Author: Chief Data and Compliance Officer and attorney, Nicole Cosby
Two Thirds of Companies Say Compliance Is Key Barrier to Growth
Not long ago, the role of the General Counsel with regard to compliance in highly-regulated industries was largely about setting up sensible guardrails. The job was to ensure a solid approach focused on good reporting, defensible “best-effort” internal practices, and a rock-solid audit trail. The words “compliance” and “growth” wouldn’t be used in the same sentence.
However, according to a study Fyllo recently completed in partnership with The Harris Poll of more than 300 compliance leaders, nearly two-thirds of heavily regulated companies agreed compliance was the critical factor blocking growth. In fact, compliance issues ranked as a bigger barrier than having the right strategy or even capital to fuel growth. This belief was shared by companies as small as local cannabis start-ups managing rapid growth and global banks with deeply-experienced compliance leaders.
One of the biggest factors cited by compliance professionals is the inability to adapt quickly. Nearly two-thirds (61%) did not believe their organizations could adapt quickly to sudden changes in regulations, with 28% pointing to outdated technology as the cause.
Patchwork Legislation is a Significant Pain Point
When taking a look even closer, managing regulations across jurisdictions is a significant pain point for compliance professionals, with 76% citing that decentralization of regulatory information is a challenge. The majority of professionals discussed how complicated it is to decipher between local and state laws. More than half of respondents (51%) even went as far to say that the number of regulations their organization needs to keep on top of is unmanageable. Moreover, the dynamic nature of regulations even has these leaders questionioning their own compliance.
For cannabis operators, even basic functions of marketing and advertising are so restricted by location that it would take a literal army of compliance officers to humanly tackle the problem on a day-to-day basis.
Among companies in highly regulated industries, data for privacy regulations (59%), product-related regulations (45%), and marketing or advertising-related regulations (44%) are the three most common areas where regulatory or compliance issues are the most difficult to balance with business processes.
What risks must General Counsel (GCs) guard against?
|Growth risks||Market expansion and innovation may be constrained|
|Opportunity risks||A lack of awareness of pending regulatory shifts that may open new opportunities may leave your company unable to respond quickly enough|
|Reputation risks||Companies with a poor track record may face harsher scrutiny from the government. In cannabis, this might make obtaining new licenses in new geographies slower and more difficult|
|Revenue risks||Every compliance misstep risks delays in products getting to shelves, or worse, requiring product to be destroyed. Every delay and loss of product results in lost revenue.|
|Cost risks||Keeping up to date with ever-changing regulations is costly and difficult, particularly for understaffed compliance departments|
Compliance Missteps Go Beyond Financial to Reputational
While compliance citations have become the norm, with companies being cited on average 12.6 times for noncompliance over the past five years, the ramifications of those missteps reach far beyond fines.
Nearly two-thirds (73%) say that key stakeholders like consumers, employees and regulators have lost trust in a company due to compliance issues, and almost half (49%) say it results in higher costs to attract new customers and investors.
Use Technology to Turn Compliance Into a Competitive Advantage
The emphasis on growth demands a different approach that encompasses both defense and offense. Fast-growing companies need to access new markets, develop innovative new products, and challenge the status quo — all while managing the challenges of dealing with an ever-changing patchwork of state, local, and federal legislation.
Compliance professionals need to redefine their compliance roadmap based on real-time intelligence which should take into account federal, state and local laws and ordinances. In fast-paced, highly-regulated industries, the winners are the companies who know more and know it sooner. Leveraging technology can help.
This is why Fyllo has built its Regulatory Database whichhelps companies gain a view beyond Black Letter Law, accelerate legislative and regulatory research, track licensing opportunities and make better decisions with the largest collection of cannabis regulatory intelligence in the U.S. Without that kind of resource, costly mistakes happen.
Once GCs recognize that a compliance suite does much more than just protect a company from citations, they can begin to understand the true cost of non-compliance from a financial, operational, and reputational perspective, giving them a leg up in today’s most challenging regulatory environments.