What Compliance & Risk Management Means for Companies Today
While there have been some efforts to roll back the regulatory tide, the secular trend is clear: governments will continue to place more and more onerous regulations on business for as long as they can get away with it.
Companies, therefore, need to develop robust responses to this threat that both enable them to avoid financial penalties and cut compliance costs.
Many firms, however, haven’t adjusted to the new regulatory landscape and are still using old-school approaches to compliance that leave them open to regulatory risk.
The Difference Between Compliance Management And Risk Management?
It turns out that compliance and risk management systems are not the same thing.
Compliance management has to do with developing procedures that allow companies to stick to the rules, no matter how challenging or arbitrary they may be. Companies, therefore, need to implement training and management systems that ensure every facet of the business adheres to current regulatory stipulations.
Risk management is all about taking steps to manage the uncertainties that come with new regulations and dealing with government bureaucracies with the legal power to impose sanctions. It, therefore, involves developing strategies that will undermine any regulatory case against a firm and exonerate it from blame.
As you might imagine, you can’t develop an effective compliance management strategy without a proper risk management protocol in place and vice versa — the two work hand in glove.
The Need For A New Compliance And Risk Management Paradigm
Some leading firms have significantly changed their approach to risk and compliance management in the light of recent changes to the regulatory environment. The reactive compliance and risk management of old is no longer sufficient. Companies need to be responsive to threats coming down the pike from regulators. Audit readiness is vital. What’s more, it’s no longer enough for compliance to be piecemeal — something that the compliance department does. It needs to be holistic and applicable across the entire organisation.
The new paradigm, therefore, is that compliance needs to be both intelligent and span the entire organisation. Companies need a central plan, orchestrated by senior management and implemented throughout the organisation. With a single, company-wide protocol, firms can cut risk, improve customer satisfaction, and reduce shareholder losses to penalties.
The Need To Create Enterprise-Wide Compliance And Risk Management Solutions
Creating enterprise-wide compliance and risk management systems is more complicated than you might imagine. While some companies have the expertise to do it in-house, the majority do not. It’s vital, therefore, that they seek professional services that can provide them with frameworks that they can implement in their organisations to ensure long-term compliance and slash risks.
A unified compliance framework helps to generate a culture of compliance across an organisation. A combination of training, more collaboration between the various arms of the business, and professional tools to manage risk can all help firms navigate challenging regulatory requirements. What’s more, it helps to bolster transparency, improving public relations.
Thus, these changes are, in essence, the explanation for shifting conceptualisations of compliance management.