Types of Compliance Risk Part 2

Compliance risk represents a very real concern for companies both large and small. In today’s corporate landscape, risk management is a crucial component of a winning business strategy. But even smaller and mid-sized companies are realizing the importance of compliance risk mitigation. In order to effectively address those risks, you must have a firm grasp on the many different types of compliance risk.

Types of Compliance Risk – Health and Safety

Health and safety compliance risk is one of the most well-known within the risk management realm. The Occupational Safety and Health Administration (OSHA) is the most prominent regulatory organization in this area, with companies required to adhere to stringent health and safety measures in order to achieve and maintain full compliance. Companies are also required to report accidents, injuries, and other events that affect health and safety, sometimes resulting in OSHA investigations.

Health Data and Protected Health Information (PHI) as a Type of Compliance Risk

In the health care and insurance fields, HIPAA regulations call for very specific handling of health-related data and other protected health information (PIH). HIPAA-related fines and penalties can be significant — sufficient to cause a company’s closure in some instances. Therefore, this is one compliance risk that should be taken very seriously.

HIPAA compliance risk surrounds virtually all forms of health care data. If a bit of information can be traced back to a specific individual, then it may be considered PHI, which is protected by HIPAA regulations. There are stringent rules surrounding the manner in which an individual’s health care and personal information is collected, transmitted, stored, handled, and accessed. In addition to maintaining compliance as your business handles sensitive data, an organization must also have the ability to perform data audits that prove compliance. This is vital because all of those efforts put toward HIPAA compliance are for naught if you are unable to prove that your organization has been compliant.

Employees, Behavior, Processes, and Compliance Risk

Employee actions (or lack thereof) represent a challenging aspect of compliance risk management. People are, by nature, difficult to control and this makes it difficult to achieve and maintain compliance. As such, training is an important part of the compliance equation. Staff must understand more than just what regulations and rules exist; they need to know why these regulations exist so they will be better equipped to behave in a way that is consistent with compliance.

Most companies will see a noticeable benefit from educating employees on the company’s regulatory obligations and what measures must be in place to achieve compliance.

Employee behavior is another consideration that will need to be addressed, particularly if you have staff who work outside of a traditional office space. In-office behavior is relatively easy to manage and govern, but when team members are out and about in the world, behavior becomes a greater concern. For example, reckless driving in company equipment can have disastrous consequences from an OSHA / health and safety perspective and from a public relations standpoint. Again, this is an area where it is advantageous to spend some time reviewing what regulations and rules are in place and launch an initiative to ensure that all employees are aware of what it takes to achieve and maintain compliance.

As you address the risks surrounding employee behavior and actions, you may find that it is a good time to review processes. Are your processes in line with your compliance efforts? Often, you can leverage technology in a way that streamlines processes and minimizes compliance risk.

Data Management and the Types of Compliance Risk

A company’s data is often amongst its most valuable assets. It’s also an asset that presents a great deal of vulnerability from a compliance perspective.

Regulations such as the California Consumer Protection Act (CCPA) and the EU’s General Data Protection Regulation (GDPR) both deal with data collection, data handling, data storage, and date deletion. Both regulations are also associated with significant fines and penalties for non-compliance. Take the case of GDPR: fines and penalties are handed down at a rate of $20 million or 4% of the company’s total worldwide turnover for the prior fiscal year – whichever figure happens to be greater. Many companies could not survive this sort of non-compliance fine, especially in the uncertain and tumultuous post-COVID business landscape that exists today. That makes compliance all the more critical.

In some ways, HIPAA regulations also fall under this data management compliance risk umbrella.

These data management regulations require auditing capabilities to prove compliance. This emphasizes the importance of implementing and maintaining technology that allows for data audits that prove how data is stored, accessed, handled, and even deleted.

Types of Compliance Risk Surrounding Messaging, Communications, and Record keeping

In many industries, there is an increasing focus on the regulatory compliance risks surrounding communications, messaging, and recordkeeping of those exchanges. The investing and financial sector is a great example of an area where these risk mitigation efforts are commonplace, with JPMorgan serving as a prime example of the disastrous impact of non-compliance.

Recently, JPMorgan paid out a whopping $200 million in fines to two regulatory bodies: $75 million to The Commodity Futures Trading Commission for allegedly allowing “unapproved communications” and $125 million to The Securities and Exchange Commission (SEC) for “widespread recordkeeping failures” that represented a violation of SEC regulations and federal recordkeeping laws.

These hefty fines were handed down after JPMorgan apparently allowed its employees to use WhatsApp to communicate with clients. But the messages were not preserved or auditable as is required — a fact that made JPMorgan non-compliant and in alleged violation of recordkeeping laws for that industry.

Many companies are also subject to strict privacy regulations surrounding communications and messaging. This represents yet another compliance risk that ought to be addressed in a company’s process flows and risk mitigation strategy.

The compliance risk management landscape is a diverse one, filled with numerous snares that can unknowingly lead down the path toward all of the fines, penalties, and hassles that come with non-compliance. But there is help. At iTech, we have a talented team of risk management and compliance experts who are available to provide cost-effective solutions to clients in all industries and business sectors. Contact the pros at iTech today to discuss your company’s compliance risks, mitigation efforts, and how we will guide your organization forward while achieving full regulatory compliance.