In 2022, a rapidly scaling fintech company found itself under regulatory scrutiny when a newly introduced privacy regulation went unaddressed across several of its data handling practices. The oversight wasn't due to negligence. The legal department was buried under contract reviews and licensing agreements. The compliance function, loosely distributed across operations and IT, had no centralized owner. By the time the issue was discovered, the firm was facing steep fines, reputational damage, and forced remediation costing six figures.
This is not an isolated story. From data privacy to employment law to industry-specific mandates, compliance today is a complex and evolving challenge. Regulations are no longer confined to borders. They shift quickly, carry significant penalties, and often require immediate operational response. Without a structured approach, even well-intentioned organizations can fall out of step.
Navigating compliance is viewed not as a reactive necessity but as a proactive business function. Strong compliance frameworks protect value, strengthen brand trust, and reduce operational friction.
Common Pitfalls: Where Compliance Efforts Break Down
Pitfall 1: Fragmented Ownership and Accountability
The challenge: Many organizations treat compliance as a shared responsibility without clear ownership. Legal, HR, IT, and operations all play a part, but no one team is accountable for the full picture.
Why this creates risk: When roles are unclear, issues fall between the cracks. Regulatory updates may be missed. Audits may lack adequate documentation. Employees may receive inconsistent guidance.
The business impact: A fragmented compliance approach often results in inconsistent adherence to policies, poor reporting practices, and delayed response to changes in regulatory environments. According to a report by PwC, 60 percent of compliance failures stem from lack of ownership and coordination across departments (PwC, 2023).
Pitfall 2: Underestimating the Scope of Applicable Regulations
The challenge: Especially in industries like healthcare, finance, and technology, organizations may be subject to a wide range of overlapping local, federal, and international regulations. Many underestimate which laws apply to them.
Why this creates risk: New data privacy regulations such as GDPR, CCPA, or Canada's PIPEDA often apply based on where customers are located, not just where the business is based. Failing to account for these requirements can leave organizations exposed.
The business impact: Misalignment between operations and the legal implications of cross-border data handling can result in noncompliance fines. For instance, under GDPR, noncompliance can result in penalties up to 4 percent of annual global revenue.
Pitfall 3: Compliance Viewed as a Barrier, Not an Enabler
The challenge: Compliance is sometimes viewed as the "Department of No" rather than a strategic partner. This perception leads to workarounds, limited engagement, and reluctance to consult compliance teams early in a project lifecycle.
Why this creates risk: When compliance is brought in late or avoided altogether, teams may build processes, products, or partnerships that require costly rework to align with regulatory obligations.
The business impact: Resistance to compliance guidance contributes to inefficiencies and poor governance. A Thomson Reuters survey found that 59 percent of legal and compliance leaders believe their internal stakeholders lack awareness of core compliance requirements (Thomson Reuters, 2022).
