What is compliance? Definition and examples
Compliance describes a person’s, company’s, or organization’s ability to adhere to standards, regulations, rules, policies, orders, or requests. If you adhere to a set of rules, you comply with them. Hence, we have the two terms: compliance and adherence.
Put simply; compliance is all about conforming to a rule or set of rules.
All companies or organizations across most of the world must comply with several rules and regulations. If you run or own a company, it is crucial that you make sure every employee is complying with the rules and regulations of the relevant supervisory bodies. You must also ensure that they adhere to your internal rules and policies.
Power DMS, which helps organizations protect their resources and reputation, says the following regarding the two types of compliance:
“Regulatory Compliance: the steps an organization takes to comply with relevant external laws, regulations, and guidelines. Corporate Compliance: the actions and programs an organization sets in place to ensure compliance with internal policies, procedures, and accepted behavior, as well as external regulations.”
Compliance is important in business
If a company can claim that it is in strategic compliance, it means that there is total transparency and a competent and responsible management. Additionally, it is telling the world that those who run the business are in control of its procedures and processes.
Badly run and risky enterprise
If a business is not adhering to rules, regulations, and standards, it will be seen as a high-risk operation. This means that people will think it is more likely than, for example, its competitors, to experience market and equity losses and other problems.
Consumers, prospects, competitors, suppliers, and lenders will view it as a badly run organization. A prospect is a person or company that you believe could turn into a paying customer.
Siteware, a management, engagement and technology company that was founded in 2000, says the following about the term in the world of business:
“Being able to say that a company is in strategic compliance is by itself a fundamental business strategy. It means that there is transparency and an increasing degree of management maturity.”
“Being in compliance shows that managers and teams are in control of the processes and procedures, implemented and executed with effective political, commercial, labor, contractual and behavioral compliance.”
These officers make sure that their company and employees comply with external and internal regulations, bylaws, policies, etc. In large corporations, they are in charge of the Compliance Department.
They work with company employees and upper management to detect and manage regulatory and compliance risk. They make sure that there are internal controls in place that can manage and measure the risks that it might have to face.
Investopedia, a website that focuses on finance and investing education, writes the following on its website:
“Compliance officers provide an in-house service that effectively supports business areas in their duty to comply with relevant laws and regulations and internal procedures. The compliance officer is usually the company’s general counsel, but not always.”
There is much more to compliance than adherence to external rules and regulations. It also includes adhering to the company’s system of values and policies. Complying with national or local rules is mandatory in the world of business, while those that companies impose themselves are not.
Code of conduct
Internal standards, values, policies, etc. form part of a code of conduct that can have a powerful impact on the business’ brand. If you want consumers, competitors, suppliers, and other stakeholders in the marketplace to view your business as professional, reliable, honest, and well run, complying to a set of values and high standards that you have set yourself is crucial.
A company’s brand is its image and personality. It conveys a promise to consumers that the products or services they buy will meet the high standards that you seek to deliver. A positive brand image helps boost customer loyalty, brand loyalty, sales, and ultimately profits.
Idox Compliance, one of Europe’s top providers of compliance solutions, makes the following comment:
“Non-compliance can have serious consequences to both individuals and for the entire organization in general. Compliance is a key requirement for long-term sustainable success. Reliability, continuity and trust can only exist in an organization if it is clearly committed to compliance.”
Etymology of the verb ‘to comply’
Etymology is the study of words, phrases, and expressions and where they came from, i.e., their origins. It also includes studying their meanings and how they evolved over time.
According to the Online Etymology Dictionary, the verb to comply emerged in the English language in early 14c, with the meaning “fulfill, to carry out.” It came from the Old French word Compli, the past participle of Complir, meaning to “carry out, fulfill, accomplish.”
The Old French Word came from the Vulgar Latin word Complire. The Vulgar Latin term came from the Latin word Complere, meaning “fulfill, finish (a task), fill up.”
In c. 1600, it also acquired the meaning “to act in accordance with another’s desire or will, to consent.”
The noun Compliance appeared in the 1640s, with the meaning “disposition to yield to others, act of complying.”