There are many different misconceptions when it comes to compliance and risk. Organizations presume that if they are compliant, they can automatically avoid any potential risk and vice versa!
However, simply holding compliance training courses and remaining compliant doesn’t automatically mean you’re free from any risks. Let’s delve into what compliance and risk management are and why they are different from one another.
Compliance refers to managing processes to ensure the organization carries out its duties according to appropriate requirements. These requirements can range from contracts, policies, laws, regulations, internal strategies, along with an organization’s mission statements and ethical values.
The point of organizational compliance is to ensure that you have a solid set of guidelines in place and are followed. Furthermore, compliance isn’t static, and organizations need to adapt to new rules and regulations, with platforms like True Office Learning allowing employers to update training programs for easier employee learning.
About Risk Management
Risk management refers to internal processes identifying, analyzing, and responding to risks that can negatively impact the organization’s goals. This sounds similar to compliance, but risk management focuses more on avoiding, accepting, or controlling certain risks, may they be commercial, financial, IT, or other technological risks.
Look at risk from the perspective of what would happen if organizations had no strict risk management processes. If so, then they can face internal and external threats that lead to significant financial losses, along with reputational damage and potential injury to employees and clients.
Risk management is a measure that helps organizations fight against problematic risks and avoid such risks entirely.
Compliance vs. Risk Management
It’s essential to understand their differences to focus on both rather than overlooking one in favor of the other. That said, here are the major differences between compliance and risk management.
· Compliance is prescriptive as it focuses on adhering to rules and regulations already set. Risk management follows a predictive nature, as it needs to be agile to identify and prevent any new and unexpected risks that threaten the organization.
· Compliance is mainly seen as something you need to do to make sure organizations comply with rules and regulations. On the other hand, risk management is about being forward-thinking and strategic. With risk management, you’re setting up appropriate systems and making sure you properly analyze them to overcome any risks.
· Departments would have differing compliance processes, which can be transparent, though it isn’t required. This is a siloed mentality we find in compliance. Risk management is more centralized to be effective, with all departments and processes coming together in a centralized and transparent system to analyze, identify, and combat any risks.
The differences don’t mean that compliance is more critical than risk management, or vice versa. You need to bring these two together with the right tools and strategies. There are central tools you can use to better track and manage risks so you can address compliance’s prescriptive nature!
Wrapping It Up
Make sure that you focus on compliance and risk management and align them to reap all the benefits.