How Compliance Automation Can Reduce the Cost of Compliance?

Ritika Jain

Sep 16, 2024

With the regulatory requirements becoming increasingly complex and stringent, organizations are firing on all cylinders to prove their compliance. According to a report by A-LIGN, 2/3 of teams spend at least 3 months and more than $100,000 annually on audits, and these figures continue to rise as new regulations are introduced. Despite these significant efforts, regulatory non-compliance risks have also increased.

In fact, organizations lose about $4 million on average due to a single non-compliance event. These trends underscore the growing challenges organizations face in navigating the intricate web of regulations.

As a result, global businesses are turning to compliance automation as a way to reduce compliance costs while optimizing operations. By automating compliance processes, organizations can not only lower compliance costs but also minimize the risk of non-compliance and avoid costly penalties.

Understanding the Comprehensive Cost of Compliance

Compliance costs represent the total expenses associated with adhering to the applicable regulatory benchmarks and standards. These costs are essential for ensuring that an organization’s operations are legal, ethical, and in line with all relevant regulations.

Direct Costs:

These are the straightforward expenses that are directly tied to compliance activities, including

Technology investments: Investing in compliance-specific software and tools is essential for efficient management but requires licensing fees and operational costs.
Operational Costs: These include day-to-day operational expenses related to compliance activities, such as evidence collection and reporting.
Salaries of compliance staff: Employing skilled professionals dedicated to compliance functions incurs significant costs.
Cost of training programs: Providing continuous education to employees on new regulations and changes ensures awareness and adherence but comes at a price.
Auditors' fees: Engaging external auditors for assessments and guidance adds to the expense.

Indirect Costs:

These expenses are often less visible but equally significant.

Time Spent by Employees: Compliance tasks often divert employees' time from their primary roles, impacting productivity and requiring overtime to meet deadlines.
Consultancy Fees: Engaging external consultants for specific compliance projects or guidance adds to the expense.
Penalties for Non-Compliance: Fines and penalties for failing to meet regulatory standards can be significant, impacting the organization's finances and reputation.

Also Read: SOC 2 vs. ISO 27001: Understanding the Difference

Top Drivers for Compliance Costs

Several factors drive the high costs associated with compliance and some key drivers include

Changing Regulatory Landscape: The regulatory environment is constantly evolving, requiring organizations to regularly update their processes and procedures. This constant need to adapt to new regulations leads to increased operational costs.
Skillset Demand: Recruiting and retaining compliance experts is costly. The demand for these roles continues to rise, and as a result, salaries and benefits for compliance staff are growing.
Need for New Technology: Organizations must invest in emerging compliance-specific technologies to stay ahead of the regulatory requirements effectively. While these technologies are necessary, the costs of implementation and ongoing maintenance can be substantial.
Data Management: The secure storage and management of large volumes of data, particularly in processes like Anti-Money Laundering (AML) and Know Your Customer (KYC), are significant cost drivers. Ensuring data integrity and security in compliance with regulations is both complex and expensive.

Role of Compliance Automation in Reducing Compliance Costs

Compliance automation offers a practical solution to the challenges of high compliance costs. Here’s how it can help

Automating Compliance Processes: Compliance automation can significantly reduce the time and effort required for compliance tasks by automating routine processes. This minimizes human error, improves accuracy, and allows compliance staff to focus on more strategic activities.
Real-time Risk Assessment: Automation enables smarter, real-time risk assessment, allowing organizations to identify and address potential compliance issues before they escalate into more significant problems. This proactive approach can reduce the likelihood of costly penalties.
Enhanced Visibility: Compliance automation provides greater visibility and control over compliance activities. With automated systems, organizations can easily track and manage compliance requirements, ensuring that all necessary actions are completed on time.
Continuous Monitoring and Reporting: Automated compliance management platforms allow for continuous monitoring of compliance activities and real-time reporting. This ensures that any issues are promptly identified and addressed, reducing the risk of non-compliance.

How letsbloom Can Help?

letsbloom's automated compliance management platform offers a smarter, faster, and affordable route to continuous compliance with regional and global regulations including SOC 2, ISO 27001, PCI DSS, NIST, DORA, and more. Our platform automates and accelerates your compliance journey from start to final audit and beyond, and helps you achieve compliance ~10x faster and ~80% cheaper.