Think compliance is boring? Think again! It’s the most exciting game around. Whether in soccer, basketball, or ice hockey, you have to play by the rules. A player who breaks the rules gets a penalty, or referees punish the whole team.
Similarly, compliance is all about sticking to the rules. It sounds straightforward, but lack of compliance can sideline your business. Read on to discover why compliance, with or without referees, is a risk to your business – yet also how it benefits your organization:
Let’s quickly define compliance, which is obeying defined rules and general principles of ethical behavior. So, compliance risk management is understanding and mitigating the risk of non-compliance. Businesses must comply to rules including company code of conduct, corporate guidelines, industry standards, national requirements, international laws and global conventions. Such rules exist primarily to prevent harm to individuals, corporate entities, societies or the environment. Companies that fail to adhere to laws and regulations can face steep fines and penalties, including imprisonment for wrongdoers. And it’s not enough to assess your own operations. Your suppliers could be putting you at risk, too.
Compliance risk comes from the odds that you break the rules. And for enterprises, just as in sports teams, compliance comes from the top. A compliance risk management plan is establishing procedures for mitigating the compliance risk. Think of it like this: in sports, coaches develop the strategy, and they manage the risk of their players getting penalized for infractions. A coach can insist on fair play or can encourage unsportsmanlike conduct. And a referee is the compliance auditor who catches anyone breaking the rules. To learn more about managing compliance risk in your supply network, download our whitepaper.
Assessing compliance risk is measuring the likelihood of breaking the rules, as well as the chances that your suppliers might. A compliance risk assessment is not merely “checking the boxes,” to confirm that your enterprise adheres to existing and new regulations. Performing an assessment of compliance risk means you also evaluate which areas lack sufficient controls. Through a compliance risk assessment, you identify threats to your company or its reputation that arise through non-compliance. This is particularly true in heavily regulated industries such as aerospace and defense, automotive, banking and finance, chemicals, healthcare, pharmaceuticals, where more rules also mean more risk along the supply chain.
Compliance regulations generally cover six main categories. These are:
So how can compliance be a risk to your business? In the business world, particularly in international trade and finance, new rules are frequently added, and existing ones amended. What makes the situation even more complex is that companies may need to ensure compliance in their supply base, too. And despite the complexity, businesses must always play by the rules, or face consequences.
To understand whether your supply base is adhering to the ever-growing volume of regulatory requirements, you need real-time data. The AI-based tools of The riskmethods Solution™ make compliance-risk monitoring and reporting faster and simpler than through traditional methods.
Governance, risk and compliance (GRC) is a corporate strategy that integrates these three disciplines into process of every department. This strategy is intended to break down silos in an organization, and enterprises increasingly rely on GRC tools to do the heavy lifting. With specialized data, complementary technology, and category knowledge from our consulting, content and solution partners, The riskmethods Solution helps you automate and streamline governance, compliance processes and risk reporting:
Governance: This is establishing policies, exercising authority and making rules, practices and procedures to ensure smooth running of an organization. The riskmethods Solution supports risk-based compliance monitoring at the supplier’s enterprise level.
Risk: The chance that a negative event will occur and potentially cause loss or injury. With the riskmethods scorecard, you can assess any compliance threats arising from your suppliers, along with the impact of non-compliance.
Compliance: Conforming to established rules and regulations. The riskmethods Solution continually scans your supply network and alerts you to image and compliance violations in real time.
Many corporations create a GRC framework that defines measurables and ensures effectiveness of their compliance and risk management. The framework includes written guidelines, such as policies, procedures or controls, and increasingly, relies on the use of GRC software. However, a compliance and risk management plan is only effective when employees accept and adhere to the guidelines, much as players must keep to the rules if they want to win. An effective governance, risk and compliance framework seeks to protect an organization's capital base and earnings without restricting growth. Risk and regulatory compliance aim to:
In other words, managing compliance risk is like managing other risks. With automated data collection and real-time monitoring, technology-based supply chain risk management makes your job easier and your operations more efficient.
For manufacturers, managing compliance risk must extend to and include suppliers. What happens when non-compliance is detected in your supply base? This can lead to risk events along with severe outcomes, such as:
When it comes to compliance risk management, organizations who embrace the tools and technology of risk management gain a holistic view of their supply network, and this can put them ahead of the competition. To slightly modify a common idiom: In sports and business, what counts is how you play the game.