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Policies are a general written document that establishes a standard by which the institution manages its affairs. They are intended to enhance organizational efficiency, ensure coordinated compliance with laws and regulations, promote operational effectiveness and/or reduce institutional risk.
Policies differ from procedures and guidelines in that they are more formal and enforceable, so they should be used when the potential consequences of non-compliance with laws or standards are severe. Policies are also more rigid and may be easier to enforce than guidelines, depending on the culture of an organization. Some types of organizations, such as small businesses, can benefit from more flexible, less formal policies. Others, such as highly regulated industries like banking and finance, require more enforceable policies.