Global compliance, i.e., compliance with the laws of all countries where a company operates, has business interests or investments is a daunting and often an expensive task. And as the world sharpens its focus on areas like ESG, human rights, anti-corruption, data privacy and compliance requirements and costs will only continue to rise.
For adherence to local laws, setting up the right controls, and continued monitoring of compliance adherence are integral to global expansion. This task is easier said than done with new laws being introduced frequently, it isn’t surprising that even the most compliant and large resourceful organizations have a hard time staying on top of the compliance standards.
In 2017, a study conducted by Ponemon Institute revealed that the average non-compliance cost stood at a whopping $14.82 million, compared to the average compliance cost of $5.47 million. Today, this figure would be immensely higher as more data privacy and anti-corruption mandates click in. But what exactly are the global compliance challenges that companies face?
Let’s explore the link between globalization and compliance complexity and the solutions to help companies navigate the compliance maze.
Global Compliance Challenges that Businesses Face
Human Resource – Labor Laws, Fair Wages and Payroll Taxation
Businesses, while expanding their global presence, are inclined towards hiring local talent either directly or through association with vendors and suppliers. Now in many countries, authorities hold organizations responsible for ethical practices across their supply chain and compliance with local labor laws and pay/wage regulations. The problem compounds in regions where regulations evolve often. Organizations with best intentions end up being levied high penalties for non-compliance.
- It is advisable that Organizations hire legal advisors and experts for local regional labor laws and build strong compliance processes. It is recommended to invest in technology that will help manage international compliance
Local Regulations for Data Protection and Information Security
The globalization of business, especially e-commerce has made data protection a real challenge. For multi-national operations regional regulations like GDPR / PCI DSS can be tricky to manage. General Data Protection Regulation (GDPR) that came into enforcement in May 2018 calls for businesses in the European Union (EU) to protect the personal data of stakeholders. However, not as much clarity on data protection rules and frameworks may exist in other countries where you have business interests. This would make it challenging for you to establish a standard compliance policy in your organization.
- It would be best for you to customize your information security compliance policies and processes as per regional laws and take into account factors like cybersecurity risks, infrastructure capabilities, economy, etc.
Regulations can be very Industry Specific
Geo-political factors also influence regional industry laws and inclination of the current national leadership can lead to changes in laws. Some political ideologies might be more aligned towards regulating the manufacturing sector, or applying restrictions on export/import of certain raw materials or products etc. It is difficult for businesses to stay adequately prepared for such changes in trade and investment policies at the government level.
- For businesses to thrive, it is recommended to stay informed about local economic and political trends. It is noted, often reactive operational changes implemented to mitigate impact of new regulations don’t sustain, leading eventually to compliance failures. Businesses should be well prepared at all times to adopt new regulations, having a short – term as well as a longer-term response plan in place. Investment in a good compliance management solution that enables you to be agile will be highly beneficial for a global business
The Tax Front
Of course, taxes are usually a major area of concern for any business. Taxation is a complex topic, very knowledge-driven and laws around taxation are very stringent. The taxation-related obligations become multi-fold for international operations as most countries have very specific tax regulations and laws. These laws will be pertaining to corporate tax, VAT, income tax, etc. with which it is mandatory for businesses to be compliant in order to run their operations in a legal and lawful manner. The silos in departmental functioning, use of point solutions and inflexible IT systems compound the issues as they add to business fragmentation.
- It is most important to onboard experts on international tax laws as well as local tax experts and advisors for your business. Further, a comprehensive solution that provides transparency and real-time reporting for your accounts team would help you stay on top of your tax compliance requirements.
Addressing Global Compliance Complexity with a Robust Compliance Management Platform
Multi-national, global compliance is a complex business requirement with the plethora of compliance regulations to be adhered to, be they regional or industrial-specific. Inevitably, businesses find themselves dealing with legal obligations despite their best efforts and intentions to be compliant to local laws. This is where an intelligent and collaborative compliance management platform like Compliance Cart helps businesses to:
- Collaborate, end Silos: With Compliance Cart you can end silos between different departments, geographically distributed business units and your suppliers and vendors. Collaborate on internal compliance requirements as well as with 3rd party business partners across your supply chain, on one single digital and centralized platform.
- Establish a comprehensive Compliance Management System: Manage all your compliance requirements on one platform – be it finance, health, data security, labor, customs, logistics or any other category. Get rid of multiple fractional solutions and keep track of compliance status and obligations in one place.
- Bring Efficiency to your Compliance Management Program : Stay up to date with compliance requirements and rules with Compliance Cart’s Compliance Calendar – a compliance tracker and scheduler so that businesses stay up to date with the regulatory requirements without missing important due dates.
- Manage Vendor compliance proactively: Compliance Cart enables businesses to onboard vendors and suppliers worldwide and seamlessly interact with them enabling transparency and visibility of compliance status across the supply chain
- Be Agile: Regulatory changes are frequent, be agile in adopting them. With Compliance Cart you can be efficient in implementing changes to your internal as well as vendor compliance policies.
- Be Secure: Exchange and store your compliance data in a secure manner and secure space. Make it accessible while protecting your sensitive information.
Such a comprehensive compliance management platform is essential for multinational enterprises to stay on top of regulatory requirements and implement their global compliance strategies. Contact us to know more.
