You might think cutting a few corners on regulatory standards is a savvy way to shave your quarterly budget. And you wouldn’t be alone. The reality of non-compliance, however, is much grimmer than you might expect.
There are direct, immediate and serious consequences for the non-compliant.
For one, you may get hit with a huge fine. But some of the ways regulatory non-compliance cost you big aren’t as obvious. For instance, failing to comply with technology regulations can ruin your reputation or lead to other long-term effects.
The high cost of regulatory non-compliance shouldn’t be underestimated.
Throwing money away in fines
If any of the data associated with your business is medical in nature, you are likely bound by HIPAA rules. This strict set of government regulations seeks to protect the confidentiality of protected health information. HIPAA violations are expensive.
Fines are charged per health record, at a rate of at least $100. Let a server full of patient information become non-compliant, and you’re looking at thousands—or even millions—of dollars in fines.
Other industries impose similarly devastating fines on businesses who don’t comply with data regulations. Financial records are bound by FFIEC-IT regulations, and the FTC can fine companies that put consumer data at risk.
And then there are new European regulations to consider—even if you operate out of the US. Failing to comply with GDPR could lead to a fine of 4 percent of your global revenue. No matter your industry, the fines alone make it irresponsible to roll the dice on IT compliance.
Losing new business
Failing to comply with IT-related regulations also has long-term implications. Once the fines are settled, customers may not trust you with their data anymore.
After Target had a major credit card breach in 2014, the company’s sales dipped by 46 percent. Failing to operate within regulations doesn’t bode well for how much you respect your clients. In a world where customers are apt to be hyper-sensitive about who has access to their information, being outed as regulatory non-compliant (even if there is no breach) could be catastrophic on quarterly sales.
Retail companies like Target haven’t been the only businesses to lose money after a data breach. Major financial institutions such as Equifax have also faced fierce criticism for letting sensitive data into the hands of nefarious parties.
Even if a company takes major steps to rectify a breach and become compliant with all regulations, the word-of-mouth damage has been done.
Paying serious legal fees
So, you’ve been found non-compliant. You assemble a PR strategy and gulp at the size of the fine. But wait, there’s more. Getting out of the mess you’re in will also force you to rack up serious legal fees.
Fighting a fine and dealing with the mountain of paperwork involved with resolving the matter can cost you thousands alone. You may also get sued by outside parties, depending on the situation. If you violate HIPAA regulations, for example, patients who believe their data was compromised can sue you.
When it comes to new regulations, like GDPR in Europe, being non-compliant is relatively new territory. That could mean a longer legal process if you’ve been found non-compliant, and at the very least you’re unlikely to know how to handle the situation on your own.
You may think you’re being smart to avoid the legal fees associated with setting up compliance, but it gets worse if you fail to abide. Pay for lawyers and an experienced business consultant up front rather than facing a crisis later.
Risking cybersecurity losses
If the fines, lost business and hefty attorney fees don’t scare you off from regulatory non-compliance, the risk of lost data should.
Regulations, irritating as they may be, typically exist for a reason. When your IT system is not adequately protected, chalking up fines may end up being the least of your worries. Unprotected cloud servers can be breached, computers without a strong enough firewall could be infiltrated by ransomware, and improper password protocols leave your systems at risk.
How much money would you lose if you couldn’t access your records for three days? What if there were permanent data losses? If you are non-compliant with security regulations and protocols and data gets lost altogether, the ultimate costs are nearly incalculable.
Regulatory compliance is a non-negotiable
There are plenty of reasons to remain compliant with industry and government regulations—not the least of which is that it’s the legal thing to do.
If you fail to meet the standards, the costs can be serious in both the short and long-term.
It’s bad enough that you could still get hacked when you do everything right, and the mitigating factor of non-compliance just opens a new can of worms. If you need some help with your regulatory compliance, contact the TechBundle today.