Off the Backburner: Compliance during COVID – Featured by NCIA

June 1, 2020

Operational Cannabis Compliance during COVID

Operational cannabis compliance exists as a vital but often ignored part of many Owners’ guide to success. With the hustle and bustle, ever-expanding nature of the cannabis business, most owners and operators want to believe they are compliant 100% of the time. 

However, understanding the constantly changing regulatory updates presents a constant challenge. Often, the needs of the business outweigh the time it takes to assess the best ways to remain compliant. Too often, the distractions of growing the brand, networking, and conferences distract us from what’s happening behind the scenes. 

This has become alarmingly evident during COVID.

The pandemic affected operators across different states, requiring adjustment to various emergency procedures and restrictions on purchasing and selling. From there, Pandora’s compliance box released a torrent of issues to look at and review.

Reactivity Costs

In our experience, 95% of the industry maintains a reactive approach to compliance management. This means businesses scramble and pay expensive attorneys fees to dig out of trouble when caught. 

And what you resist persists.

During COVID, owners are already making procedural adjustments to remain compliant, and many are staying at home. This allows owners and their teams more focus and less distraction by avoiding conferences, travel, and in-person meetings as much as possible. 

What many are finding is that the compliance train has been off the tracks for a while.

Naturally, as the industry grows, so does the responsibility of mitigating liability and staying on top of the backburner projects. It is not the sexiest or most fun aspect of the industry (if you aren’t compliance nerds like us). 

People tend to resist being honest about compliance, managing it appropriately, or holding others accountable until it’s too late. 

Finally, Some Time for Cannabis Compliance

Even with all the drawbacks, COVID has at least provided some breathing room for owners, at least figuratively speaking, to focus on operational cannabis compliance. Owners and operators have more time to put on their face mask and dust off their SOPs. They might even be able to untangle the strings around poor inventory management issues or address employee training gaps.

iComply is experiencing an influx of business from cannabis companies looking to address such concerns. Many are asking themselves how they can use the boredom of COVID. The extra time saved from travel, conferences, and meetings can be best used to re-examine operational compliance infrastructure. 

We are finding that owners in the cannabis industry often lack a transparent cannabis compliance plan. Also, owners need a plan that can be easily adjusted to stay ahead of regulators, rules, and to mitigate product liability. Many lack accurate employee training to specific procedures with accountability and may wonder why turnover is so high. Many are starting to realize that lapses in inventory, books and records, and daily compliance management create high risk situations. Above all, we want to enable owners to minimize risk while maximizing profit, and compliance is key to both outcomes.

10% of the Cannabis Industry Inherently At Risk

The word “decimation” comes from the Roman times. Decimation was a military punishment in which squads of 10 (deci) would draw stones from a bag. One black stone among the white ones meant his fellows would beat the soldier who drew the black stone to death. While extreme, the lesson was an important one for Roman troops. Statistics show that the lesson remains relevant even today in the cannabis industry.

Out of every inspection by the MED in Colorado, around 10% of licensees were found in violation and administratively punished.  Having come from a banking risk management background, it is shocking to see that level of risk be “ok” with most operators. Operational cannabis compliance strategies create long-term success for companies and mitigate risk.

No other heavily regulated industry tolerates such a high level of risk. Cannabis, in fact, tolerates ten times more risk loss on average than is acceptable in banking (the banking industry considers anything less than 1% unacceptable). With that in mind, we want to remind all our friends in the industry to consider taking on projects to bolster compliance during this enforced downtime.

Some of the biggest backburner projects in operational cannabis compliance coming to the forefront are:

  • SOPs and Employee Training Manuals: It is crucial to have compliant procedures that are accurate to current operations. One cannot effectively and proactively run a cannabis company without valid and accurate Standard Operating Procedures and related documents. They are essential. 

What we find: most established operators need to dust these SOPs off, take them off the shelf, and update them. 

  • Inventory and METRC: Another big problem area is inventory inaccuracies which require regular reconciliation and clean up. As we all know, once the snowball effect of inaccuracy happens, it simply gets more entangled and difficult over time.

During COVID, regulators are doing fewer in-person visits and are relying more on their ability to look at seed-to-sale tracking systems to identify potential non-compliance to conduct their inspections and request specific information from operators.

  • Books and Records: Most cannabis companies think SOPs, audits, and inventory represent compliance management in a nutshell. The detailed accountability over files, logs, and forms often escapes their mind as soon as they click the save button or place the form in the file cabinet. 

Like dusting off SOPs, COVID offers a chance to open the file cabinet and ensure the accuracy of these documents as well. Insight to this helps improve procedures and ensure everything from staff and visitor accountability, to pesticide applications, incident reports, and manifests.

  • Staff Knowledge: For many of our medium to large clients, COVID negatively affected their staff members. When one person becomes infected, many others may not want to come to work. Companies are forced to hire in additional labor to meet operational demand. If this hasn’t happened, consider how to best prepare for it. We know it takes a minimum of 2 to 4 weeks to get a new employee up to speed. 

COVID causes a wide gap due to faster training requirements. This creates more risk for non-compliance, product liability, and workplace safety.

iComply is adept at managing these challenges and in doing the boring and difficult tasks for our clients. By helping the entire company understand there is nothing more important than compliance and in implementing accurate standard operating procedures, employee training, and measures and management of compliance, we help support compliance across every aspect of cannabis businesses to create a strong infrastructure in an ever-changing industry. 

Challenges like COVID, rule changes and human nature are greatly mitigated and proactively managed when cannabis companies commit to taking compliance off the back burner and putting it at the forefront. Taking the time now to do so may be better than any other time for experienced operators to better prepare for “normalcy” when it returns. 

An ounce of prevention is literally worth pounds of cure. During COVID, cannabis companies would do well to prevent the “decimation” of their very valuable licenses and operations. Taking advantage of the extra time and energy available now will allow teams to take compliance off the backburner and prioritize operational cannabis compliance.