What is compliance risk, and why do you need to assess it on a regular basis?
Compliance risk is what a business faces if it violates laws, regulations, standards of practice, and other important codes. The threat is to the company’s reputation, finances, and ability to be successful, if it is non-compliant and penalized for not abiding by the rules.
A compliance risk assessment identifies the risks a business inherently faces, and then looks at the ways that same company controls and mitigates the risks. What is left is known as residual risk – the risk that remains uncontrolled and unmitigated. A business needs to determine if that residual risk is acceptable or if more work needs to be done.
A Better Reputation
A compliance risk assessment protects your company’s reputation, in a big way. We can all think of businesses that broke the rules, whether they failed to uphold environmental standards, treated employees in a way that broke the law, did not disclose something important, or worse. If non-compliance is bad enough, news of it will spread like fire, through word of mouth, media reports, and talk amongst competitors. A company can have its entire brand image tarnished by one compliance misstep.
By completing a compliance risk assessment, you are working to identify potential problems in a proactive way. You are reducing the chance that you’ll fail to comply with something and protecting your reputation in the process.
Show Clients and Staff You Care
Compliance is and should be important to your business as a whole. Your customers likely want to work with a company that does not take uncalculated risks, and your staff is likely to feel the same.
By looking at compliance as a serious issue, through compliance risk assessment, you are demonstrating that you take compliance seriously. You will be taking the necessary steps to avoid the fines, penalties, and damages of non-compliance. You won’t be exposing others to unwarranted risk, either.
Make Informed Decisions
You cannot know what risks you face unless you work to identify them. While you may understand that there are some basic laws you need to follow, and you may have the background knowledge of regulations that apply to your company, you have to have a full understanding of every risk. It’s crucial to make sure that your company has addressed each one so that you can make informed decisions for your business.
Save Time in the Long Run
By regularly checking in with a compliance risk assessment, you can save yourself a significant amount of time. While regularly addressing compliance risk assessment may well cut into your usual business dealings, it will allow you to avoid the headache of having to sort through a non-compliance issue if it occurs. Problems like these often take up significantly more time than preventing the problem in advance.
While you may not have a lot of time, it’s worth paying attention to compliance. Use this time wisely, by working to reduce your residual risk. If you need some help in doing this, give IT Direct a call and we’ll get to work.