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Blog > What is Compliance Risk Management?

What is Compliance Risk Management?

VComply Editorial Team
February 25, 2021
1 minutes

Compliance risks are defined as the risks that result from violations of laws, regulations, codes of conduct, or organizational standards of practice. Compliance risk management is a part of compliance management and it helps identify, assess, and monitor and manage risks that might cause because of non-compliance. Compliance requirements differ from sectors to sectors. The government and regulatory agencies specify rules and regulations based on which companies in a particular sector should do business. For example, banks and financial institutions face the most complicated regulatory environment.

There are three layers to compliance: Compliance with regulations, standards defined by various organizations and industry groups, and internal policies. The most stringent compliance tier is compliance with regulations. The regulatory requirements are rules that the government impose on organizations. Both federal and state governments define rules and regulations that govern the conduct of companies and how they interact with customers and employees. One of the typical examples of a regulation that a company should publish financial statement every quarter. The second layer of compliance risks are the standards that put forth by international organizations and industry groups. For instance, companies need to follow ISO standards and deliver products and services that meet regulatory and customer requirements. To be certified in ISO series of standards, a company should adhere to the requirements outlined by the International Organization for Standardization. The third layer is the internal policies that an organization establishes to perform efficiently and effectively and to keep up with the regulations.

Understand the risk of non-compliance

Compliance officers need to assess and understand the risk of non-compliance. Some of these risks need to be prioritized and addressed aggressively as they might result in huge fine, reputational damage that companies might not be able to recover from. For instance, the US banking regulators fined Citigroup $400 million on Thursday for “longstanding failure” to fix its data and risk management systems recently. So, the first and foremost step is to understand what your organization’s compliance risks are, how have they become risks, rank risks based on the priority and create a compliance risk management plan to address these high priority risks.

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Implementing successful compliance risk management programs

Successful compliance risk management programs adopt a risk-based approach to achieve its goals. Compliance officers identify the priority compliance risks and implement controls to address them. It allows the compliance teams to focus on the compliance risks that matter to them the most. They can tailor their compliance programs to make them ready to respond to risks rapidly. VComply is a leading GRC platform that helps meet the demands of compliance professionals by helping them perform risk assessment and implement controls.

See why VComply stands out as a G2 high performer in Compliance and Risk Management. Request your demo to see how it can drive your compliance initiatives.