Compliance is something no business can afford to have a casual attitude about. In today's environment, corporate responsibility is more important than ever, for both customers and investors, so any enterprise that isn't taking this seriously is likely to see a range of negative consequences.
This isn't just limited to attention from regulators and the potential for large penalties. In fact, regulatory compliance is only one part of today's risk management picture. Firms also need to prove that they’re setting and sticking to their own internal compliance rules in order to remain safe.
Despite this, many businesses are still failing to adequately define and identify all the various compliance risks they may face. This could be partly because there is such a wide range of issues to be taken into consideration, from keeping up with new privacy rules to meeting voluntary sustainability goals.
Knowing exactly what compliance rules apply to you is the first step in ensuring your company is operating responsibly and within the rules. Here are five risk management areas you should be focusing on:
1. Privacy breaches
One of the biggest considerations for any business today is how they handle the huge amounts of sensitive and confidential information they possess. While data such as intellectual property and trade secrets need to be protected, it’s the personally identifiable information of employees and customers that needs to be a top priority.
There are increasingly strict regulations governing the usage of this, while at the same time, the public is more aware than ever of the value of this information and the risks they face should it be compromised.
Some firms, such as those in the finance industry or the healthcare sector, may have especially tough external compliance requirements in this area, but it's something that every firm needs to focus on. Aside from the threat of fines, companies that don't take good care of their customers' most personal details will find it very hard to build and maintain trust.
2. Environmental and sustainability concerns
Sustainability and an organization's environmental performance are key concerns for a growing number of people. According to one survey, nearly 70% of consumers said that sustainability is at least 'somewhat important' to them when making a purchase and 47% would pay more for a sustainable product.
There are a wide range of issues associated with this:
- How sustainable is your supply chain?
- What are the environmental impacts of your products when used or discarded?
- How much CO2 do your employees generate when travelling for business?
- What should you be doing to reduce the carbon footprint of your organization?
These areas are easy to overlook, but even if you're meeting minimum government standards, customers and stakeholders may have higher expectations, so strong internal compliance is a must in this area.
3. Corrupt and illegal practices
How you deal with the potential for illegal activity within your organization is another important factor. This can come in a wide range of forms, from executives taking or offering bribes to insiders committing fraud or siphoning funds.
You can't assume this won't happen to you, or that all your employees will be honest or loyal enough not to engage in such practices. Ultimately, you're responsible for everything that takes place in your business, so you need strong compliance controls in place to monitor your operations for any suspicious activity.
4. Process risks
Process risk management covers all the various day-to-day activities that go on within your business, from quality assurance checks to maintenance of critical machinery or IT systems. There are a range of things that can go wrong within these areas that can result in compliance breaches.
For example, human error could lead to essential financial reporting being incomplete or inaccurate, which can leave you in violation of various industry or government regulations. On the internal compliance side, failure to follow specified steps for activities such as IT management or repair schedules can leave businesses more vulnerable to hackers, or result in greater risk of equipment failure.
5. Health and safety
Potential threats to the safety of your workforce or your customers can be particularly damaging if you don't keep a close eye on this area. Regulators such as OSHA have significant powers when it comes to penalties, not to mention the reputational harm this can have.
This isn't just limited to obvious dangers such as factory floors where there’s heavy machinery. Risk assessments need to cover any potential scenario. For instance, if a sales rep has to drive to meetings, you need to check their license and confirm they have no medical conditions that may put them in danger. Even in low-risk workplaces like offices, you need to prove you've done the necessary audits in order to remain compliant, from evaluating electrical devices to having a clear system for reporting issues.