Tackling rising compliance costs in 2025

What is a compliance cost?

Compliance costs encompass the total expenditure an organization incurs to comply with industry regulations and standards. These costs are comprehensive and varied, with the most common ones including:

• Salaries of compliance staff: Compensation for employees responsible for upholding regulatory adherence
• Regulatory reporting costs: Expenditure related to preparing and submitting reports required by regulatory bodies
• System upgrades for data retention and security: Investments in technology to store sensitive information securely and in compliance with data privacy regulations
• Training and education: Costs for training staff on new regulations and compliance procedures
• Audit and legal fees: Expenses incurred for external audits and legal consultations to ensure compliance
• Implementation of new procedures: Costs associated with integrating new regulatory guidelines into existing business operations, such as updating policies and procedures

8 strategies for managing compliance costs

Given the detrimental effects of compliance negligence, organizations must find ways to effectively manage and mitigate rising compliance costs. Here are eight strategies that can help:

1. Invest in the right technologies

As regulatory requirements become more complex, companies can benefit from investing in advanced technologies that can streamline compliance processes. Some of these technologies include:

• Blockchain: This secure digital ledger technology can help maintain and track data in a tamper-proof manner, making it easier to comply with privacy regulations.
• Robotic process automation (RPA): RPA enables businesses to automate manual tasks for compliance, minimizing human intervention and potentially reducing labor costs.
• Cognitive computing: With its ability to analyze big data rapidly, cognitive computing helps companies quickly identify compliance issues and respond promptly.

By automating and simplifying compliance processes with the right tools, organizations can reduce human error, improve efficiency and lower compliance costs.

> Read more: How RPA and AI drive end-to-end intelligent process automation

2. Take a proactive approach to compliance

Proactively addressing compliance can be the difference between a thriving business and one plagued by disruptions and fines. Proactive compliance planning involves conducting regular risk assessments to identify areas of vulnerability and address them before they become compliance issues. It also enables businesses to anticipate future regulatory changes, prepare in advance and avoid costly reactive measures.

By continuously monitoring regulatory developments and updating compliance strategies, companies can ensure smoother operations and minimize the risk of noncompliance penalties and reputational damage. This approach fosters a culture of compliance, making it easier for businesses to adapt to changes as they occur.

3. Embed compliance into everyday activities

Integrating compliance into core business processes ensures it becomes an integral part of your organization’s daily operations, not an afterthought. This means incorporating compliance considerations right from the planning stages of product development, customer service protocols and internal audits. By doing so, all team members become aware of the importance of compliance in their everyday tasks.

Embedding compliance into business processes can also reduce redundancies and errors, resulting in a more cohesive and streamlined approach to compliance. This can ultimately reduce costs associated with noncompliance and inefficient practices.

4. Implement a compliance management system

Implementing tailored compliance management software is integral for businesses to maintain regulatory adherence efficiently and cost-effectively. A robust compliance management tool automates routine compliance tasks, minimizes the risk of human error and ensures consistent application of compliance standards across all operational levels.

Compliance management systems offer a range of beneficial features, including real-time dashboards, centralized document control and automated alerts for regulatory changes. These features enable businesses to streamline compliance processes, reduce administrative costs and improve overall compliance efficiency.

5. Educate your employees

Training and awareness programs empower employees to become the first line of defense against compliance violations. Educating employees about compliance obligations allows everyone to understand their role in maintaining compliance and flag any potential issues before they escalate.

Comprehensive training programs goes beyond simply informing your employees about compliance regulations. It requires ongoing education and clear communication on your company policies, procedures and regulatory updates that affect daily tasks. This equips your employees with the necessary knowledge to navigate their responsibilities effectively, reducing the risk of compliance breaches while enabling employee autonomy.

6. Leverage external expertise and resources

Outsourcing compliance functions can be a cost-effective strategy for businesses with limited resources to maintain a dedicated compliance department. By converting fixed costs into variable costs, companies gain flexibility and scalability by paying only for the services they need. This can lead to significant labor cost savings, particularly for small and medium-sized businesses.

Moreover, external firms bring a wealth of expertise and stay updated on regulatory changes. They offer valuable resources such as compliance software and training programs, minimizing the need for businesses to invest heavily in specialized staff or training. This not only reduces costs but also guarantees access to niche skills as and when required.

7. Conduct regular audits

Regular internal and external audits are crucial for maintaining an effective compliance framework. Through these audits, businesses can thoroughly review and assess their compliance strategies, identifying any discrepancies or areas for improvement.

To ensure effective audits, establish a well-defined schedule, use comprehensive checklists tailored to industry regulations and engage unbiased auditors with expertise in relevant compliance domains.

By systematically evaluating current practices, you can identify and rectify areas within your organization that may result in regulatory breaches or inefficiencies. Over time, these refinements reduce compliance expenses while enhancing operational agility.

> Learn more: Document retention periods and best practices to ensure compliance

8. Utilize analytics for compliance insights

Data analytics offers a detailed and nuanced view into operational workflows, allowing businesses to identify costly processes and predict potential compliance risks. By regularly collecting and examining compliance-related data, companies can pinpoint inefficiencies and proactively anticipate potential regulatory breaches or financial losses.

Having access to real-time insights also affords companies the opportunity to make data-driven decisions and adjust their compliance strategies as needed. This can significantly reduce the costs associated with noncompliance penalties, reputational damage and inefficiencies.

Key factors influencing compliance costs

When it comes to compliance costs, there are several factors at play. Understanding and addressing these factors is vital for businesses seeking to manage and mitigate rising compliance expenses.

