Ongoing compliance: Overview, definition, and example
What is ongoing compliance?
Ongoing compliance refers to the continuous adherence to laws, regulations, standards, and contractual obligations throughout the duration of a business operation or contractual relationship. Unlike initial compliance, which focuses on meeting requirements at the outset of a project or business activity, ongoing compliance ensures that the necessary actions, checks, and reporting are maintained over time to ensure the business remains in accordance with applicable laws and agreements. This can involve regularly updated practices, audits, reporting, training, and monitoring to ensure that any changes in laws or internal policies are promptly addressed.
For example, a company operating in multiple countries must ensure ongoing compliance with local tax laws, employment regulations, and environmental standards in each jurisdiction.
Why is ongoing compliance important?
Ongoing compliance is important because it helps businesses avoid legal risks, penalties, and reputational damage. Regulatory environments are dynamic, with laws and standards often changing. By ensuring that compliance is maintained over time, organizations can prevent violations that could result in fines, lawsuits, or loss of business licenses. Additionally, demonstrating ongoing compliance enhances a company's credibility with regulators, customers, investors, and partners. It shows a commitment to ethical practices, governance, and operational integrity. Effective ongoing compliance helps to protect an organization’s long-term sustainability and legal standing.
Understanding ongoing compliance through an example
Let’s say a financial institution is required to comply with anti-money laundering (AML) regulations. At the time of starting operations, the company implements the necessary policies and procedures to meet regulatory requirements. However, to maintain compliance, the institution must regularly update these policies, conduct employee training, perform periodic audits, and submit ongoing reports to regulators. If there are changes to AML laws, the company must adapt its processes accordingly. Failing to maintain this ongoing compliance could result in penalties or even the suspension of its ability to operate.
In another example, a manufacturing company may be subject to environmental regulations that require ongoing monitoring of emissions or waste disposal practices. The company must continuously monitor and report its activities to ensure compliance with environmental standards. If new regulations are enacted or the company expands its operations, it must update its procedures and make any necessary adjustments to stay compliant.
An example of an ongoing compliance clause
Here’s how an ongoing compliance clause might appear in a contract or policy:
“The Company agrees to maintain ongoing compliance with all applicable laws, regulations, and industry standards throughout the term of this Agreement. The Company will regularly review and update its policies, procedures, and practices to ensure adherence to legal and regulatory requirements and shall provide evidence of compliance upon request.”
Conclusion
Ongoing compliance is an essential part of business operations, ensuring that organizations continuously meet legal, regulatory, and contractual obligations. By maintaining ongoing compliance, companies reduce the risk of non-compliance, which can lead to legal consequences, reputational damage, or operational disruptions. Establishing robust processes for ongoing compliance helps businesses remain adaptable to regulatory changes and sustain their operations effectively over the long term.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.