Compliance risk management is the process of identifying, assessing, and monitoring the risks to your enterprise’s compliance with regulations and industry standards. This includes all the internal controls you put in place to assure that your business complies with those obligations, and monitoring those controls to confirm they’re effective on an ongoing basis.

A compliance risk management program documents the potential losses and liability your organization could face for non-compliance, including legal penalties, fines, business loss, and reputational loss; and then implements necessary remediation steps to keep those risks at acceptable levels.

What Is Risk Management?

Risk management is the detecting, analyzing, and controlling of financial, legal, strategic, and security threats to an organization’s strategic objectives. These threats or hazards might arise from several sources, such as financial instability, legal liability, strategic management failures, accidents, or natural calamities.

What Is Compliance Management?

Compliance management constantly monitors and evaluates systems to assure that they meet industry and security standards and corporate and regulatory rules and mandates.

How Do Risk Management and Compliance Management Differ?

Compliance risk management is a subset of enterprise risk management (ERM). ERM tries to address all possible risks that might disrupt your enterprise. Compliance failures are one such risk, but they are only one. Businesses also face many other threats that have nothing to do with compliance obligations.

Compliance risks are still a significant concern for any large organization. This is especially true for highly regulated industries such as healthcare or banking; and for publicly traded companies, which labor under extensive investor protection and securities laws.

Potential Risks of Non-Compliance

What happens if your business violates its compliance obligations? Such failures can bring monetary penalties, painfully high investigation costs, and in the most egregious cases, prison time for executives involved in wrongdoing. Depending on your industry, you could suffer a few different consequences.

Penalties and Fines

Most state and federal laws and regulations include monetary penalties for compliance failures. Moreover, a company under investigation by regulators will need to pay lawyers, auditors, investigators, and other advisers as it works with the regulators to resolve the issue. Those investigation costs can often be several times larger than the actual monetary fine that might result in the end.

Damage to Your Reputation

Compliance failures – say, faulty consumer safety practices, wage and hour abuses, or accounting fraud – often end up in the news. The damage to a company’s corporate reputation can be quick and severe and ruin years of carefully cultivated brand building.

At the same time, unhappy consumers, employees, or customers might complain about your business online in the modern social media and online world. Unfortunately, those comments can linger for years.

Blocked Access to Your Supply Chain

Compliance failures at an international border, such as failing to pay import taxes or forgetting necessary documentation, could leave your business unable to access goods being shipped to you or deliver your goods to customers. As a result, suppliers, distributors, joint venture partners, and other parts of your supply chain may stop working with your business.

Industry-Specific Compliance Risks

Many industries have laws and regulations specific to them, and each carries compliance burdens. For example:

  • Banking. Banks must comply with regulations set by the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC), and several other regulatory agencies. Financial firms also labor under laws such as the Bank Secrecy Act (BSA), the Investment Companies Act, and the Dodd-Frank Act.
  • Healthcare. Hospitals and other businesses that handle personal health information must comply with the Health Insurance Portability and Accountability Act (HIPAA) and reimbursement rules for government spending through Medicare and Medicaid.
  • Pharmaceuticals. The pharmaceutical industry has extensive quality control obligations under the Food & Drug Act, Medicare & Medicaid rules, and HIPAA privacy rules.
  • Consumer products. Manufacturers must comply with the Consumer Products Safety Act, plus various state consumer protection laws throughout the United States and overseas.
  • Retailers. Retail operations that process credit card transactions must abide by the Payment Card Industry Data Security Standard (PCI DSS) to keep credit card data secure or risk losing their ability to process such transactions.

Compliance Risk Management Best Practices

A comprehensive compliance-risk management program, which is vital for a healthy business, includes the following components:

Active Board and Senior Management Oversight

The basic foundation of an efficient compliance risk management approach is meaningful board and senior management supervision.

Effective Policies and Procedures

You must consider your company’s industry and level of complexity when defining its compliance risk management rules and procedures.

Compliance Risk Analysis and Comprehensive Controls

In compliance risk analysis, organizations must use relevant tools such as self-assessment, process flows, risk maps, key indicators, and audit reports. These provide for an efficient set of internal controls.

Effective Compliance Monitoring and Reporting

An organization must assure that it has suitable management information systems that offer accurate, timely compliance reports to management, such as an effective complaint system and certifications.


Your business must perform independent testing to assure that compliance-risk mitigation activities are in place and working correctly throughout the company.

Manage compliance with ZenComply

To help manage compliance risk, compliance officers and risk managers are wise to use compliance management software. Solutions such as ZenComply can help with every step of the compliance process, including using a compliance framework such as ISO or COSO.

Within 30 minutes, ZenComply enables you to conduct your first audit. A prescriptive workflow walks you through picking frameworks and scoping requirements and controls step by step. ZenComply removes ambiguity and gets you up and running quickly, allowing you to arrive at your first audit conclusion and achieve immediate gains.

ZenComply delivers instant visibility into how your compliance efforts affect your residual risk position. A risk posture dashboard provides you with the same insight as a risk assessment without the work, allowing you to swiftly prioritize the actions and investments that increase compliance and minimize risk.

Worry-free compliance is the Zen way. Contact us today for your free consultation.

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