Hard Data on the Cost of Noncompliance

by Parker Poe Adams & Bernstein LLP

A Corporate Compliance Insights article written by Peter Merkulov recently caught my eye because of its breakdown of the hard costs of compliance – and noncompliance. The title is “The True Cost of Compliance,” and the subject is the December 2017 report issued by Globalscape and Ponemon Institute called “The True Cost of Compliance with Data Protection Regulations.” Mr. Merkulov is the chief technology officer at Globalscape, and as of this date I have not made his acquaintance, but he plucked thoughts right out of my brain with this quote:

“Unfortunately, there are organizations who elect to delay compliance efforts because of the associated costs. In so doing, they risk incurring large fines and the loss of customer trust, as well as damage to their reputation, all in an effort to avoid compliance-related expenditures.”

He then backed this statement up with hard numbers. In my effort to share my passion for building effective compliance programs, I have often described their ability to enhance corporate culture. And I do truly believe that a compliance culture is a culture of trust, accountability, and openness for which most companies at least say they are striving. But let’s go ahead and focus on the hard cost data. After all, it takes all kinds to lead on compliance – the “quals” and the “quants,” as it were. 

Now, to be crystal clear, the study cited and Mr. Merkulov’s article are focused largely on data compliance. But the overall conclusion – it is significantly more expensive to not comply than comply – is certainly valid across all compliance spectrums.

The cost to comply includes costs associated with personnel, audits, training programs, legal expertise, policy development, incident response plans, technology, and the like. The average cost to comply is pegged at $5.47 million for fiscal year 2017; the average cost of noncompliance, however, is almost three times as much at $14.82 million. Mind you, these numbers are averages, with highly regulated industries such as energy, health care, and financial services skewing high on both the cost of compliance and the cost of noncompliance. However, if you focus on the fact that, on average, the cost of noncompliance is three times that of building a proper compliance framework and culture, the efficacy of focusing on compliance is clear.

If you are not convinced yet, consider these additional data points. Most people focus on the fines, penalties, and other legal costs as the greatest cost of noncompliance, yet the statistics in the Globalscape study show that the costs of business disruption, productivity loss, and revenue loss absolutely dwarf the penalty category.

The good news is that the study also illustrates that a few best practices lower total compliance costs. Deploying a centralized governance program is shown to reduce compliance costs by slightly more than $3 million, while conducting compliance audits reduces total compliance costs by slightly less than $3 million. In all, 12 best practices reduce total compliance costs by more than $18 million.

So, if you are looking for a reason to take your first step or the next step in your organization’s compliance program, and culture is just not quantifiable enough, you will join us in being thrilled to see hard numbers enabling compliance professionals to sell the imperative to act to those who hold the purse strings.

Most encouraging is that many of the best practices are relatively simple to achieve once the imperative is established. In the spirit of spring and my bike that is calling me from the wall where it is gathering dust – there is no reason for any entity at this point in time to recreate the wheel. Rather, today’s compliance professionals need not even grab the fastest wheel. Just grab the wheel at the back of the pack and start moving up the pace line wheel by wheel. Then hang in the middle and enjoy the ride knowing that you have minimized costs to your company.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Parker Poe Adams & Bernstein LLP | Attorney Advertising

Written by:

Parker Poe Adams & Bernstein LLP

Parker Poe Adams & Bernstein LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.