Last Updated on by Aardvark
Out of all the issues associated with the volatile nature of industries such as the cannabis industry—compliance is the top barrier, representatives from multiple companies said. As it turns out, sectors such as the healthcare industry face similar problems with compliance.
According to a new study announced by The Harris Poll and Fyllo on September 21, nearly two-thirds, or 63 percent of companies see compliance issues as a “critical barrier to growth.” Representatives from highly regulated industries were asked a series of questions in a survey—with a selective highlight on the cannabis industry in particular.
The study is entitled, “Leading With Compliance: The Key To Growth In Highly Regulated Industries.” Researchers surveyed 305 compliance leaders at companies in highly regulated industries including cannabis, healthcare, financial services, alcohol and pharmaceuticals.
The results revealed a common denominator: all of the highly-regulated industries struggle with a complex web of federal and local legislation and an outdated compliance approach—not just the cannabis industry.
“In the face of fast-paced regulatory demands, outdated processes can’t keep up and that derails growth,” said Chad Bronstein, CEO and founder of Fyllo. “This survey revealed that companies want to utilize technology to understand regulatory updates, whether new laws or even just local legislative conversations.” Fyllo offers software to overcome the complexities of compliance. Fyllo’s Data Marketplace, for instance, can target previously inaccessible cannabis and CBD consumers.
Nearly 50 percent said noncompliance results in higher costs to attract new investors and win new customers. Eighty-two percent report that adhering to regulations drains resources that would otherwise drive expansion into new markets, new products/services and innovation.
Twenty-five percent said problems led to a loss of customers; 20 percent said it led to employee turnover. Seventy-three precent of companies say compliance issues damage trust among consumers, regulators and employees.
Survey respondents also said that getting fined for noncompliance is practically unavoidable—just something they have 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 on average 12.6 times for noncompliance.
This results in extensive operational, reputational and financial risks. Moreover, the majority of compliance leaders admit that they are often uncertain as to whether or not that the organization is compliant due the dynamic nature of the regulatory environment.
Constant changes in laws is getting to be the norm, but most companies said they can handle it, albeit the technological problems that make it more difficult.
When asked if their company could adapt quickly to sudden changes in its regulatory or compliance environment, 61 percent said they did not believe their company could, with 28 percent citing outdated technology as the core cause for those problems.
Compliance in the Cannabis Industry
Depending on how you define regulation and if you include nuclear industries, etc., cannabis remains one of the most-regulated industries in the U.S. However, IBIS World ranks the healthcare industry as the most regulated industry of all, which of course overlaps with medical cannabis.
The discord between state and federal law makes the cannabis industry unique in the sense that laws often contradict one another more than you’d see in other industries. It would require a figurative PhD of regulation just to understand the full scope of the patchwork of state cannabis laws.
“Cannabis professionals are operating in a regulatory environment that changes daily across federal, state and local levels,” Bronstein added. “As such, cannabis businesses have been quick to embrace tech solutions that streamline compliance processes to free up resources for growth, with the industry becoming the benchmark for effective management of compliance processes at scale.”
Noncompliance in the hemp industry, for instance, is a problem. 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 to be “hot crops” that surpassed the THC limit. Although crops in 2020 decreased, hot crops still increased, which led to an even more devastating year with 6,234 labeled as hot.
Cannabis and hemp laws are constantly changing at a rapid pace, much faster than you see in other established sectors such as traditional healthcare.
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