The myth of partial compliance: Measuring compliance is not like measuring body temperature. Compliance, by definition, is binary: you are either compliant, or you are not. Yet, in corporate circles, it has become disturbingly common for experts, auditors, and even board members to discuss non-compliance in degrees. Terms like minor gaps, less serious deviations, and the idea that non-compliance can somehow be graded have started to normalise a grey area within a black-and-white framework. This creeping acceptance of partial compliance poses serious risks to business stability.
Consider this scenario: A company’s compliance officer, in a quarterly board review, states that “most of the regulations have been complied with” and assures that the remaining gaps “are not too serious and can be bridged in time.” The board members nod, reassured that everything is generally under control. Yet, this acceptance of partial compliance is not just flawed — it is dangerous. It fosters a false sense of security and responsibility. In reality, the gap between almost compliant and compliant can be vast enough to jeopardize the entire business.
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Partial compliance: A slippery slope to scandal
Compliance, especially in highly regulated industries like finance and banking, often becomes a box-checking exercise. As long as most boxes are ticked, there is a sense of accomplishment. However, partial adherence to regulations is exactly what has led to high-profile scandals and crises. To believe that ‘most’ is sufficient contradicts the purpose of compliance itself. It’s like claiming that a bridge built according to most engineering standards is safe, even though it contains structural weaknesses. It may hold for a time, but collapse is only a matter of when—not if.
Some may argue that complex regulatory frameworks make full compliance challenging, particularly in evolving markets like India’s, where regulations can vary widely across sectors. But this is a weak justification. Allowing compliance to be assessed by degrees undermines its purpose entirely. Compliance is meant to be a guarantee of stability, not a convenience.
Compromise of compliance standards
Even more concerning is the role of governance, a term associated with ethical oversight, in eroding compliance standards. Boards that evaluate compliance based on business goals or growth targets do a disservice to the very organizations they are meant to protect. When board members accept explanations for minor compliance gaps, they set a dangerous precedent that compliance is flexible, even negotiable. This ethos, once embedded in an organization, leads to a culture where the line between right and wrong becomes increasingly blurred.
In the pursuit of business growth, compliance is often viewed as a hurdle to be minimized or delayed. What boards and leaders must understand is that compliance is foundational to the trust that stakeholders—investors, employees, and the public—place in a company. Complying with most regulations is insufficient. Gaps, no matter how minor they may seem, represent risks that can quickly escalate. In today’s environment of heightened accountability, any lapse in compliance can have swift and severe consequences.
Risks of complacency and disconnect
When the mindset shifts from “we must comply” to “we have mostly complied,” companies are already on a slippery slope. This complacency is exacerbated in larger organizations where layers of management create a disconnect between those responsible for daily operations and those overseeing compliance. The further removed board members are from compliance realities, the more likely they are to accept “minor” gaps as inevitable. But these gaps are not inevitable—they result from choices that prioritize short-term convenience over long-term stability.
Today’s business environment is increasingly competitive, and regulatory scrutiny is intensifying. Companies that cultivate a culture of full compliance, rather than mere box-ticking, will not only avoid the pitfalls others have faced but will also build stronger, more resilient organizations. Compliance, in its truest sense, is binary. Until boards and leaders embrace this, they are not merely exposing their companies to regulatory risks—they are inviting existential threats.
Srinath Sridharan is a strategic counsel with 25 years experience with leading corporates across diverse sectors including automobiles, e-commerce, advertising and financial services. He understands and ideates on intersection of finance, digital, contextual-finance, consumer, mobility, Urban transformation, and ESG. Actively engaged across growth policy conversations and public policy issues.