The span of Risk Management and Compliance process includes three elements
Governance is the oversight role and the process by which companies manage and mitigate business risks
Risk management enables an organization to evaluate all relevant business and regulatory risks and controls and monitor mitigation actions in a structured manner
Compliance ensures that an organization has the processes and internal controls to meet the requirements imposed by governmental bodies, regulators, industry mandates or internal policies.
Governance: With an increase in activism among shareholders and increased scrutiny from the regulatory bodies, corporate boards and executive teams are more focused on governance-related issues than ever before. The governance process within n organization includes elements such as definition and communication of corporate control, key policies, enterprise risk management, regulatory and compliance management and oversight (e.g., compliance with ethics and options compliance as well as overall oversight of regulatory issues) and evaluating business performance through balanced scorecards, risk scorecards and operational dashboards. A governance process integrates all these elements into a coherent process to drive corporate governance.
Risk Management: With the recent jump in regulatory mandates and increasingly activist shareholders, many organizations have become sensitized to identifying and managing areas of risk in their business: whether it is financial, operational, IT, brand or reputation related risk. These risks are no longer considered the sole responsibility of specialists – executives and the boards demand visibility into exposure and status so they can effectively manage the organization’s long-term strategies. As a result, companies are looking to systemically identify, measure, prioritize and respond to all types of risk in the business, and then manage any exposure accordingly. A risk management process provides a strategic orientation for companies of all sizes in all geographies with a formal process to identify, measure and manage risk.
Compliance: An initiative to comply with a regulation typically begins as a project as companies race to meet deadlines to comply with that regulation. These projects consume significant resources as meeting the deadline becomes the most important objective. However, compliance is not a one-time event – organizations realize that they need to make it into a repeatable process so that they can continue to sustain compliance with that regulation at a lower cost than for the first deadline. When an organization is dealing with multiple regulations at the same time, a streamlined process of managing compliance with each of these initiatives is critical, or else, costs can spiral out of control and the risk of non-compliance increases. The compliance process enables organizations to make compliance repeatable and hence enables them to sustain it on an ongoing basis at a lower cost.