Glossary definition: Compliance Risk

Compliance Risk: Understanding the Basics

Compliance risk is the risk of legal or regulatory sanctions, financial loss, or loss of reputation a business may face as a result of its failure to comply with laws, regulations, codes of conduct, or standards of practice. Compliance risk can arise from a variety of sources, including government regulations, industry standards, contractual obligations, and internal policies. It is important to note that compliance risk is not limited to legal and regulatory requirements, but also includes a company’s ethical and moral obligations. Companies must be aware of and manage their compliance risk in order to protect their brand, reputation, and bottom line. Compliance risk management involves identifying potential compliance risks, assessing their potential impact, and developing strategies to mitigate them. This includes developing policies and procedures to ensure compliance, training staff on the policies, and implementing systems to monitor and report on compliance.