31 Mar What is Compliance Reporting and Why Is It Important?
Posted at 12:37h in Compliance
Based on the industry they operate in, businesses must comply with industry standards, laws, rules and regulations set by regulatory bodies and government agencies. Failing to do so can subject a business to hefty penalties, loss of reputation, expensive lawsuits and even worse, closure of business. Most regulations deal with the electronic storage, processing and transmission of citizen or customer data, which serves as a goldmine for cybercriminals in today’s IT landscape. Compliance with such regulations is no longer just a talking point. It has become a necessity. In order to demonstrate full compliance with these regulations, businesses need to build and maintain compliance reports so they can produce them during an audit by a regulator and also to ensure they do not violate any regulations at any given moment.
What Are Compliance Reports?A compliance report is the documented evidence you must produce to auditors to prove your company is compliant with the requirements put in place by a government and regulatory agency under a particular regulation. Compliance reports determine the compliance initiatives that have been effectively undertaken and the areas that need to be worked on to ensure full compliance. Besides being used as proof for submission to auditors, compliance reports can be utilized to make better decisions about risk management, allocation of resources and additional measures with respect to compliance. Neither compliance nor the generation of compliance reports are one-and-done affairs. As standards, reporting requirements and threats evolve, businesses are required to generate the necessary reporting to meet the requirements of various compliance regulations.
What are the different types of compliance reports?Compliance reports can be built in various forms with a focus on several key business matters. Most have a pre-determined structure based on the requirements of a specific industry standard or regulation. Some of the most common types focus on key aspects such as the security of sensitive data (cybersecurity/IT), financial records, health and safety, payroll, human resources, management standards, etc.
What industries are often subject to compliance reporting?While nearly every industry is subjected to compliance reporting, certain industries, such as healthcare, education, banking, electronics, pharmaceutical, hospitality, defense and automotive, often receive elaborate mandates. One could say that these industries are held to the highest standards since these have a profound impact on the safety of human lives and sensitive information about them.
Common Standards & RegulationsGiven below is a list of the common standards and regulations that businesses operating in varied industries must adhere to:
|Standards and Regulations||Industry||Brief Description of the Regulation|
|Health Insurance Portability and Accountability Act (HIPAA)||Healthcare industry||The HIPAA Privacy Rule lays down national standards for the protection of individuals’ medical records and other personal health information (PHI). It applies to health plans, healthcare clearing houses and those healthcare providers that conduct certain healthcare transactions electronically. The HIPAA Security Rule mandates appropriate administrative, physical and technical safeguards to ensure the confidentiality, integrity and security of electronically protected health information.|
|Payment Card Industry Data Security Standard (PCI DSS)||Retail, financial institutions, any business or organization that processes, stores or transmits credit card information||The PCI Data Security Standards define the operational and technical requirements for organizations accepting or processing payment transactions, and for software developers and manufacturers of applications and devices used in those transactions.|
|General Data Protection Regulation (GDPR)||Any business that has customers in the European Union (EU)||Europe’s data privacy and security law lists down regulations on organizations regardless of where they are based, as long as they target or collect data related to the citizens of the EU.|
|National Institute of Standards and Technology (NIST)||Communications technology and cybersecurity||The NIST Cybersecurity Framework integrates industry standards and best practices to help organizations manage their cybersecurity risks.|
|California Consumer Privacy Act (CCPA)||Any business with customers in the state of California||The California Consumer Privacy Act of 2018 (CCPA) is aimed at giving consumers more control over the personal information that businesses collect about them.|
|SOC 2||Any service provider that manages any type of business operations outsourced to it by a business||Developed by the American Institute of CPAs (AICPA), SOC 2 mandates service providers to manage customer data based on five “trust service principles.”|
|Sarbanes-Oxley Act, 2002 (SOX)||Any publicly-traded company in the U.S., and wholly-owned subsidiaries and foreign companies that are publicly traded in the U.S.||The goal of the SOX is “to protect investors by improving the accuracy and reliability of corporate disclosures.”|
|International Organization for Standardization (ISO)||Any business, irrespective of the size or the industry they cater to||ISO compliance refers to ISO 9001, a quality management standard used by businesses to demonstrate that they provide services and/or products that fulfil certain requirements.|
Why Compliance Reporting Is ImportantCompliance reporting helps you keep a keen eye on things that you are doing correctly and things you must improve on with respect to regulatory compliance. Turning a blind eye to this could lead to destructive consequences for your business in the form of penalties, fines, loss of reputation or even closure. More importantly, in certain scenarios, ignoring compliance reporting could allow a malicious criminal to exploit any compliance risk such as the lack of cybersecurity controls. Businesses that have implemented regular compliance reporting have been able to identify compliance risks and mitigate them in time before an auditor or a cybercriminal (in some cases) made them pay for it.
Benefits of Effective Compliance ReportingConducting compliance assessments and generating compliance reports bring a list of benefits to your business that include:
- Peace of mind: As a business owner or a major stakeholder, you are bound to experience greater peace of mind with regular compliance reports providing you concrete evidence on where your business stands with respect to compliance. It’s much better than flying blind.
- Greater client assurance: A thorough compliance report instils greater confidence in your clients and potential investors about how ethical and trustworthy your business is.
- Risk mitigation: Since a compliance report works like a reality check for your business, it gives you a list of risks you must mitigate. This can work wonders for your business since there wouldn’t be much that would catch you off guard.
- Vendor quality control: Compliance reports will also help you streamline your operations with third-party vendors since you would be able to hold them accountable for their commitment to compliance.
The Compliance Reporting ProcessA general compliance reporting program comprises of similar facets, irrespective of the business in question. It’s only the complexity and scale that varies based on the business and the regulations it must comply with. However, keeping the below-mentioned aspects in mind is a great way to start.
What should a compliance report include?At large, a compliance report must include four main components:
- A statement on the regulation the report would focus on
- A description of the scope of the report — what it would cover and what it would not
- A thorough review of the compliance process
- A summary of the findings of the compliance assessment
Who is in charge of compliance reporting?In most large corporations, a compliance report is supervised by the Chief Compliance Officer (CCO). However, in the case of most SMBs, it’s the IT team that is entrusted with the responsibility. Several businesses also have a dedicated team for managing compliance.
Who are compliance reports submitted to?Compliance reports can be submitted to an auditor or to internal stakeholders. Invariably, both reports would vary significantly and being prepared for that always comes in handy.
How often should compliance reporting be performed?If you feel that conducting a compliance assessment once a year and producing a compliance report is sufficient, nothing could be farther from the truth. Ensuring compliance requires continued effort and you must decide the frequency of compliance reporting based on your business’ evolving needs. Automating compliance reporting can save it from being a herculean effort. Automated data collection and report generation, as per the requirements of a given standard, can enhance speed, accuracy and efficiency of the process. It will help in standardizing the reporting practices for all the departments. Most importantly, it will provide you with valuable business insights with regularly generated analytics.
Simplify the Process With Compliance ManagerThe process of compliance assessments and compliance reporting does not have to be arduous. You can leverage tools such as RapidFire Tools’ Compliance Manager, a compliance automation platform that:
- Streamlines data collection
- Identifies and prioritizes risks
- Provides remediation plans
- Automatically generates the required documentation