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When running a business of any size, risk management and compliance are of the utmost importance. Both should be top priorities in your business operations, as they ensure your company’s continued success and survival in the industry. Believe it or not, though, these two have a lot in common and can be managed as part of a single system. Here is how risk management and compliance are connected, and why a risk-based compliance management system is the right choice for your business.
Risk management and compliance are two closely related processes, both integral to your company’s continued success. Before understanding how they work together, though, it’s important to understand what they each entail.
Risk management is exactly what it sounds like– strategizing to mitigate the risk of an incident and any potential consequences. It involves assessing and controlling issues that could impact your company’s earnings, operations, and capital. Risk management measures are taken proactively, and equip businesses to handle any incident that comes their way.
Compliance is the continuous process of abiding by your industry’s legal rules and regulations. Typically, new compliance measures are only enacted when these regulations change, although ongoing compliance training is also necessary. Complying with all rules and regulations is important, as it helps you to avoid fines and penalties due to noncompliance.
Compliance and risk management intersect whenever new legal regulations are introduced. Because the rules have changed, risks that weren’t a problem before may become much more urgent. Thus, your risk management strategy must be updated to account for this.
While many businesses keep their management and compliance strategies separate, it’s much more efficient to combine them. A combined process allows you to address every issue at once and makes it easier to see how they relate to each other. This combined process is known as risk-based compliance management.
Risk-based compliance management is a risk management methodology that focuses on observing compliance guidelines and finding the places where noncompliance is most likely to occur. While there are many ways that your business could lapse into noncompliance, some are much more likely than others.
This management helps you to prioritize these potential violations. This gives you the greatest protection against noncompliance for the least amount of time and effort possible.
While you can’t prepare for every incident, setting priorities can help strengthen your risk management procedures. When determining how important it is to prepare for a certain incident or risk, ask yourself two questions. The first: How likely is this incident to occur? The second: How severe are the consequences if it does? Prioritize addressing risks with the highest likelihood of occurrence and the most severe consequences.
To illustrate, let’s use a common example: information security. In this example, let’s say that you can either choose to protect your physical files against break-ins, or you can train your employees on what they are and aren’t allowed to disclose.
There are two potential risks: someone breaks into the building and takes paper files, or a well-meaning employee accidentally leaks confidential information. The information gets out in both cases, so the severity of consequences is more or less the same. However, it’s much more likely that an employee will leak information, so you should spend more time and resources on information security training.
Keeping your priorities in order like this not only allows you to protect your business from common risks, but also helps you avoid wasting energy on risks that are unlikely to ever occur. This ensures that you can stay compliant with all regulations without sacrificing efficiency.
Risk-based compliance management provides two main benefits: efficiency and consistency. While handling management and compliance separately will get the job done, it takes a considerable amount of unnecessary effort. Because risk-based compliance management combines the two issues, it allows you to address them as one. This helps you take action quickly and decisively, and is just as, if not more effective than alternative methodologies. Here’s how.
These processes have so much in common, handling them separately creates redundant work. Risk-based compliance management allows you to handle the issues simultaneously, which allows you to avoid these redundancies. You can use this extra time to further reinforce your risk management measures, keeping your company’s security stronger than ever.
Combining your management and compliance efforts allows you to spend much more time ensuring compliance than you would otherwise. The rules that distinguish compliance from noncompliance can change rapidly, and it’s challenging to keep up with them all. However, failing to keep up with them could lead to noncompliance and the resulting penalties.
Risk-based compliance management allows you to view your compliance measures alongside your risk prevention measures and encourages you to examine both on a regular basis. This means that if your measures become outdated, you’ll notice before it becomes an issue. By maintaining a risk-based compliance management system, you can ensure that your business is always working by the rules.
Developing a risk-based compliance management strategy can be challenging, but we at Compyl are here to make things easier. We use the latest technology to develop risk management and compliance solutions that are effective, simple, and customizable for any business owner.
We’ll walk you through the process and help you adapt our software to your company’s needs. By the end of this process, you’ll be able to keep your company safe, secure, and in line with regulations easily. Interested? We’re more than happy to answer any questions you may have, and can even set up a demo if you’d like to see our solutions in action. Feel free to contact us today!
