One of the main advantages of running a startup is that there’s greater freedom to be agile and flexible. Unlike larger companies that often have to deal with bureaucratic systems, startups can work at a faster pace to beat competitors to market.
For startups working in heavily regulated industries like healthcare, finance or energy, it’s challenging to move quickly. You need a deep understanding of current regulations to make sure you’re compliant, and be able to keep a close eye on draft bills from lawmakers to prepare for future changes.
It can be tough to fully embrace creativity and innovative thinking when you need to adhere to so many rules and processes. However, it’s not impossible – there are lots of ways you can combine innovation with compliance to build a successful, high-growth business.
The changing regulatory landscape
The regulatory landscape is constantly evolving. Issues such as data protection and climate change have influenced laws over the last decade, and there are already debates on how to regulate emerging technologies like artificial intelligence.
It’s even more complex when businesses need to navigate multiple tiers of regulation. In the US, regulations can differ at a state and federal level; in Europe, there are both national regulations and those imposed by the European Union.
Be agile enough to adapt
If your startup grinds to a halt every time there are new regulations, it will become an uphill battle to innovate and grow. It’s essential that you’re agile enough to respond to changes, without too much disruption to your day-to-day operations.
This is where technology can do a lot of the heavy lifting. You can use cutting-edge technologies to organize and streamline your compliance processes, making it much faster to adapt to new regulations.
For example, if your startup is the financial sector, you might use:
- Software that instantly detects unusual transactions, to support compliance with money laundering regulations
- Data analytics to reliably verify a customer’s identity, in line with due diligence regulations
- Digital tools to automate the reporting process, to ensure regulatory reports are accurate and submitted on time
Adopt secure processes around customer data
Putting data management systems in place is good practice for any business, but it’s non-negotiable for startups in regulated industries.
If you’re in an industry like healthcare or insurance, it’s likely that you’ll be dealing with particularly sensitive data such as personal contact details, medical records and claim histories. As a result, data privacy and protection rules tend to be much stricter and include steeper fines for non-compliance.
What’s more, customers will want to know that their data is fully secure before doing business with you. If your startup is going to succeed in a competitive, regulated space, you’ll need to go the extra mile to build trust and credibility.
This rigor can be frustrating, especially if you have peers in non-regulated sectors who can operate more freely. But investing in secure systems right from the start will help to create a more sustainable foundation to grow from.
Rather than having to overhaul your systems in the future, you can confidently scale your startup with the knowledge that it’s backed by a strong framework.
Use regulation as a catalyst for innovation
Being compliant doesn’t just give you a strong platform to innovate from. New regulations can reshape how businesses operate and unlock innovation in the process. This includes:
- Stimulating fresh ideas as founders adopt new business models or ways of working
- Building consumer trust and confidence in new innovations
- Legitimizing businesses, making them more attractive to investors
- Triggering technology developments to support new regulations
For startups, new legislation can be a powerful tool to level the playing field, too. Antitrust laws, for example, prioritize fairness and competition. These laws prevent large companies from dominating the market, which will open up opportunities for your startup and allow you to build traction.
Stay up to date with regulatory changes
As your startup grows, it’s vital to keep your finger on the pulse of industry news, global trends and significant laws in other jurisdictions. This will help you to identify and mitigate risks to your business, as well as plan future compliance efforts.
There’s no quick fix for staying up to date with regulatory changes, but having active business networks and processes can make it much easier. Here are five places to start:
- Attend industry events: Whether it’s a live conference or an online webinar, these can be valuable sources for expert opinions and the most up-to-date information
- Regularly audit your processes: Auditing your compliance processes will allow you to spot issues before they become a problem
- Conduct risk assessments: A risk assessment lets you analyze how new regulations could impact your business and what actions you need to take to prepare
- Train your team: As you bring on new employees, make sure they’re aware of the importance of compliance so they can take ownership over processes
- Utilize new technology: Save time by using software to streamline compliance processes, automate reporting and adapt to new measures