Tips to Avoid Consequences of Non-Compliance

According to GlobalSCAPE, the average price of noncompliance is 2.71 times higher than that of compliance. The consequences of noncompliance have become a significant concern today. Failing to adhere to cyber security can go beyond reputational damage and can have devastating repercussions for your business.

If you’re a business owner, understanding these consequences is not only imperative in safeguarding your data but also in fostering an effective cyber security posture for demonstrating credibility and trust among your clientele.

Lack of compliance means that your company is not adhering to the rules and regulations set forth by industry standards for cybersecurity best practices.  This blog will elaborate on the importance of following such regulations and the penalties you will face if you’re non-compliant.

What does non-compliance mean?

Non-compliance is the indication that an organization is not, in part or wholly, compliant with certain cybersecurity policies, compliance requirements, or best practices. This can leave the organization in a negative light and can cause bad brand value, inability to secure investments, high employee churn, and increased capital cost.

Ignoring security rules makes it easy for hackers to attack systems and data. By being non-compliant, companies leave themselves wide open to data breaches, hacks, and cyber attacks. And this can cause irreparable damage and even lead to complete loss of business. On the other hand, doing the hard work of following compliance requirements comes with a significant payoff. It keeps your data locked down tight and your business healthy.

What are the consequences of non-compliance?

Businesses that don’t comply with regulations are at serious risk. They could face security breaches, loss of productivity, and reputational damage. Non-compliance might also lead to financial penalties, loss of clientele, disruptions in operations, and even regional lockouts. It’s crucial for businesses to follow the rules to avoid these problems.

Consequences of non-compliance:

1. Fines and penalties
2. Prison time
3. Reputational damage
4. Disrupted business activities
5. Legal proceedings
6. Loss of revenue

1. Fines and penalties

Regulators drop huge fines on non-compliant companies. GDPR fines alone can cost 4% of revenue. There are also investigational costs, legal fees, breach fixes, and payouts to affected customers. Depending on the violation, fines can really stack up.

2. Prison time

For major compliance failures, individuals can land behind bars for months or years. For example, a HIPAA violation where the organization knowingly obtained or disclosed personal health information can lead to imprisonment of up to one year. (Refer: HIPAA violation examples)

3. Reputational damage

Non-compliance can quickly cause customers to lose trust and loyalty. People will look for alternative solutions and choose those that take security and compliance more seriously. 

4. Disrupted business activities

Missing out on crucial cybersecurity strategies and improper implementation of compliance frameworks puts you behind competitors. Data breaches cause downtime, sinking productivity and profits. For example, in major violations, PCI DSS non-compliance can lead to businesses losing their license to process credit cards.

5. Legal proceedings

Apart from fines and penalties, when businesses do not comply with regulatory requirements, other parties can decide to take legal action against the senior management of the company. These cases can sometimes continue for a long time and cause business interruption.

6. Loss of revenue

The amount of money to be paid during settlements for cases of non-compliance can cause businesses to lose their revenue. For example, a Children’s Medical Center in Dallas suffered a loss of $3.2 million due to a HIPAA violation. It happened because the healthcare facility did not take adequate security measures to protect health information.

How Sprinto can help:

Sprinto lets you take complete control of your compliance process, allowing you to leverage automation and streamlined compliance-related tasks.