1. Scale of operations

The size of an organization is a critical factor in determining its compliance costs. Smaller firms often struggle without economies of scale, making it challenging to absorb compliance-related expenditure. As for larger companies, especially those with a global presence, they may face higher compliance costs that come with navigating various regulatory landscapes and their complex operations.

2. Multiple jurisdictions

Operating in multiple countries or states adds an extra layer of complexity and cost when it comes to compliance. Each region may have its own rules on taxation, labor, data protection and environmental standards. Navigating these diverse regulatory landscapes requires significant resources, including hiring local experts, which further adds to compliance costs.

3. Industry-specific regulations

While all industries are subject to regulatory standards, each industry has its own unique compliance requirements. These regulations often demand specialized staff or technology, which translates to varying burden of compliance costs across different sectors.

Heavily regulated industries, such as financial services and healthcare, typically face higher expenses due to compliance requirements like Anti-Money Laundering (AML), Know Your Customer (KYC) and the Health Insurance Portability and Accountability Act (HIPAA).

Other industries like hospitality, retail and manufacturing, while less regulated, can still incur significant compliance costs for meeting industry-specific standards, such as food safety and product quality.

4. Technological requirements

To meet compliance standards in the digital age, adopting advanced technology is crucial. With remote work and cloud-based systems on the rise, companies must invest in data security measures to protect sensitive and confidential information. This includes data encryption, multifactor authentication and regular network activity monitoring.

Implementing new technology may also necessitate staff training and system upgrades to integrate tools into existing operations, leading to increased compliance costs.

> Read more: Why organizations need secure business file sharing

5. Administrative and legal costs

Compliance often involves extensive documentation, reporting and administrative tasks. This requires dedicated staff or external consultants, contributing to higher labor costs. When compliance issues arise, legal expenses can also be substantial, especially when dealing with complex regulatory matters or when operating in highly regulated industries.

6. Training and development

Keeping staff informed and trained on the latest compliance requirements is essential but also adds to the costs. To ensure that employees are up to date with current regulations and best practices, conducting regular training sessions, workshops and seminars is necessary. These investments in staff development directly contribute to overall compliance costs but are indispensable for maintaining a high level of adherence.

7. Compliance monitoring and auditing

To ensure that compliance measures are effective, regular monitoring and audits are essential. These audits, whether conducted internally or by external agencies, require time, effort and financial resources. Such costs can add up quickly, particularly for larger companies or those operating in industries that require frequent audits.

> Read more: How ECM helps organizations with regulatory compliance 

What the future holds for compliance

As businesses face an ever-changing regulatory landscape, the future of compliance is shaping up to be more complex than ever before. To stay ahead, organizations must continuously adapt to emerging trends influencing compliance strategies and requirements.

Here are four key trends to take note of:

Data privacy is taking center stage

With the rise of data breaches and concerns around personal information protection, data privacy regulations are becoming increasingly stringent.

The European Union's General Data Protection Regulation (GDPR) was just the beginning — many other countries and regions have followed suit with their own regulations, such as the California Consumer Privacy Act (CCPA) and the Brazilian General Data Protection Law (LGPD). Companies must invest in robust data protection measures and ensure compliance to maintain consumer trust and avoid hefty penalties.

Cybersecurity compliance is a growing concern

As more businesses move towards digital platforms and remote work, addressing cybersecurity threats is also becoming a top concern for compliance professionals. This has led to an increased focus on cybersecurity compliance, with regulations like HIPAA and the New York Department of Financial Services (NYDFS) Cybersecurity Regulation setting strict requirements for safeguarding sensitive data.

AI and automation are transforming risk and compliance management

Faced with the challenge of managing numerous regulations, businesses are finding promising solutions in technological advancements such as AI and machine learning. With the help of these technologies, companies can streamline compliance processes, identify potential risks and automate manual tasks. This allows for more efficient use of resources while reducing the likelihood of human error.

Preparation for global AI regulations is becoming a priority

The increasing use of AI in businesses has prompted the need for regulations to govern its development and usage. Countries such as Canada, the UK and Australia have already developed guidelines for ethical AI use while others are in the process of doing so. As more countries implement AI-specific regulations, organizations must stay informed and adjust their compliance strategies accordingly.

How intelligent document processing supports easier compliance management

Intelligent document processing (IDP) solutions like Hyland IDP aid organizations in bridging the gap between data privacy, cybersecurity and AI compliance requirements.

At its essence, IDP is a sophisticated blend of technologies, including optical character recognition, machine learning and natural language processing. These technologies work in tandem to facilitate automated ingestion, understanding and organizing of documents. This automated orchestration is critical in today's digital landscape, where the volume of data can overwhelm traditional manual processes, leading to errors and noncompliance.

Here are some of the ways in which Hyland IDP simplifies compliance management:

• Automating data processing and extraction, eliminating the need for manual data entry, categorization and validation
• Improving accuracy by utilizing machine learning to recognize and extract data from various document types, including unstructured sources such as emails and handwritten notes
• Ensuring secure data handling with robust security protocols, including secure access controls, encryption and audit trails to maintain the integrity and confidentiality of sensitive information
• Adapting to regulatory changes with the platform’s continuous AI-driven learning feature, reducing the need for manual updates while ensuring ongoing compliance

With Hyland IDP, organizations can achieve easier and more streamlined compliance management, reducing costs and minimizing the risk of noncompliance penalties. Businesses are better positioned to focus on their core objectives, knowing that their data is being handled with the utmost care and in accordance with regulatory requirements.

> Read more: Why AI-powered IDP is the future of intelligent enterprise