All businesses across all industries will face a plethora of different risks throughout their operational lifetime. These potential issues require the development of risk and compliance management strategies to ensure a company operates by the book and avoids the negative consequences of broken regulations and ineffective risk assessments.
To ensure the maximum effectiveness of your strategies, invest in high-quality risk management software. This software can reduce the chances of human error and guarantee that your company stays well-informed and well-prepared for anything that may come its way.
What is Risk Management?
Risk management is the process of identifying all possible risks that can affect an organisation and finding practical, repeatable strategies to either mitigate and control their impacts on the company or leverage and exploit them for a strategic advantage.
Risk management differs from company to company but generally follows a similar framework. This includes identifying risks, conducting a thorough and detailed assessment, prioritising their importance and potential impact, exploring ways to mitigate or exploit them, continuously monitoring efforts and outcomes, and regularly repeating this process to stay ahead of possible issues.
What is Compliance Management?
Compliance management is the process of ensuring your company is always within any legal and regulatory requirements and industry standards specific to your business operations. These management strategies are vital for avoiding legal and reputational consequences associated with non-compliance.
They typically involve following a procedure similar to general risk management but emphasise compliance risks and the necessary steps your organisation must take to reduce them. Common compliance risk strategies include assessing your risk landscape, creating a priority list, determining the best policies and procedures to mitigate these risks and continuously monitoring results to evaluate the effectiveness of your approach.
Risk vs. Compliance
Compliance and risk management are two different concepts that overlap in some aspects. Compliance risk management is a branch of enterprise risk management (ERM) which involves addressing any and all types of risks a company can face. Compliance risk specifically addresses regulations and laws.
Risk management is a strategic and analytic approach to determining what risks are worth taking in business and what should be avoided. Alternatively, compliance risk can be viewed as a legal checklist, with items that need to be addressed and crossed off to ensure adherence to regulations to avoid costly fines and penalties.
Compliance risk management affects regulations that are already known and in place, regardless of whether they are brand new or have been an industry requirement for years. In contrast, risk management proactively works to identify and mitigate potential risks and forecast possible impacts of said risk.
Finally, compliance risk is often handled by a single department or a team led by a compliance officer. On the other hand, risk management requires a collaborative approach by the entire workforce and typically involves all departments. These departments collectively determine whether technology and processes can generate enough data to handle associated risks.
Strategies for Risk Management
When it comes to managing compliance and risk management, all businesses need to establish and implement effective strategies and automatic programs to reduce human error and maintain legal and industry readiness.
Proven & Repeatable Processes
One of the quickest ways for your company to encounter regulatory difficulties and, ultimately, non-compliance issues is to approach your management strategies without consistency.
Having a proven and trusted process to return to each time enables you to apply a uniform and repeatable method for managing any compliance risk, regardless of where new regulations may come from and what they might entail.
Leverage Technology
Managing compliance risk through traditional means, such as spreadsheets and other administrative forms, significantly increases the risk of missing crucial deadlines, overlooking important requirements, and committing general human error.
Instead, invest in good quality risk management software that allows you to centralise all of your compliance risk data and automate management processes for improved accuracy and better data storage.
Improved Training
At its core, compliance risk management is about ensuring that the actions and operations of your frontline employees strictly follow specific regulatory requirements that your company is legally required to follow. Implementing detailed and compulsory training programs in your organisation is the best way to keep your entire workforce well-educated about your compliance risks and how to maintain them properly.
The focus of these programs and the various employees that will need to partake in them will ultimately differ based on the specific role and the department it falls under, but it is vital to create them and conduct them regularly.
Furthermore, regularly assessing and stress testing your compliance controls to ensure maximum effectiveness guarantees that you can adjust controls or switch to more effective methods to suit changing regulatory landscapes.
Regulatory Education
As crucial as it is to have reliable and consistent processes for dealing with compliance risk, it is equally as important to have an efficient system in place to notify you of all regulatory changes that occur, which can affect your industry and business operations.
In 2021, the Harvard Business Review noted that, on average, 2.4 regulatory changes occurred every day. This statistic highlights the importance of having an effective system to monitor any new regulations that go into effect. Staying aware of any possible changes mitigates the risk of missing one and facing the consequences of non-compliance.
