Managing a business firm can be bitter-sweet. It is often exciting, challenging, and downright overwhelming. The latter seldom only has to do with securing profits. Can maintaining ROI be a problem? Yes, since the statistics show that nearly 3,200 startups failed in 2023.
Every year, businesses, small and big, shut down or go bankrupt due to an inability to retain profits. However, there are other aspects to take care of, including regulatory compliance. Each business must follow certain laws and guidelines laid down to govern its specific processes. Consider public liability insurance as a safeguard against unexpected liabilities
In the event of non-adherence to that minimum standard, there can be serious repercussions. This blog will focus on three crucial corporate compliance mandates that can make or break an enterprise.
Product Safety and Efficacy
Business entities do not sell their products out of nowhere. The Food and Drug Administration (FDA) is responsible for ensuring public health and safety through regulations across the US. This is to imply that companies can only make their products commercially available after the FDA grants its approval.
Product approval is usually given following a few clinical trials. In many cases, the full impact or side effects of a certain product become known after public use. This was the case with the Paragard IUD or intrauterine device.
As the flagship product of Teva Pharmaceuticals and CooperSurgical, the Paragard IUD received FDA approval in 1984. This is the oldest non-hormonal IUD that uses copper to prevent pregnancy for at least ten years. With time, women experienced severe side effects due to device rupture and migration.
According to TorHoerman Law, some of the common injuries included perforation of the cervix, organ damage, infertility, severe pain, and infection, among others. Given the fact that women had to undergo extensive and expensive surgeries, the product failed to meet its safety compliance standards.
Is it effective? Yes, but the FDA issued warnings regarding the dangers and complications in 2022. In such cases, the agency has the authority to recall the product permanently or until the manufacturer launches a safer variant. The duty to market the product responsibly is also closely tied to safety compliance.
It appears that Paragard’s manufacturers had failed to meet this as well. Injured women filed the Paragard lawsuit not just for their injuries but also for deceptive advertising practices. The medical device was promoted as safe and effective to keep a steady influx of profits.
Data Protection and Privacy
We live in a world where data is more precious than even gold. Did you know that the world generates a gargantuan volume of over 330,000 petabytes (PB) of data daily? This information often includes personal customer details that help companies to serve clients better.
For instance, cookies are used to gather login-specific info, the customer’s personal data, and their website activity or behavior. It is not a coincidence that customers can find useful recommended products without searching for them in the first place.
It is equally true that information is power, and power can be misused. That is when cases of financial losses, damaged reputation, and identity theft arise. So, companies have the responsibility for customer data protection and privacy. This is done in the following ways –
- Disclosing completely how the gathered data will be used
- Using the data only for the purpose that was originally communicated
- Securely storing data using strong cybersecurity measures
- Anonymizing the data to protect the customer’s identity
Just like product safety compliance, data protection laws are there to safeguard the customer. Failure to comply will lead to legal action, financial penalties, and reputational damage.
Tax Compliance
Every company across the US must pay its corporate tax, which is applicable at the rate of 21% on the taxable income. This means the tax is levied on a company’s revenue left behind after subtracting the expenses.
In most cases, it is poor payroll management that causes tax compliance issues for companies. These may take the following forms –
- Not respecting a worker’s minimum wage requirements
- Not providing equal pay for equal work
- Incorrect payroll calculations
- Not maintaining detailed payroll records
- Crossing the legal overtime limit
- Delayed salary payments
Other than these, a company may fail to meet tax compliance laws due to withholding correct tax calculations, misclassifying employees, and late tax filings. If any company does not meet tax law requirements, they risk facing legal charges and heavy penalties.
In the end, ethical laws also apply that essentially govern safe and reasonable labor practices. The cost of compliance can be high as companies often murmur. After all, there are several major regulatory requirements to meet.
Even so, the cost of non-compliance is heftier. An enterprise risks losing as high as $14 million due to a single event of non-compliance. In the final analysis, it only makes sense to comply with the necessary laws. The alternative, especially a damaged reputation and loss of customer confidence, is not worth the risk.