What is the difference between compliance and risk management?

Compliance and risk management are inter-related, They co-exist and are complementary. Compliance is meeting all regulatory requisites while risk management is knowing the risks and doing control to avoid or eliminate unacceptable risks.

Compliance involves ensuring an organization follows established rules and regulations to prevent legal violations, while Risk Management is the proactive process of identifying, assessing, and mitigating risks that could impact an organization's objectives and includes both negative and positive risks. Compliance is more focused on meeting external requirements, while Risk Management has a broader scope, considering internal and external risks to an organization. While they have distinct purposes, they often intersect as effective risk management can help ensure compliance with relevant regulations and standards.

Compliance and risk management are inter-related, They co-exist and are complementary. Compliance is meeting all governing regulatory levels while risk management is diagnosing the risks and find the right tool control even system upgrade or process improvement to mitigate risks in future

Compliance and Risk Management: Interrelated, but Not the Same.

Compliance nanagement is managing the process to meet all regulatory and legislative requirements”. 

 

Managing risk is not just about assessing and quantifying all the things that could go wrong, but, perhaps more importantly, understanding all the things that need to go right for the enterprise to be successful. Somehow we have descended into a culture focused on ferreting out all the issues that could contribute to failure to the point where risk management has become marginalized as overhead to the business process, not a contributor to its success.

Compliance - It means following the applicable laws and regulations in the conduct of business activities. Not following the applicable laws and regulations, results in non-compliance which is called as compliance risk. Risk management - Process to identify, assess, manage and control potential events to provide reasonable assurance regarding the achievement of business objectives. Relationship between compliance and risk management: Compliance activities are constantly monitored in a risk management exercise to identify any compliance risk and manage the same to be within the acceptable level in order to achieve the business objectives.

Compliance risk is integrity risk. Compliance regulations standardize business practices to maintain company's activities and ethical manner. Companies that fail to comply are posed to compliance risk such as financial loss, material loss, fines and reputation in the market.

Risk management is focusing on the risks as they pertain to strategic planning. The task is evaluating, and planning strategies pose new threats to the company.