Many business owners find it difficult to navigate the complicated regulatory landscape, however, understanding and complying with regulations is crucial for the success and sustainability of any venture. In this blog article, we’ll take a look at key steps and strategies for helping company founders navigate the regulatory landscape successfully.
Gather Regulatory Intelligence
Before you start your business, conduct extensive research to understand the exact legislation that governs the sector you work in. Gather as much intelligence as possible. Stay up to date on any changes or revisions to local, state, and federal regulations that might impact your business. Regulators usually publish their guidance documents on their websites, so monitor these sites regularly. You can also utilize other online resources or websites, industry publications, and legal databases to keep updated. It’s also important to connect with industry associations and to get advice from colleagues or mentors who are familiar with the regulations.
Verify The Regulatory Intelligence You’ve Gathered
It is vital to verify that published regulations and guidance documents correctly reflect real-world scenarios:
Consult Lawyers or Regulatory Specialists
Consult lawyers who specialize in the relevant industry or space. They usually have the knowledge and experience to advise on the practical applications of different regulations. Similar to lawyers, regulatory specialists have the knowledge and experience to interpret regulations and liaise with regulatory agencies.
Join Industry Associations and Forums
Networking with industry colleagues can provide information about how regulations are interpreted and executed. Trade associations are usually good forums to table regulatory challenges because other members can offer practical advice based on their experiences.
Attend Regulatory Seminars
Attend workshops and seminars hosted by regulatory agencies as these events tend to include case studies and Q&A sessions from which you can learn from.
Build A Regulatory Affairs/Compliance Team
The first step is to create a regulatory team or hire regulatory consultants. This team or the consultant will be primarily responsible for gathering and updating regulatory intelligence. In most cases, you’d also need legal advisers, compliance specialists, and industry-specific experts. It’s very important to hold regular meetings to review and debate regulatory developments and their potential impact on current and future operations.
Develop a Regulatory Compliance Roadmap
In most cases, compliance with regulatory requirements involves additional financial resources due to agency fees or certain human resource or training requirements. Therefore, having a clear plan can help build compliance over time and avoid costly mistakes. The first step is to outline the various requirements and their potential impacts on your operations. Then, set priorities for critical milestones and deadlines, and finally, develop a system (such as an internal audit) for reviewing and updating your compliance plan regularly.
Engage Regulatory Authorities
Build a positive relationship with regulators. It’s always advisable to have pre-implementation meetings with agencies. Some agencies have published guidelines on how to set up these meetings and what resources or documents to bring along. It’s also important to have a company point of contact (a regulatory liaison) with relevant authorities for direct communication with the company. Developing strong relationships can help you stay up to date on regulatory developments and potentially influence future regulations or policies.
Develop A Robust Internal Control System
The more compliance issues you have, the lower your rating with authorities. The disadvantage is that it becomes harder to negotiate certain situations with these agencies. In some cases, agencies will provide certain concessions to very compliant companies, especially in areas where regulation is unclear. So, in addition to avoiding hefty fines, internal controls are important for maintaining a good reputation.
This involves creating internal controls and processes to maintain continuing compliance. For example, frequent training for your team, audits to identify potential issues, and procedures for reporting and responding to compliance concerns quickly. Most companies will opt for a quality management system such as ISO (International Organization for Standardization). You can also invest in regulatory technology (RegTech) tools to automate compliance processes.
Common Mistakes that Lead to Regulatory Issues
- Failure to undertake thorough research on the relevant regulations. Being unaware of regulations can lead to unintended violations.
- Ignoring local regulations. Regional regulations may vary slightly from federal regulations. In some cases, there might be additional requirements.
- Not having a diverse and knowledgeable regulatory compliance team.
- Neglecting certain aspects of regulations. i.e. some people might focus on financial regulations while neglecting any other applicable regulation.
- Failure to adapt to changes in regulations. Regulations can evolve.
- Inadequate internal controls. Not having processes for checks and balances.
- Poor communication with regulators.
- Poor documentation. Being able to prove historical compliances in cases of audits.
- Not assessing the impact of regulation on product development or launches.
Case Study: Adobe and Figma cancelled their $20B deal due to Regulatory Hurdles
More than 15 months after Adobe announced its intention to acquire design platform Figma, the companies announced Monday, Dec. 18, 2023, that they had reached a mutual agreement to terminate the transaction because European Commission and UK Competition and Markets Authority regulators offered “no clear path” to a completed deal.
