The Difference and Link Between Risk and Compliance Management

Both risk management and Compliance help prevent threats to the company's legal structure and physical assets. Therefore, we have prepared this special content for you to check everything about the two methodologies and the advantages that the proper implementation confers on the business. Check out! 

What is risk management?  

First, it is important to conceptualize what risks are: internal and external effects that cause uncertainty and unpredictability in any business management process. When these uncertainties are combined with inadequate management, the possibility of losses, in many cases irreparable, grows. The best way to deal with the issue is to perform a management capable of directly measuring and combating risks, avoiding, mainly, that they reach the company's profits. 

Risk self assessment, therefore, constitutes a series of specific processes and activities with the objective of correcting deficiencies and avoiding failures that compromise the organization - in addition to generating value for the company. This management also involves identifying opportunities that enrich the market value and the infrastructure of the business. Managing risks also means establishing strategies that provide a balance between the goals to be met and the different dangers that surround them. Risk management professionals are responsible for identifying uncertainties in the processes, measuring the probability of damage and its possible impacts. 

They also operate by establishing how failures will be treated and ways to reduce their effects. This team assesses any non-conformities, external or internal, that could threaten the goals and objectives set by the company. Regardless of the segment and size of the company, it is risk management that will help define the future and the capacity for business growth. Among the multiple benefits that risk management provides for the company is the prevention of losses and financial assets. 

This is done through product testing and analysis even before it is launched on the market. Thus, the company maps all the variables of the processes involving that asset. The modernization brought by the risk management methodology helps companies to consider all factors related to the launch of new solutions on the market. 

Another significant benefit is the general optimization of processes and the appropriate use of operational resources. When verifying and managing the risks involved, it becomes much easier to allocate resources and inputs with agility and define more effective processes, optimizing the company's performance. In this way, it is possible to increase the team's productivity and generate more efficiency in the business routine. 

The company's profit margin is also directly benefited by a competent implementation of risk management. After all, resolving all the issues that displeased consumers after the launch costs a lot more for the company. 

What is Compliance? 

The name comes from the English verb "to comply", which designates the action in accordance with the rules. Compliance is often translated as compliance by several communication vehicles, highlighting its meaning - a methodology for complying with current legislation. 

Compliance relates to a series of control mechanisms with the function of ensuring that the institution's processes are being carried out in accordance with legal requirements and without neglecting the ethical values ​​imbued in the company's mission and values. It involves a good relationship with investors, customers, and suppliers, that is, the entire chain of relations of the company. 

The objective of Compliance is to ensure, in conjunction with certain sectors of a company, the adequacy and strengthening of the institution's system of guidelines to laws and regulations. It can also be understood as a set of procedures aimed at complying with legal rules and combating ethical deviations in corporations. 

Compliance has an obvious bias of compliance with legislative standards, related to compliance and compliance with laws, guidelines, and regulations, but that is not all. The implementation of the program in an organization will ensure that there is greater control over the processes, which will be able to mitigate risks and act in the verification of more transparent performance practices. 

We can make an important distinction between Compliance and Corporate Governance, although the concepts are related. The latter is the group of strategies used by a company to demonstrate its value and commitment to shareholders and customers. 

The objective of Corporate Governance, therefore, is to guarantee the responsible and ethical management of the company, following the obligations established by the regulatory agencies.  

Compliance, on the other hand, relates to effective actions to combat fraud and a continuous effort to adapt to the laws.  

What is the difference between risk management and compliance? 

Distinguishing Compliance risk management effectively can be a little tricky, as both tools aim to combat structural damage and comply with legislation. But it is possible to draw comparisons, based mainly on another way of looking at the two processes, respectively: the need to avoid risks and ensure the effective implementation of the combat tools. 

What really matters is that joining the two tools will generate competitive advantage and add value to your business. Compliance with established rules and regulations (Compliance), after all, is directly aligned with the protection of companies against risks that could lead to disregard of the current rules. 

In this way, we can say that risk management relieves Compliance work and facilitates its implementation without causing major disruptions to the company's activities. An organization cannot really have a robust risk management program without Compliance - and vice versa. 

In this sense, Compliance is the satisfaction of all requirements related to risk management for the business and exemplary compliance with the rules and rules so that the company is not compromised. The company's sustainability is also guaranteed, ensuring the interests of stakeholders, employees, and customers. 

While risk management is related to a more strategic procedure, Compliance is more incisive. Risk management depends on analysis to circumvent risks or, at the very least, mitigate process failures. Compliance will work decisively with possible fines and penalties, for example, as well as remedy the damage to reputation related to management failures. 

Thus, risk management is more predictive and less reactive. This methodology must be able to predict the impact that possible failures can cause to the company and it also encourages new procedures to minimize risk situations and establish combat actions and seek improvements. Compliance, on the other hand, is more prescriptive since organizations must adhere to the rules and standards already in force. 

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