How Much Does Compliance Really Cost?

A 2011 study conducted by Ponemon Institute LLC surveyed 46 multinational organizations over a 12-month period to estimate the true cost of compliance.

December 23, 2020

A January 2011 study, “The True Cost of Compliance” conducted by Ponemon Institute LLC, surveyed 46 multinational organizations over a 12-month period to estimate the true cost of compliance.

The study yielded the following results:

Average compliance cost = $3,529,570

Average non-compliance cost = $9,368,351

Why such a significant difference between the two? Simple: the missing piece is a corporate compliance program. That missing piece, or program in this instance, results in a difference of a whopping $5.8 million. Can your organization’s budget afford to fall in the unfortunate category of non-compliance? Most likely not.


[Photo credit: Ponemon Institute LLC]

Satisfactory compliance encompasses a multitude of various factors. A wide range of compliance facets needs to be adhered to in order to meet both internal and external requirements, including policies and procedures, regulatory standards, laws, and regulations.

Compliance requires a great deal of investing, and not just financially. To derail risk, it’s vital to have the proper people, processes, and maintenance implemented. Otherwise, your organization will end up doling out more money associated with risk and neglect, which could’ve been easily avoided from the start.

Ponemon’s study found that 60 percent of compliance cost activities include administrative overhead and 40 percent of the direct costs include payments to consultants, auditors, etc. Additionally, researchers discovered that increasing compliance spending resulted in a positive correlation between the costs associated with non-compliance.


[Photo credit: Ponemon Institute LLC]

Non-compliance and accidents are bound to occur from time to time, but if the proper precautionary measures and funds are established, then it will undoubtedly be a much smaller blow than if no preparations were in place. That’s why covering all your compliance bases is non-negotiable. It’s imperative to be prepared before an incident exposes any weaknesses in your compliance management process.

If you haven’t already realized the immense importance of why investing in a compliance program is not an option but a necessity, here are a few of the positive gains.

•   Reduces risk
•   Increases productivity
•   Lowers costs associated with non-compliance
•   Decreases penalties and fines
•   Fosters company culture
•   Protects confidential data

Overall, choosing to forgo a compliance program covering the aforementioned areas can result in a much higher expenditure. In addition to fines, penalties, and extraneous costs is the loss of efficiency associated with shifting gears to correct the troublesome situation.

Therefore, it goes without saying that there needs to be some sort of activities or actions that are waiting in the wings of your compliance program.  Otherwise, your organization’s purse strings will tighten indefinitely. It’s possible to avoid the pitfalls, however: simply implement a comprehensive program with set tactics to target all possible aspects and devote adequate time and financial support to maintaining the utmost degree of acquiescence. Then your organization will truly realize the benefits, values, and actual cost of compliance.

In what ways has your compliance program saved your organization?

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