The Cost of Non-Compliance
In today’s business world, the key to success has without a doubt become the ability for organizations to gather and analyze data. Data provides organizations with critical information regarding competitors, and consumers, and can provide significant resources to better make decisions for further growth. Information has truly become a critical aspect of ensuring longevity and overall success for organizations of all sizes. However, with the growing reliance on data and information regulatory bodies have begun to expand and reinforce data management requirements.
Compliance obligations for organizations regarding data management and security have increased tenfold over recent years and the increase in regulation has driven organizations to a point where compliance cannot be ignored. In many cases, organizations believe that the cost of compliance is too great to warrant any action on their part. However, this is quite the contrary as recent studies have shown that the cost of non-compliance can be much greater than that of remaining compliant. The cost of non-compliance does not solely reside within the monetary loss of fines but can also have a detrimental effect on the organization’s reputation and operations. There have been countless examples of organizations experiencing a data breach in which the organization is not only fined for negligence but experiences disruptions to its processes resulting in the company halting operations for an extended period of time. In addition, once a breach is known to the public and the organization has been publicly denounced for its failure to provide proper data security consumers will find other suppliers.
With this in mind, organizations are quickly finding that maintaining effective compliance, while expensive, can actually be nearly three times less expensive than remaining non-compliant. A study conducted by Ponemon and Globalscape found that the average cost of compliance annually is roughly$5.47 million. This may seem expensive, but the study also found that the annual cost of non-compliance is nearly three times higher with an average cost reaching $14.82 million.
Data security has been a hot topic within the compliance world as it has become extremely prominent for organizations of all sizes, however, other areas of compliance result in the same or similar numbers. Environmental, social, governance, is another critical area of compliance that has grown in importance as of late, with failure to abide by ESG standards has proven to dissuade consumers from continuously purchasing a product as a study fromMcKinsey & Co. found that 66% of consumers consider an organization’s environmental footprint when choosing a product or service.
The cost of compliance may seem high for several organizations, however, data shows that failing to abide by regulatory requirements can have a much more negative impact on the success of an organization. Whether the organization must achieve better financial, data, or environmental compliance the fact of the matter remains the same, organizations must do all that they can in order to achieve effective compliance. Fortunately, with greater developments within AI and technology, numerous information and technology architectures have become available that can greatly assist organizations in their goal to become compliant. These architectures are equipped with tools to automate manual processes such as researching regulatory changes in which organizations can receive critical information at a much faster rate. In addition, by automating these processes organizations can better reallocate their resources to more critical areas of identifying and creating effective compliance solutions.