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What Is Regulatory Compliance and Why Does It Matter?

June 9, 2021

Any person with business experience in the Houston area probably realizes that forming a business and signing its initial contracts is only a critical first step in starting a successful enterprise.

The reality is that at just about every stage in a business’s growth and development, the leadership will have to be aware of and respond to a number of federal, state and even local laws and regulations.

Sometimes these laws apply broadly to all businesses. Laws related to employment matters, like anti-discrimination laws, medical leave laws, wage and hour laws and workers’ compensation laws, are good examples.

In other cases, a business may have to follow additional laws and regulations that are specific to the industry or profession the business trades in.

The art of being aware of and taking steps to follow these laws is called regulatory compliance. It is an important step in ongoing business planning and will usually require the help of someone who has experience in offering businesses professional legal advice.

Not Taking Regulatory Compliance Seriously Can Lead to Financial Fallout

A business which is not forward-thinking about how it will follow an ever-changing body of laws is running a number of risks.

For one, administrative agencies which often enforce these laws will usually have the ability to impose fines and other penalties on businesses which do not follow the rules.

To give just one example, a business that fails to follow Texas’s wage and hour laws may face an administrative penalty of $1,000 per violation.

Many agencies have the ability to mete out other consequences as well that can damage a firm’s reputation or even capability to continue business operations.

A business that does not take compliance seriously also runs the risk of being sued by a disgruntled customer or business associate or even being the target of a class action case.