Compliance risk is an organisation’s potential exposure to legal penalties, monetary fines, reputation damages and material loss, caused by a failure to act under government laws, industry regulations, or prescribed best practices.
This type of risk is present in every type of organisation.
Risk compliance is a real threat to organisations for a wide variety of reasons that extend beyond penalties. For instance, legal & liability concerns include any failure to comply or overt negligence, this may result in further legal troubles for your business. Compliance helps organisations to avoid additional legal issues that include work stoppages, lawsuits that could result in the ultimate shutdown of business, and legal fees.
Regulations and standards provide industry insights and maintaining regular compliance mean that an organisation is routinely implementing the latest protections against data breaches and other risks. This is a topic we will discuss further surrounding financial services, at our breakfast seminar on the 16th of June 2022, including talks from Oliver Church, Haydn Brooks and Karla Reffold for more information regarding how you can attend,click here.
If organisations experience a breach or receive a fine for non-compliance, this has the potential to completely ruin the reputation of organisations. Breaches can plant a seed of doubt into the minds of customers, potential customers and industry peers because they may have doubts about establishing a business relationship with organisations. Knowing that an organisation is fully compliant with all relevant standards is the best situation.
All organisations regardless face a certain degree of risk, this is regardless of the industry they are in. Risk has always been interwoven with business endeavours and the need for risk management has never been greater. Leaders in areas like healthcare and the credit card industry have taken note over the past several decades. Likewise, governing bodies have developed compliance standards to help organizations avoid and mitigate risk. Security protocols need to be implemented for compliance and to prevent the mishandling and misuse of electronic patient information.
The General Data Protection Regulation (GDPR) coming into effect is an example of how legislation causes a huge impact. The EU created a set of data privacy laws in the interest of protecting consumers’ confidentiality. The EU wanted to place more control of data into the hands of its citizens by developing and mandating requirement matters.
This mandatory regulation comes with severe penalties and fines for lack of complete compliance, keeping companies on their toes all around the globe. Companies that are uncertain as to whether they are subject to the GDPR may wish to consult with an auditing firm for optimal risk management.
The potential risks against organisations should allow many organisations to pinpoint the potential areas and aspects that may potentially be affected by each different type of risk. It is more important than ever to examine every possible scenario that may affect the business. Effective risk management control starts by working with the management team to develop and bring the organisation’s shared vision to fruition, risk management game plan involves defining concrete objectives, laid out in clear terms.
An organisation’s management team should oversee leading the primary phase of risk management control, identifying and categorising the various risks that run throughout your organisation. Effective risk management control should be dynamic. Risks need to be continually monitored.