What is Risk and Compliance?

Risk and compliance is a central concept to many businesses, organizations, and even government bodies today. While most of us are sure to understand the meaning of both words, “compliance” and “risk,” many aren’t quite so sure as to the meaning of this particular term which uses both words combined. To learn more about risk and compliance, or R&C, as a business concept, follow along as we cover the basics.

Risk and Compliance Defined

Risk and compliance is actually a part of a greater business concept called GRC, or governance, risk, and compliance. As the words used in this term indicate, this concept is all about risks as well as rule-compliance and governance with relation to those risks. Specifically, GRC and R&C are each business concepts which strive for the same goal: the mitigation of risks through rules.

The Role of Risk

At the root of the risk and compliance concept, and many other business approaches not covered here specifically, is the all-important factor of risk. So, why is risk so important? Essentially, risk, when identified, is an indicator of what to completely avoid in most business situations.

A risky lending practice is probably sure to incur substantial losses. The elevated risk in one business choice versus another is extremely important to note when making a decision. Mislabeled work areas and broken equipment can lead to risks with employee health and safety. Risks typically equate to costs and losses, and as such, programs and concepts such as risk and compliance are created and used in businesses so as to identify and avoid risks of all kinds. As to those different kinds, most fall into the categories of people, processes, premises, providers, profile, and performance, according to Business Victoria.

Compliance and Risk Mitigation

Once risks have been identified, the other part of the risk and compliance function, compliance, seeks to mitigate those risks as much as possible. Compliance itself manifests in two forms, rules and regulations and the heeding of those rules and regulations. This is where enforcement of rules also comes into play.

Believe it or not, you’ve likely seen indicators of risk and compliance, or more specifically, the compliance side of the concept in many everyday places already. Signs ask employees to wash hands or wear gloves before preparing food. Manufacturers provide manuals which list all known safety concerns with their manufactured item. Children’s school paperwork must be signed by their parent or guardian as opposed to just anyone else.

Perhaps one of the biggest keys in compliance, enforcement, rules, and the like is the issuing of an employee handbook when a new employee is hired at an establishment. Many are even required to sign an acknowledgement stating that they received and have reviewed it. This is because within its pages lie all of the parameters, risks, regulations, and company positions on any situation that may come up in the workplace. From this one document alone, most risks are addressed and compliance and non-compliance is able to be measured from there on out.

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Risk and compliance factors can make or break any business or establishment. This is why so many seek to control these factors as much as possible. These are the basics of risk and compliance in the business world today.