the process used to ensure that a business is operating within the laws established by the nation they are operating in.
How Compliance Assurance Works
Compliance assurance is implemented both by the appropriate government agency and by the company in operation. Governments may regulate and oversee almost any aspect of a business operating within its borders, including finances, environmental impact, or interactions with consumers. These regulations ensure that each business operates in a way that the country it inhabits deems acceptable, appropriate, and safe.
Many businesses have internal compliance assurance systems in place. By doing internal checks, companies can avoid government penalties and can continue to operate smoothly. These penalties can range in severity but will often interfere with company profits.
Example of Compliance Assurance
An example of compliance assurance would be if a large corporation was located near a body of water producing textiles. The process of making textiles often creates a large amount of waste and by-product. Many of these substances can be toxic to the ecosystems that surround the production plants. The country this company is functioning in has high ecological standards to uphold. They know that many of the production facilities within their borders have the potential to do incredible damage to very fragile ecosystems. As a result, they founded an agency to oversee all businesses that produce waste and how they are allowed to dispose of such waste.
This textile company decided that it would be more cost effective to forgo an internal compliance assurance system. Upper management believed itself to be knowledgeable in the local laws and regulations. The company continued in this way for some time, and when the government agent came to the production plant to do its yearly inspections, they discovered that the company was dumping its waste in a way that did not follow the law.
Because of this, the company was required to halt all production. In addition to halting production, they were required to update operation systems to comply with the law, as well as pay steep fines. Because of these changes to their operation systems and equipment combined with the fines, the company was forced into bankruptcy and closed permanently. Had the company employed a compliance assurance department or officer, they would have followed the local laws. It may have saved the company upfront to rely only on upper management, but the long term consequences were devastating.
Significance of Compliance Assurance
Compliance assurance is critically important for many reasons. Not only does this ensure that all companies are operating within the law, but it also ensures they are safe for the environment and the consumer. Without compliance assurance, pollution rates would be much higher than they are. Compliance assurance is key to keeping our ecosystems in check and global warming at bay.
In addition to the inevitable environmental impacts companies have, they also are directly responsible for their relationship to contractors and consumers. By implementing regulations that protect consumers, governments can ensure that the public is not being defrauded or injured. Governments can protect their people through regulations stating what can be used during production, when those materials can be used, and how to disclose what is in the products that are put into the market. Through the regulation and enforcement of these laws, governments have the ability to affect and protect the population both globally and locally.