What is Compliance Risk Management
Compliance risk management has become a central component of today’s modern business strategy. Not only are there an increasing number of regulatory bodies coming into existence, but we are also seeing more and more social pressure for companies to operate in an ethical, environmentally friendly, and socially responsible way. This means that even where there is no government agency or regulatory body in place to enforce policies or impose fines, organizations are still feeling pressure to comply — even if it’s just compliance with a societal expectation.
But what is compliance risk management? And how do you go about managing and mitigating these risks? Well, in its broadest sense, compliance risk management involves the identification, assessment, and mitigation of risks that could lead to losses — losses that arise from non-compliance with rules, laws, and regulations issued by the government and regulatory bodies, among others. A company’s compliance risk management and mitigation efforts can encompass virtually every aspect of an organization’s operations, including their policies, procedures, protocols, and processes. It is this broad impact that makes compliance risk management so very complex and downright daunting.
What is Compliance Risk Management? – What Mitigation Looks LIke for Different Risk Factors
To understand compliance risk management and mitigation, you must have a firm handle on what constitutes compliance risk in a broader sense. Compliance risk actually spans an extremely broad range, impacting virtually every aspect of a company’s operations and beyond. Here is a look at a few of the most commonly encountered forms of compliance risk and how each threat can effectively be addressed or mitigated. As you will see, each area of risk looks a bit different and that means that the mitigation strategy varies somewhat depending upon the issue that you are confronting.
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- Health and Safety Compliance Risk Management – The Occupational Health and Safety Administration (OSHA) is perhaps one of the best-known regulatory bodies and they deal with some of the most prominent of all compliance risks: health and safety. OSHA issues strict regulations and they have the power to hand down hefty fines. The agency also performs investigations at a business when dangerous conditions are reported or suspected. For health and safety, compliance risk management means understanding all of the OSHA guidelines for your industry and ensuring that all protocol is followed properly at all times.
- Data Compliance Risk Management – Data management is an increasingly important area of focus in the risk management landscape. Privacy and data handling practices surrounding health data and personal health information (PHI) have long been the focus of HIPAA regulations. HIPAA has impacted the health care and insurance industries for many years, but in recent years, we have seen additional data handling regulations emerge. There is the EU’s General Data Protection Regulation (GDPR) and the California Consumer Protection Act (CCPA), among others. Companies must take time to understand what data handling regulations impact their operations, then, determine what measures must be implemented in order to achieve and maintain compliance. These regulations have very specific requirements for the ways in which data is collected, transmitted, stored/encrypted, accessed, deleted, and audited. Effective compliance risk management means understanding these data management requirements and implementing measures that align with these regulations. This includes auditing capabilities that will enable you to prove that you are compliant.
- Environmental Risk Management – The increased awareness of issues such as global warming has led to a much greater collective consciousness surrounding environmental regulations. Companies that have an adverse impact on the environment are coming under harsh scrutiny, even in cases where formal regulations do not exist. This makes environmental risk management especially challenging because any perception of eco-harm can lead to negative consequences and an all-around bad situation for a business. Good environmental risk management requires a complete understanding of the rules and requirements that have been set forth by the EPA and other organizations. There are many industry-specific organizations to consider too, particularly in the construction, manufacturing, energy, and transportation industries. But beyond this, you must keep your finger on the eco-friendly community’s pulse to ensure that your company is not acting in a way that could be construed as environmentally damaging.
- Communications and Recordkeeping Compliance Risk Management – The banking industry, investment firms, the legal field, insurance industry, and many other business sectors are subject to strict regulations surrounding communications and recordkeeping. These businesses must retain records of communications and transactions for a certain period of time, usually with a minimum level of encryption. It is not uncommon for there to be requirements surrounding privacy and confidentiality too. To achieve and maintain compliance, an organization needs to know exactly what regulations they’re subject to; then, it’s a matter of developing processes and strategies that will ensure compliance. Recordkeeping laws and communications-related regulations tend to be extremely stringent, which makes this a critical aspect of any compliance risk management strategy.As you can see, compliance risk management looks a bit different depending upon your business niche or industry and the specific type of risk that you are confronting.Risk management software can prove to be a valuable tool as you navigate the compliance risk landscape. These platforms offer tools for identifying and tracking risks, in addition to tools for developing and refining business practices in a way that achieves compliance. Some of these risk management software systems also include updates on new regulations and laws, along with project management-type tools that are designed to simplify the process of rolling out new initiatives and workflows that promote better compliance.Compliance risk management is a critical component of a good overall risk mitigation strategy for your business and with the right tools and expertise, you can avoid costly non-compliance pitfalls. At iTech, our talented risk management specialists are here to provide cost-effective solutions to companies and organizations in all industries and business sectors. We invite you to reach out to the iTech team today to discuss your compliance risks, your risk management and mitigation efforts, and your goals for the future. We look forward to guiding you toward a more compliant, profitable future for your company.