What is Compliance Risk Management and How Does It Differ From Risk Management?
Compliance exists so that companies and their employees act in a fair and ethical manner. Unfortunately, there are times when these ethical lines are crossed, which can seriously tarnish the brand and reputation of a company.
Compliance risk management exists to avoid such circumstances. It implements a compliance procedure with rules, regulations, and policies that reduce unique risks (e.g. fraud, fines, theft, discrimination, etc.) in the workplace.
It’s important to note that compliance risk management and risk management are not the same. Below, we go over what compliance risk management is, and how it differs from risk management.
What Is Compliance Risk Management?
Compliance risk management addresses concerns of threat by implementing and abiding by set rules, regulations, and policies given by a company. It is often called integrity risk, according to BoardEffect, and it handles risks to the company’s integrity by making sure all procedures are managed ethically and fairly.
Analyzing a company’s existing compliance process
Determining additional risks along with implementing new regulations to reduce those risks
Planning and achieving those regulations within a certain timeframe and budget
Compliance risk management is implemented in order to protect the safety and health of the business and its employees. When an organization fails to comply with policy, consequences, such as financial loss and legal penalties, can occur.
Examples of Compliance Risk Management
There are various forms of compliance risk management, but the most common are:
Health and Safety - Ensuring workplace health and safety regulations are established in order to avoid onsite injuries and/or harassment.
Corruption - Ensuring ethical boundaries are set in place in order to avoid corrupt practices such as bribery and fraud.
Quality Assurance - Ensuring proper quality assurance checks are executed in order to avoid delivering poor quality products to clients.
Thus, compliance risk management exists to guarantee that organizations are following the policies and laws pertaining to their industry. It’s a necessary procedure to build expectations and allow operations to run smoothly. Moreover, it fuels a positive work culture, with all employees being on the same page and working toward the same goal.
If there are compliance managers who help validate company standards and ethics to alleviate risks, then why are there risk managers?
Compliance risk management is part of risk management. They both certainly work toward a goal of maintaining integrity in the workplace, but their goals differ. You can think of risk management as the overarching program for all the types of risks involved in a company’s outlook.
As mentioned earlier, compliance risk managers focus on existing compliance processes to safeguard that the organization is abiding by all rules and regulations. Risk managers are expected to be knowledgeable on compliance standards, but they work on more “big picture” things. They are involved in a proactive and strategic planning process intended to flesh out an optimistic future for the organization.
For example, as industry standards are constantly evolving, businesses are trying to evolve with them to keep up with their competitors. As executives discuss and plan new directions for growth, risk managers step in to strategically identify potential risks and how to combat those risks.
Strategic planning is a continual process. New plans often mean new risks, which is what risk management focuses on. Risk managers look over long-term business plans and assess whether they are worth pursuing.
Examples of Risk Management
Risk management is broad, but the most common topics covered in this area (in addition to compliance) are:
Economy - Ensuring that business plans will perform well and bring positive results in the upcoming economy.
Competition - Looking at competitors and determining whether their performance and finances will hinder a company’s potential of achieving its goals in the future.
Operations - Ensuring that the day-to-day operations of a business (e.g. customer service, quality control, IT, etc.) will have the right resources to combat conflicts.
Thus, risk management carries out calculated plans to avoid non-compliance. It’s the umbrella that oversees broad but important types of risks—such as compliance risks—and manages them, helping optimize growth for companies. Read this report on how leveraging risk management platforms helps control complex supply chains.
Learn More about Compliance Management Solutions
Through a contractor management software, Avetta provides compliance management solutions by offering services such as auditing and prequalification management. We are here to help mitigate any risk and provide transparent supplier relationships.
For more information on how Avetta provides compliance management solutions, visit avetta.com or call 844-633-3801, or email [email protected].