Who enforces regulatory compliance?
Regulations and regulatory bodies exist at the local, state, federal and international level. These bodies differ from state-to-state or locality-to-locality as different regions have different laws that are to be enforced. For example, different councils have different regulations on the height of buildings.
An example of a federal regulator is the Australian Securities and Investments Commission (ASIC). ASIC regulations apply to all corporate, markets and financial services operating in Australia.
At a state level, as Occupational Health and Safety (OH&S) regulations differ between Australian states, OH&S laws are governed by state-based bodies, such as WorkSafe Victoria and SafeWork NSW.
Countries or organisations may sign up to multinational or international organisations and regulatory bodies. For example, many European countries are members of the European Union (EU), which has its own regulations and regulators regarding policies on trade, agriculture, fisheries and regional development.
National regulatory bodies may be signatories to international bodies, which confers that a national regulatory body will enforce the standards of the international body and are subject to their judgements. For example, Australian sporting organisations, such as the AFL and NRL, are regulated by the Australian Sports Anti-Doping Authority (ASADA). As Australia is a signatory to the UNESCO International Convention against Doping in Sport, ASADA is required to implement the anti-doping arrangements in accordance with the principles of the World Anti-Doping Agency (WADA), of which Australia is a member.
You can find links to various common legal laws your Australian business may need to comply with here.
What are some examples of regulatory compliance?
Most aspects of business are regulated in some manner. Regulations extend from ensuring workplaces are safe for employees, to environmental protection policies, to taxation, to industry specific regulations such as food hygiene standards for restaurants, or minimum 'local content' percentages for media organisations.
To take a specific example, your organisation might produce inflatable aquatic toys. There are mandatory standards that apply to your product, such as labelling. In Australia the Australian Competition & Consumer Commission (ACCC) is an authority that enforces the Competition and Consumer Act 2010. Their remit covers issues such as product safety and labelling.
Regarding the labelling of your business, the ACCC stipulates that your inflatable aquatic toys must be permanently marked with a specific warning notice that must meet a number of criteria. These criteria might be that the letters of the warning must be:
The requirement that the warning is 'permanent' means that it should remain legible and attached to the product for the life of the product.
'Contrasting' means the colour of the warning label must not blend into the background.
If your organisation’s aquatic toy has a label which meets this requirement, in this specific regard, you are regulatorily compliant.
Why is regulatory compliance important?
Regulation promotes the proper functioning of society and the economy. By ensuring your organisation is regulatorily compliant you are contributing towards this goal.
Additionally, there are penalties for both organisations and individuals that are caught in breach of regulations. These range in severity from financial penalties to both individuals and businesses, to the cessation of trading, and imprisonment.
In recent years there has been a strong focus on the regulatory burden on Australian business. Directors are spending more time on corporate compliance and related activities, and less time on areas of governance relating to strategy, entrepreneurship, risk management, and organisation performance.
Well-designed regulation can enhance competitiveness, and thereby improve economic performance as well as generate substantial innovation offsets for firms.
How to ensure regulatory compliance and implement an effective regulatory compliance plan
It is generally not possible for a board or an organisation’s leadership to know every law that applies to their organisation in detail or to evaluate for themselves whether the organisation is complying with every relevant law. However, there are ways that leaders can oversee compliance with the law, for example, by:
Seeking independent review of proposed decisions;
Establishing a policy framework that requires staff to follow relevant laws;
Maintaining integrity of internal and external audit processes;
Promoting a culture of compliance;
Seeking independent legal advice where necessary; and
Establishing robust systems for reporting and investigating misconduct.
Boards and leaders can and should apply a similar approach to requiring compliance with their governing documents and internal policies. Boards may be interested to inquire into how management maintains compliance with policies such as through providing regular training, internal communications or through requiring compliance through employment contracts.