What is Compliance Management?

For a business, compliance management involves complying with various laws, regulations, and standards, ensuring the proper internal processes for remaining compliant, and reducing the risk of financial penalties and adverse non-quantifiable outcomes such as reputational damage.

Effective compliance management protects a company’s assets, systems, and data from security threats and vulnerabilities. It strengthens a company’s relationship with existing customers and opens new business opportunities.

However, becoming certified for compliance standards and managing compliance takes considerable time and effort.

Compliance Defined

The Oxford Dictionary business definition of compliance is “The state or fact of according with or meeting rules or standards.”

Voluntary and required (government-mandated) compliance standards exist depending on the industry.

Compliance and SMEs

According to NFIB, a Washington D.C.-based advocate for America’s small and independent business owners, “Small businesses are responsible for nearly two-thirds of job growth in this country. However, regulatory compliance limits small business expansion.”

Unfortunately, the regulatory burden on small businesses continues to grow, making it more difficult for them to manage compliance.

Data Compliance Regulations

Specific regulations relate to data handling, storage, and processing. Complying with these laws is non-voluntary for organizations that meet particular criteria.

Jurisdictions, including the U.S. federal government, U.S. state governments, and the European Union, have legislated data privacy laws. 

Well-known data compliance regulations include HIPAA, the EU’s GDPR, and California’s CCPA. Other countries, such as Canada, have versions of these. The Personal Information Protection and Electronic Documents Act (PIPEDA) is Canada’s.

Components of Compliance Management

Identification of Applicable Regulations

How does a business identify which regulations and standards apply to them? In some federally mandated or regulatory instances, it’s obvious. Here are some examples

• A requirement for being awarded DoD contracts is CMMC compliance
• If an organization creates, stores, processes, or transmits protected health information (PHI), it must adhere to HIPAA regulations
• All entities that store, process, and/or transmit cardholder data must comply with the PCI DSS 

In other cases, a company may voluntarily comply with standards that build credibility, strengthen cyber security, and broaden its addressable market. Examples are

• ISO 27001 – a data security certification with many benefits that can ultimately lead to business growth
• SOC 2 – a cybersecurity compliance framework developed by the American Institute of CPAs (AICPA) for service organizations. It specifies how organizations should handle customer data.

Assessing Risk

Understanding potential compliance risks such as financial ones. For example, the penalties for HIPAA violations range from just over $100 to more than $65,000 per individual violation.

The penalty for non-compliance with GDPR is approximately $23 million USD or 4% of the company’s annual turnover, whichever is greater.

While no fines are associated with CMMC non-compliance, several potential consequences exist, including ineligibility for future DoD contracts.

FAIR (Factor Analysis of Information Risk) provides a model for understanding, analyzing, and quantifying cyber risk and operational risk in financial terms.

Policies

In compliance management, policies are the foundation that ensures an organization adheres to laws, regulations, and internal standards.

Policies define the rules and guidelines the company and its people must follow, providing a framework for operational consistency and risk mitigation.

Employees are typically required to review and accept each policy. The policies provide employees with a reference for making decisions that align with regulatory and behavioral requirements, ensuring accountability at every level of the organization.

Policies can include the following documents.

• Acceptable Use Policy
• Access Control and Termination Policy
• Business Continuity and Disaster Recovery Plan
• Change Management Policy
• Code of Conduct
• Configuration and Asset Management Policy
• Data Classification Policy
• Information Security Policy
• Internal Control Policy
• Privacy and Data Protection Policy
• Risk Assessment and Treatment Policy
• Vendor Management Policy

For example, a data classification policy establishes a system to protect an organization’s data confidentiality.

An information security policy addresses the topics and requirements that maintain the confidentiality, integrity, and availability (the ‘CIA triad’) of an organization’s applications, systems, infrastructure, and data. 

Employee Awareness and Training

Employees and subcontractors are part of the compliance management process since they can contribute unknowingly or willfully to non-compliance. 

Often, employees and subcontractors must complete security awareness training. Topics can include

• Social engineering red flags
• Safeguarding PII on an individual level
• How to use a password manager
• Respecting privileged access
• Characteristics of phishing emails & how to report suspected phishing emails
• Discretion in file downloading to reduce malware risks

A standard background check is sometimes required for employees and subcontractors.

Monitoring and Auditing

Compliance with regulations and standards is not a ‘set it and forget it’ proposition. Continuous monitoring of the level of compliance adherence is required.

Audits are crucial to ensuring ongoing compliance with rules and regulations within an organization.

Audits involve a systematic, independent examination of various aspects of an organization’s operations, policies, and procedures to evaluate their adherence to legal, regulatory, and internal compliance standards. 

For example, a cybersecurity audit helps organizations identify and remediate issues that could result in a costly compliance violation, a data breach, or another harmful cybersecurity incident.

A cybersecurity audit identifies vulnerabilities, potential threats, risky practices, and weak links in an organization’s cybersecurity processes and systems.

Correcting nonconformities

An incident often points to a compliance nonconformity.

For example, a cyber security incident, such as exfiltrated data, should set off a series of steps in an incident management process.

Typical steps in this case are reporting, recording, prioritizing, classifying, and managing.

Once classified, an incident is added to an incident & corrective action log, specialist resources are allocated, it is reported to management, it is managed to resolution, the root cause is identified, the risk is assessed, and it is closed.

The Role of Technology in Compliance Management

Specific software platforms and service providers make managing compliance more straightforward and less time-consuming.

Many platforms are available for monitoring, reporting, training, auditing, and securing data. Here are several examples

Selecting the proper software tools for your compliance management process can reduce employee time and shorten compliance cycles.

These tools can help with initial compliance certification, recertification, continual improvement, employee awareness, data security, and more.