How To Avoid The Consequences Of Non-Compliance In Business

The consequences of non-compliance vary greatly depending on:

  • The regulation or legislation being contravened
  • The scale of the infringement
  • The sector the business is in

But no matter the context, non-compliance with regulations or legislation generally has severe repercussions for businesses — reputational, financial, and even criminal charges and prison time. The move towards individual accountability for compliance failings makes non-compliance a corporate and personal concern.

As the regulatory and legislative landscape becomes ever-more cluttered, the considerations for organisations needing to comply become increasingly demanding. Concurrently, the consequences of non-compliance grow.

What are the consequences of non-compliance?

The increase in ways to fall foul of regulatory or legislative requirements is a worry for organisations; avoiding the consequences of non-compliance becomes more challenging as more regulations and laws are introduced.

If compliance is getting more complex, it’s natural that some business leaders might wonder: what are some consequences for non-compliance? Is it worth taking the risk of non-compliance when the work involved in complying can be so demanding?

The answer is always “no.” The cost and work involved in compliance may be high, but rest assured, non-compliance costs are far higher.


Financial penalties are the top concern of many organisations. The cost of regulatory non-compliance can be significant: the largest fine to date for GDPR breaches is an eye-watering 746 million euros ($847 million).

Even less dramatic fines are unwelcome; HIPAA violations carry a maximum penalty of $1.5 million per year for each violation. Executives who knowingly certify financial reports that don’t comply with SOX requirements face fines of up to $1 million, alongside ten years imprisonment.

Little wonder that the threat of fines can be one of the biggest drivers of regulatory compliance.


As mentioned, jail terms for regulatory or legislative breaches aren’t unheard of. Making a willfully false statement on your EEO-1 Report carries a possible prison term of five years. Violating US anti-money laundering regulations can mean imprisonment for up to 20 years for each violation.

Breaching health and safety and specific environmental laws can also incur prison sentences.

Reputational damage

Your reputation can suffer if you experience a breach of compliance. The impact of reputational damage can be one of the biggest consequences of non-compliance. Its impacts are far-reaching and include devaluing your brand, reduced profits, difficulty securing investment, an increased cost of capital and the inability to recruit or retain talent. In the worst cases, the reputational damage can lead to total business failure.

This has been thrown into stark relief in recent weeks as businesses that continued to trade in Russia saw protests and boycotts, many eventually choosing to protect their reputations by joining those shutting down Russian operations.

ESG concerns are now firmly in the mainstream. The E of ESG — the environmental aspects — may get the most airtime, but diversity, equity and inclusion issues like pay gaps, equal opportunities, and broader societal concerns — the “S” — are fast catching up. Governance is the wrapper around all of this, keeping companies’ policies and processes straight and narrow.

Non-compliance with ESG issues doesn’t just mean failing to comply with the regulations. Perceived shortcomings regarding ethics or integrity or accusations of greenwashing can tarnish your reputation and undermine your good intentions as fast as any regulatory breach.

Business interruption

Breaching some laws will compel your organisation to close operations until you have rectified the issue. This reduction in productivity can have severe implications for your business and its ability to operate.

Don’t suffer the consequences of non-compliance

The consequences of non-compliance with regulations can be varied, significant, and severe. To reduce your risk of non-compliance, ensure you take a comprehensive and robust approach to governance, risk and compliance in all its forms.

No matter the size of your business, strengthen your compliance department to ensure you have the expertise and resources you need to support regulatory compliance. Regularly audit your approach to keep up with the latest risks and apply best practices.

If you manage compliance and governance via manual, document-based processes, you increase your risk of non-compliance with regulations and legislation; consider whether compliance software might fortify your approach and reduce your risk of breaches.

And with the regulatory landscape changing and expanding constantly, don’t hesitate to keep aware of the latest requirements. Climate-related reporting, financial disclosures, DE&I obligations — the list of regulations you must comply with is ever-growing.

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