Enforceability of regulations affects which aspect of financial impact?

The enforceability of regulations significantly impacts the severity of penalties that organizations may face for non-compliance. When regulations are strictly enforced, the potential for substantial penalties increases, creating a financial risk for businesses that fail to adhere to these regulations. Companies must be aware of the consequences of non-compliance, as a higher severity of penalties can lead to substantial financial burdens, including fines and remediation costs.

In contrast, while operational performance, revenue potential, and cost structure may also be influenced by the regulatory environment, they do not directly correlate with enforceability in the same way. The severity of penalties specifically relates to the consequences that arise from non-compliance, which directly ties back to how enforceable those regulations are. If businesses understand that the regulatory framework is strictly enforced, they will be more likely to invest in compliance measures to avoid the financial impact associated with potential penalties.