From Cost Center to Core Competency: A Study on Strategic Compliance Management in the Era of Strong Regulation

Abstract

The global shift toward stronger regulatory regimes has fundamentally reshaped the role of corporate compliance. Once perceived merely as a cost center responsible for regulatory adherence and risk avoidance, compliance has evolved into a strategic capability directly shaping firm competitiveness, resilience, and sustainable performance. This paper examines how the transition from a reactive, rule-based compliance model to a proactive, strategic, and value-creating compliance management framework is becoming indispensable in the contemporary environment of heightened oversight, digital enforcement, and stakeholder activism. Drawing on regulatory evolution theory, strategic management scholarship, and empirical evidence, the study identifies the core challenges firms face when integrating compliance into enterprise strategy—including fragmented governance systems, escalating regulatory costs, digital supervision pressures, cross-border regulatory uncertainties, and persistent cultural–behavioral misalignments within organizations. It then proposes a comprehensive, capability-based framework for transforming compliance into a core competency, emphasizing leadership commitment, system redesign, technology empowerment, risk-based governance, talent restructuring, and the embedding of compliance into innovation, operations, and strategic decision-making. The paper argues that strategic compliance not only mitigates legal exposure but also enhances market legitimacy, improves resource allocation, strengthens corporate culture, accelerates digital transformation, and supports long-term value creation. Ultimately, it posits that in the era of strong regulation, firms that view compliance as strategic capital—rather than a defensive obligation—are more capable of building resilient organizations that thrive under uncertainty. The analysis contributes to both compliance management theory and managerial practice by offering an integrated approach to upgrading compliance capabilities at both the organizational and ecosystem levels.