Regulatory Compliance Explanation

April 1, 2022 | Regulatory Compliance | Daniel Potočnik

All companies must to follow the rules and regulations of the countries in which they operate. As businesses develop in size and scope, they are subject to an increasing number of rules governing how they do business. Regulatory compliance is the organisational practice of ensuring that business is done in conformity with the relevant rules and regulations. This “Regulatory Compliance Explanation” post includes definition, importance, examples and and actions to fulfils compliance.

Regulatory Compliance Definition

Regulatory compliance is the collection of organisational processes, policies, and procedures that enable compliance with the laws, rules, regulations, mandates, and guidelines issued by legislators in the jurisdictions in which the business operates.

What does a Regulatory Requirement mean?

A regulatory requirement is a government-legislated regulation or legislation that establishes a legal obligation for an entity and increases its compliance burden.

As worded, a regulatory requirement may apply to all businesses that conduct business in a certain state or nation, to organizations in a specific sector, or to organizations that participate in a specific kind of activity as part of their usual business operations.

What Is the Importance of Regulatory Compliance?

Organizations that fail to satisfy regulatory compliance standards may incur significant fines or penalties, depending on the specific nature of the infraction. Government rules also give direction that helps firms prosper, and noncompliance is often associated with different types of company failures.

Other repercussions of inadequate regulatory compliance may include:

  • The regulator may suspend or ban noncompliant companies from applying to tenders
  • It could damage the company’s reputation as a trustworthy business partner.
  • Individuals who knowingly violate the law face punishment or jail.
  • It may cause business disruption as a result of investigations or legal proceedings.


A number of rules that affect the majority of firms around the globe. Some of them are:

  • The GDPR
    The European GDPR establishes regulatory compliance requirements for organisations that gather data from European Union people.
  • IFRS 16
    It introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
  • IFRS 17
    IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts.18 May 2017
    The European Single Electronic Format (ESEF) is the electronic reporting format in which issuers on EU regulated markets must prepare their annual financial reports from 1 January 2020.

How Do Businesses Maintain Compliance?

Companies maintain regulatory compliance by engaging in a variety of actions, including:

  • Working to grasp their industry’s regulatory environment and the jurisdictions in which they operate.
  • As new regulatory compliance requirements emerge, we are working to comprehend them.
  • Developing and implementing policies, processes, procedures, and working techniques to guarantee compliance with applicable requirements.
  • Putting in place mechanisms to identify and prevent noncompliance inside the company.
  • Using digital technology to automate compliance operations and centralise compliance activity management

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