Why Legal Compliance is Important in Business?

Author - Associate Megha Motwani

Compliance is a very big, open wide and undetermined subject. From the business point of view it is something that makes your business operate within the boundaries of law and it’s not just for the sake of saying that I comply with law it’s more for the sake of you going to sleep and doing it peacefully quietly knowing that you won’t wake up tomorrow to some unnecessary unexpected and unwanted lawsuits, claims, fines, penalties, investigations and articles in the newspaper.Why compliance is important in business ?

For many firms, compliance has evolved from an isolated business prevention unit to a commercially focused business partner. Importance of legal compliance in business is that good governance can make businesses more competitive and even prevent crime, et Seq. are some major benefits:

Less legal expenses: The importance of compliance is that it has been said that good compliance equals good business. The 2008 financial crisis was the worst since the great depression. What began as a crisis in the U.S. subprime mortgage market was compounded by the collapse of the Lehman brothers. Later, the internal documents revealed that the culture of the organization was one where there is no accountability for failure. 

On what they are calling culture compliance is about obeying the rules and staying within the rules. Culture is about the approach you take to do business and the financial industry has moved closer in line with general thinking that it’s fine to come up with sets of rules that people have to obey but it’s actually a more powerful discipline on business. If you can have your employees understand the values and standards that you have at that company and keep them within those standards then you can prevent your business from many fines and penalties that a lot of banks faced following the crisis. Moreover, it also has wider societal benefits. 

Longevity: Modern compliance isn’t about ticking boxes or inhibiting business. It’s an enabler protecting society from organized crime. It’s fascinating to acknowledge the fact that you will talk to a lot of people in the modern compliance industry and see that they’re very passionate about what they do but it’s very rare to find an institution where you could actually meet a person taking responsibility and is enthusiastic to make a real difference, taking positive decisions and helping society as well as his firm as well as protecting customers.

According to me, the win-win approach is something that has just gone beyond a narrow compliance function. The banks and firms have actually realized that the compliance functions are promoting their stake it’s actually making the businesses sustainable as a whole in the long term.

Builds trust: Always being compliant with the rules and regulations and putting the companies profile in a public domain leaves a little or no room for the fraud or misconduct to take place and eventually gets all the public trust this is major importance of legal compliance. Therefore, the companies which are serious to operate and who would stay for a long period in business and won’t run away take the compliance seriously as they understand the importance of legal compliance in business and thereby gives a sense of security to the persons of interest.