Opinion: The top 5 cannabis compliance mistakes and how to avoid them

June 9, 2023 ·

Plant-touching and ancillary cannabis businesses are operating within one of the world’s most fragmented regulatory landscapes.

And as more U.S. markets come online, keeping track of cannabis compliance requirements will only become more complex.

The importance of marijuana regulatory compliance cannot be overstated.

Implementing a robust compliance program is critical to protecting not only businesses but also licenses, pipelines and reputations.

It is also key to creating a culture of accountability that encourages employees to follow the rules, which frequently change.

Here are the top five cannabis compliance mistakes to avoid:

Mistake 1. Not understanding the agencies that regulate you

One of the most common mistakes cannabis entrepreneurs make is failing to understand the agencies that regulate their businesses.

For example, California has numerous state agencies that regulate cultivation.

At the local level, operators can be regulated by a board of supervisors or city council as well as fire, planning, police, public health and tax departments.

A good first step to enacting a robust compliance program is creating a list of all local and state regulatory agencies and keeping their contact information easily accessible.

Mistake 2. Tuning out after you do the initial legwork

Regulations that apply to your business are likely to change.

Your company will benefit from monitoring local and state agencies as well as the legislature in key markets.

These entities usually give plenty of notice before discussing cannabis-related issues.

Sign up for email notifications from all relevant authorities and have a system that tracks important meetings on a calendar, monitors agency websites and helps you stay on top of the latest regulations – both proposed and final.

Mistake 3. No standard operating procedures, checklists or monitoring logs

This is a big one.

Many cannabis businesses cut corners when it comes to setting up standard operating procedures, checklists and monitoring logs.

It is nearly impossible to stay in compliance if you don’t have a firm grip on day-to-day business processes.

Taking the time to identify steps that could present potential compliance risks and setting up SOPs will help mitigate risk.

For example, you might need checklists for packaging and labeling or logs to sign visitors into your facility.

Keep in mind, these tools have no value unless you train staff on implementation.

So, in addition to setting up SOPs, checklists and monitoring logs, don’t forget to set up regular employee training.

Mistake 4. Documents aren’t easily accessible

The number of businesses I have seen get dinged for failing to fully understand all reporting requirements is astronomical.

Many operators fail to keep records accessible in the event of document requests from state or local agencies.

Consider creating a master list of records and then organizing them to be easily accessed when needed.

You can also integrate reporting requirements into your SOPs and then ensure that employees understand which situations trigger reporting requirements.

It is a good idea to make sure your list identifies whether a given situation requires prior approval or can be reported after the fact.

For example, employee hirings and firings can typically be reported after the fact, whereas bringing on new owners or investors – or modifying your premises – will typically require prior approval from a state and/or local agency.

Having a comprehensive, easily accessible list of reporting requirements will help considerably with your compliance efforts.

Mistake 5. Failing to leverage the tools at your disposal

Many companies fail to implement technology and tools that can identify compliance issues before they become a problem.

Software-as-a-service (SaaS) solutions in other heavily regulated industries such as banking, finance and insurance already have widely adopted the use of financial technology and regulatory technology tools to improve business operations.

Today, there are a host of SaaS solutions that can help business owners electronically store and organize their documents.

These tools allow business owners to search records electronically, download and print records, if needed, as well as track all processes and procedures and help spot potential problems.

Ultimately, these tools not only help ensure that nothing dangerous makes its way to the public, but they also protect the reputation of your business and can save your company significant time and money.

Marion Mariathasan is the CEO of Simplifya, a Colorado-based regulatory and operational compliance software platform for the cannabis industry. He can be reached at [email protected].

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