The difference between internal and external compliance lies in the scope and focus of compliance activities within an organization. Let’s examine each type:

Internal Compliance

Internal compliance refers to the adherence to internal policies, procedures, and standards set by the organization itself. It involves ensuring that employees, departments, and business units comply with the organization’s internal guidelines, code of conduct and best practices. Internal compliance focuses on maintaining consistency, efficiency, and ethical behavior within the organization. Key points to consider are

Policies and Procedures

Internal compliance involves the development and enforcement of internal policies and procedures that guide employees’ behavior and actions. These policies can cover areas such as data security, human resources, financial management, IT usage, and more.

Employee Conduct

Internal compliance emphasizes promoting ethical conduct and appropriate behavior among employees. It involves establishing a culture of compliance, fostering awareness, and providing training on internal policies and guidelines.

Risk Management

Internal compliance plays a role in identifying, assessing, and managing risks within the organization. Compliance activities are integrated into the organization’s risk management processes to mitigate operational, financial, and reputational risks.

Internal Audit

Internal compliance may involve conducting regular internal audits to evaluate compliance with internal policies, identify areas for improvement, and ensure proper controls are in place.

External Compliance

External compliance relates to the adherence to laws, regulations, and standards imposed by external entities, such as government bodies, regulatory agencies, industry associations, and other relevant authorities. It focuses on meeting legal obligations and industry-specific requirements. Key points to consider are:

Legal and Regulatory Requirements

External compliance ensures that an organization complies with applicable laws and regulations relevant to its industry, jurisdiction, and operations. This includes areas such as employment law, environmental regulations, consumer protection, data privacy, financial reporting, and more.

Industry Standards

External compliance also involves meeting industry-specific standards, certifications, and guidelines. These standards may be developed by industry associations or regulatory bodies and are aimed at ensuring best practices, safety, quality, and interoperability within the industry.

Reporting and Disclosures

External compliance requires organizations to meet reporting obligations, such as financial reporting, tax filings, regulatory filings, and disclosures to stakeholders. Compliance with these requirements ensures transparency and accountability to external parties.

Regulatory Oversight

External compliance involves responding to regulatory inspections, audits, and inquiries conducted by external authorities. Organizations must cooperate with regulators, provide requested information, and address any compliance concerns raised during these processes.

It’s important to note that internal and external compliance are interconnected. Effective internal compliance programs often include measures to ensure external compliance, such as monitoring changes in regulations, updating internal policies accordingly, and training employees on both internal and external requirements. By maintaining robust internal compliance practices, organizations can better align with external compliance obligations and mitigate risks associated with non-compliance.