In essence, compliance is adhering to external rules (like regulations and laws), while policy is following internal rules set by an organization.
While the concepts of policy and compliance often overlap, especially in areas like "policy as code" and "compliance as code," their primary focus differs. According to a key distinction noted on March 16, 2023, "compliance as code focuses on enforcing regulatory requirements, while policy as code can enforce any type of organizational policy." This highlights the core difference: compliance deals with mandatory external standards, whereas policy deals with voluntary internal standards.
Understanding Policy
A policy is a set of rules or guidelines established by an organization to govern its operations, decisions, and actions. Policies provide a framework for how things should be done within the organization. They reflect the organization's values, goals, and strategic direction.
Key Characteristics of Policy
- Internal Origin: Policies are created internally by the organization itself.
- Broad Scope: Policies can cover virtually any aspect of the organization, from IT usage to HR practices, financial procedures, and operational workflows.
- Flexibility: Organizations have the flexibility to define, update, or remove policies based on their evolving needs and objectives.
- Purpose: To provide structure, consistency, efficiency, and guidance for employees and operations.
Examples of Organizational Policies
- Acceptable Use Policy: Dictates how employees can use company IT resources (computers, internet, email).
- Data Retention Policy: Specifies how long certain types of data should be stored.
- Travel Expense Policy: Outlines rules for employee travel and expense reimbursement.
- Code of Conduct: Sets ethical standards and expected behavior for employees.
Policies are proactive tools designed to shape behavior and processes within the organization.
Understanding Compliance
Compliance refers to the act of conforming to external rules, regulations, laws, standards, and ethical practices that apply to an organization's operations. These external requirements are often mandated by government bodies, industry regulators, or international standards organizations.
Key Characteristics of Compliance
- External Origin: Compliance requirements are imposed by external authorities.
- Mandatory Adherence: Organizations are legally or contractually obligated to comply with relevant requirements.
- Specific Focus: Compliance often targets specific areas such as data privacy, financial reporting, environmental impact, or industry-specific safety standards.
- Purpose: To ensure the organization operates legally, ethically, and responsibly, avoiding penalties, legal issues, and reputational damage.
Examples of Compliance Requirements
- GDPR (General Data Protection Regulation): Requires organizations handling data of EU citizens to follow strict data privacy and protection rules.
- HIPAA (Health Insurance Portability and Accountability Act): Mandates standards for protecting sensitive patient health information in the U.S.
- PCI DSS (Payment Card Industry Data Security Standard): Requires organizations that handle credit card information to meet specific security standards.
- SOX (Sarbanes-Oxley Act): Requires public companies to adhere to specific financial reporting and auditing standards.
Compliance is about meeting non-negotiable external obligations.
The Overlap and Key Difference
There is significant overlap because policies are often created specifically to help an organization achieve and demonstrate compliance. For instance, an organization might create a "Data Handling Policy" to ensure employees follow procedures that meet GDPR requirements.
However, the fundamental difference, as highlighted by the reference regarding "as code" implementations, lies in the source and scope of the rules being enforced:
| Feature | Policy | Compliance |
|---|---|---|
| Origin | Internal (Organizational) | External (Regulatory, Legal, Industry) |
| Nature | Guidelines, Rules | Mandatory Requirements, Laws, Standards |
| Scope | Any organizational activity | Specific mandated areas |
| Flexibility | High (defined by organization) | Low (defined by external authorities) |
| Purpose | Structure, Efficiency, Culture | Legal & Regulatory Adherence, Risk Mitigation |
In essence, all compliance requirements could be reflected in internal policies, but not all policies are driven by external compliance mandates. Organizations have policies on things like dress code or office cleanliness that have nothing to do with external regulations.
Practical Insights
- Organizations use policies to define their desired internal state and operational procedures.
- Organizations focus on compliance to ensure their operations align with the required external legal and regulatory landscape.
- Implementing strong policies is often a crucial step towards achieving and maintaining compliance.
- Automation tools, often referred to as "policy as code" or "compliance as code," help enforce these rules. Policy as code is a broader term that can automate any organizational rule, while compliance as code specifically targets automation for regulatory adherence. (Source)
Understanding this distinction helps organizations build robust governance frameworks that address both internal best practices and external obligations effectively.
