At one time, small businesses had very little data to protect and therefore rarely saw the need to invest in state-of-the-art digital security. In some cases, they may have even had no security at all. As businesses become increasingly connected, however, smaller businesses with minimal security can unknowingly provide an unsecured portal directly to larger businesses with greater digital assets to protect. In fact, one of the largest data breaches in history, the Target data breach, was actually accomplished by exploiting a link between a much smaller (and less well-protected) HVAC company's system and Target's giant, well-protected financial network.
In the wake of revelations regarding the Target breach, security firms began to question the security of all connected devices and connections. Turns out that the remote connections many companies have with businesses that service and monitor their heating and cooling systems may also provide an easy gateway for hackers to exploit. In an increasingly connected world, it is no longer enough for only the biggest giants to invest in state-of-the-art security. Regulatory compliance is a growing field that is designed to plug exactly these types of holes.
Why is Regulatory Compliance So Important?
Imagine you moved into a home that had a tunnel that connected your home to your neighbor's home. If you have a good relationship with your neighbor, over time, you might find this tunnel to be hugely useful and convenient. Now imagine, however, that you locked all your doors and windows at night or when you left your home and even invested in a state-of-the-art security system. Your neighbor, however, regularly left home leaving doors and windows unlocked and in some cases wide open. When your home is connected to their home, then their lack of security leaves your home vulnerable.
This is why regulatory compliance is important. Regulatory compliance helps to ensure that one business' lack of security does not have a direct negative impact on another business. Particularly when one business does their best to secure and protect their data and other digital assets. Regulatory compliance also means complying with regulations set by a number of different entities, some of which may be more stringent or more or less enforceable than others. For instance, certain laws exist at both the state and local level that businesses need to be in compliance with but they also have a responsibility to maintain compliance with certain standards set by customers, clients, vendors, and suppliers. While it is true that every entity may have their own regulations they expect businesses, partners or vendors to comply with that can create something of a nightmare, the penalties for not doing so can be severe.
How Regulatory Compliance Works
One of the most infamous examples of wide-spread regulatory compliance was the U.S.shift to EMV cards in the fall of 2015. It was widely publicized that by October 1, 2015, all merchants needed to have made the shift from swipe card readers to EMV card readers. What was not so widely understood, however, was just where these regulations were coming from. With the costs of credit card fraud soaring, the UK made the move to EMV or chip cards as early as 2005 and by 2010, the majority of the rest of the world had made the switch. As a result, U.S. citizens became the most highly targeted victims of credit card fraud.
While the Federal government could have stepped in and mandated the use of EMV chips, banks decided to proactively initiate the switch themselves. Had the U.S. government needed to step in to mandate the update to EMV cards, it could have resulted in massive penalties and fines being issued for failure to comply. Instead, since banks and card issuers were the driving force behind the move, they simply enforced the move by shifting liability from themselves to merchants. Prior to October 1, 2015, if a credit card was used fraudulently, the bank shouldered the financial burden and paid the merchant. After October 1, 2015, however, if a credit card was used fraudulently at a non-EMV terminal, then the merchant was held liable and the bank could refuse to pay the charges.
Not all compliance is legally mandatory or enforceable but there can still be stiff penalties for a failure to comply. It is important for businesses to institute policies and even establish regulatory bodies within their companies to ensure that their procedures, practices, and policies are in compliance with policies required both by law and their partners, vendors, suppliers and even customers.
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