The cost of non-compliance for vendors

How do you convince your executive team that compliance is important? 

It’s tough, right? At the end of the day, it’s not like compliance has a direct impact on the bottom line — or does it? 

While compliance may not be a key revenue driver, the risk of not being compliant can actually be pretty significant from a number of perspectives. 

In this piece, we’re taking a closer look at how non-compliance can cost your business, so that you can get your executives on board. 

The security cost

Today, a large part of a company’s compliance efforts revolve around security. As cyber threats become increasingly sophisticated, industry regulators are particularly focused on ensuring that private consumer information stays private. The cost of not being compliant from a security perspective can be significant: 

• It may lead to costly fines from regulators 
• Consumers may sue for having their privacy compromised
• It could lead to the loss of proprietary information
• The company’s reputation would suffer a lot of damage, losing customer trust

Instead, businesses can take the time to ensure they are compliant with industry regulations and leading standards (like SOC 2). This will help introduce security controls such as strong password policies, data encryption, identity management and access control, as well as a robust monitoring program. Security compliance will ultimately boost the company’s security posture, therefore reducing the chance of costly consequences.

The business cost

Take a step back and you’ll see that non-compliance and gaps in your security posture could actually have a big business cost as well. 

As we mentioned above, a data breach could make a dent on how your brand is perceived (and how much it’s trusted). If your customer data is compromised, it’s likely they’ll move on to another vendor with a stronger security posture. This is supported by recent research from McKinsey: 

• 52% of B2B buyers consistently stop doing business with a vendor that is not protective of customer data. 
• 53% of all respondents claimed to only make digital purchases once they know the company has a reputation for protecting customer data.

In addition, if your business isn’t compliant with industry standards, it’s likely your sales reps will have to spend a lot of time navigating security questionnaires and additional due diligence from procurement teams.

A data breach that capitalizes on a security vulnerability can also cause business interruption. Attacks like ransomware or denial of service (DDoS) attacks are designed to compromise business operations until the criminals get what they are after (e.g. money). An interruption of services leads to lost revenue and lost productivity. 

Lastly, a lack of compliance could also increase your cyber risk insurance premiums. These are often calculated based on how well your business is set up to protect itself from an attack — so if you’re not compliant with best practices, you’ll likely be paying a lot on insurance coverage.

The legal cost

Even if you’re not in a highly regulated industry (e.g. healthcare or financial services), there can still be a lot of legal consequences to non compliance. 

These include fines and penalties. For example, under GDPR, a violation can cost 2% of a business’s annual revenue or a fine up to €10 million, whichever is more. Meanwhile, under HIPAA, wrongfully disclosing a patient’s health information could lead to jail time of up to 10 years. 

When it comes to a data breach that impacts customers’ personally identifiable information, impacted consumers would be in a position to file lawsuits in civil courts for damages. These lawsuits can quickly become expensive — even if the plaintiffs aren’t successful — as you have to pay legal fees for an extended period of time. 

The compliance burden is worth it

Setting up a robust security posture and a compliance program that supports it takes time and effort. It requires: 

• Running risk assessments
• Establishing policies and best practices
• Conducting gap assessments
• Implementing new controls and remediating old ones
• Training employees
• Preparing for audits
• Responding to findings 
• Setting up processes that support continuous compliance

These aren’t simple tasks, and they require everyone in the organization to be on the same page and operating within a culture of compliance. They can also be costly, as you have to pay for professional support, employee training, and technology solutions that bolster your security profile or enable compliance checks. 

That all said, the investment will always be worthwhile if it can prevent the security, business, and legal costs outlined above. So, as you go through this process of compliance, be sure to choose the right partners — Marana is one example of a team helping tech companies achieve SOC 2 compliance — and adopt the right technologies so that you’re lessening the burden on your team and optimizing your efforts. 

‍At Pima, we’ve made it easier than ever for SaaS vendors to introduce security into the sales process and by sharing security information quickly and securely. Learn more about our product on the homepage.