A majority of companies in tightly regulated industries say compliance is the biggest obstacle

Of all the problems associated with the volatility of industries like the cannabis industry, compliance is the biggest obstacle, representatives from several companies said. It turns out that industries like healthcare are facing similar compliance issues.

According to a new study published September 21 by The Harris Poll and Fyllo, nearly two-thirds, or 63 percent, of companies see compliance issues as a “critical barrier to growth.” Representatives from heavily regulated industries were asked a number of questions in a survey – with a selective highlight in particular on the cannabis industry.

The study is entitled “Leadership with Compliance: The Key to Growth in Highly Regulated Industries”. The researchers surveyed 305 compliance executives at companies in highly regulated industries such as cannabis, healthcare, financial services, alcohol, and pharmaceuticals.

The results showed a common denominator: All heavily regulated industries are grappling with a complex network of federal and local laws and an outdated approach to compliance – not just the cannabis industry.

“In the face of fast-paced regulatory requirements, outdated processes cannot keep up and that slows growth,” said Chad Bronstein, CEO and founder of Fyllo. “This survey found that companies want to use technology to understand regulatory updates, be it new laws or even just local legislative talks.” Fyllo offers software to help overcome the complexities of compliance. Fyllo’s data marketplace, for example, can target previously inaccessible cannabis and CBD users.

Almost 50 percent said non-compliance results in higher costs to attract new investors and attract new customers. 82 percent say compliance with regulations consumes resources that would otherwise drive expansion into new markets, new products / services, and innovation.

25 percent said problems led to lost customers; 20 percent said that this led to employee turnover. 73 percent of companies say compliance issues damage the trust of consumers, regulators, and employees.

Respondents also said that being fined for non-compliance is virtually inevitable – just something they need to learn to deal with.

Over three quarters, or 82 percent, of companies in highly regulated industries currently accept that compliance is a cost of doing business. Over the past five years, these companies have been cited an average of 12.6 times for non-compliance.

This results in extensive operational, reputational and financial risks. Additionally, the majority of compliance officers admit that due to the dynamic nature of the regulatory environment, they are often unsure whether the organization is compliant or not.

Constant changes in the law are becoming the norm, but most companies say they can deal with it, albeit with the technological issues that make it difficult to do so.

When asked if their company could adapt quickly to sudden changes in its regulatory or compliance environment, 61 percent said they didn’t think so, and 28 percent named outdated technology as the main cause of these problems.

Compliance in the cannabis industry

Depending on how you define regulation and include the nuclear industry, etc., cannabis remains one of the most highly regulated industries in the US. However, IBIS World classifies the healthcare industry as the most regulated industry, which of course overlaps with medical cannabis.

The disagreement between state and federal laws makes the cannabis industry unique in that laws are often more contradicting each other than you would see in other industries. It would take a pictorial PhD on regulation just to understand the full scope of the patchwork of state cannabis laws.

“Cannabis professionals operate in a regulatory environment that changes daily at the federal, state and local levels,” added Bronstein. “As such, cannabis companies have quickly adopted technical solutions that streamline compliance processes to free resources for growth, with the industry becoming the benchmark for effectively managing compliance processes on a large scale.”

For example, one problem is non-compliance in the hemp industry. New Frontier Data reported that over 4,000 acres of crops were destroyed in 2019 (out of the 242,565 acres that were planted) because they were considered “hot plants” that exceeded the THC limit. Although harvests declined in 2020, hot harvests continued to pick up, resulting in an even more devastating year with 6,234 harvests labeled hot.

Cannabis and hemp laws are constantly changing at a rapid pace, much faster than other established sectors like traditional healthcare.