What Is Compliance Risk Management?

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  • Written By: Kristie Lorette
  • Edited By: O. Wallace
  • Last Modified Date: 02 October 2019
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Compliance risk management is often put together as one concept. In reality, however, compliance is a form of risk management that a company or business adheres to in its operations. Generally, compliance risk management is related to the financial and banking industry, which is heavily regulated by laws and regulations.

Factors that financial service companies, banks and even other types of businesses have to manage are other risks that require management. These risks include employee turnover, growth of the company, the economy and technology. Each of these factors can put the financial services company, bank or other type of business and its information and products at risk.

Compliance risk management is actually a tool that business use. Compliance is adherence to the rules and regulations for the business or the industry in which the business operates. For example, auditors come into a financial services business or bank on a regular basis to make sure that it is operating in accordance with the rules and regulations.

Generally, compliance risk management can be separated into two primary categories. The first category is external forces. The second is internal forces. External factors consist of those that the firm does not have any control over. Internal forces, however, are ones that the firm does control and can alter to ensure compliance risk management is taking place.


This type of risk management requires the compliance manager to first assess all of the internal risks the company has. Then, the manager must assess or list out the ways to minimize these risks or deal with the risks as each presents itself. Of course, the management of these risks must adhere to the laws and regulations that the organization must follow internally and as part of a specific industry.

One of the best ways that companies have found to stay in tune with compliance risk management is to put a compliance program together. Second, it is to put this program in writing. New items should be added to the compliance program as issues arise or laws and regulations change.

The risk manager will also need to regularly review the compliance program to determine if any changes, additions or deletions are required. When putting together and managing the program, items such as policies, procedures and controls for the top risks should be the primary focus of the program. Compliance programs should also be as detailed as possible so that everyone in the organization knows precisely how to handle risks and situations that occur in the business.


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