Checklists of this type are usually internal, yet they can help you protect yourself from being persecuted for breaking the law.
Are internal audits necessary?
Internal compliance checklists aren’t legally binding and are executed by an employee who performs internal audits. The auditor needs to be objective and without a positive or negative bias toward other employees.
The results of these audits are then brought to investors and stakeholders. Depending on the results of the audit, a company can perform changes in the structure of the company and internal processes.
While you aren’t obliged to perform internal audits and create compliance checklists, employees might become non-compliant over time. An internal compliance checklist will significantly help the company as it will allow managers to keep track of the employee’s compliance.
Internal audits can help you improve your company’s workplace culture and productivity in the long run.
Consequences for non-compliance
When it comes to breaking the internal rules of the organization, there are simple steps that you can take. An employee who isn’t compliant should be warned that his behavior isn’t adequate. When an employee damages the company’s reputation or revenue, they should be dismissed.
According to the company’s system, there are numerous penalties that employees might suffer if they aren’t compliant. The bottom line is taking legal action against them.
However, being non-compliant with external regulatory bodies will lead to serious consequences for the company. As mentioned before, there are set of regulations for various fields, and breaking them can lead to financial losses for the company and even bankruptcy.
In certain situations, courts can sue certain company members rather than the company as a whole if the court decides that top executives and managers are to blame for the company’s actions. An employee who didn’t partake in decision-making shouldn’t suffer consequences because of a poor leadership.
Other reasons to implement compliance checklists
Unfortunately, there are many businesses that will overlook the security aspect of their workplace for the sake of increasing profit. Specific procedures and equipment required to fulfill compliance requirements seem expensive. However, the aftermath of an unfortunate incident will impact the revenue more significantly than trying to avoid regulations.
Every company can benefit from implementing internal audits at the workplace as it will lead to the following:
- Lower chances of harassment in the workplace
- Better productivity
- Establishing of company’s values and culture
A compliance checklist can lead to benefits regarding how groups of people, such as people of color, women, or disabled people, are treated in the workplace. With an HR compliance checklist, you can make significant efforts to lower discrimination in the workplace.
Compliance checklist plays a vital role in online business
If you are just starting with your business, then you are at the perfect place to establish the correct values for your company. Using internal audits, you can create a foundation for a positive workplace culture and help your employees develop the correct values. Of course, companies that have been around can also find compliance checklists helpful.
Besides internal audits, utilizing compliance checklists that prevent you from being sued or breaking laws and regulations is even more critical. Every online business needs to comply with GDPR as there are significant chances they will do business with a citizen of the European Union.
Being transparent about cookies and the type of data collected will help you build trust between you and your customers and make you compliant with internet privacy regulations. You should be prepared to read pages upon pages of related documents or hire someone who is an expert in this field.
