In this article, we will consider a set of measures to increase the competitiveness of the enterprise, minimize risks and ensure compliance with legal and ethical standards of conduct through the implementation of the compliance system.
Compliance in the company risk minimization system
As the experience of different economies shows, the risk is an integral part of a market economy. The rapid development of science and technology, the emergence of new technologies, their introduction into production, increasing the number of innovative projects – create new types of risks, which, in turn, complicate public relations. With the growth of global markets and relentless market competition, the question arises to ensure the proper level of compliance risk management in doing business.
Compliance is an important part of the organization’s corporate governance system, which begins at the top management level and is broadcast at all levels of the business. The introduction of effective mechanisms for adequate assessment and thus minimization of compliance risk can have a decisive impact on the financial results of any business. From the objective point of view, compliance is the foundation of the control system of any organization, and a mandatory component of the management system, where the most important part is the internal control system. So, compliance is the accordance with internal or external requirements or regulations.
For the vast majority of organizations, the compliance policy suite includes:
- code of corporate ethics or corporate conduct;
- fair competition policy;
- a policy to combat money laundering, which protects the legal sector of the economy from the penetration of shadow income;
- a policy of informing about violation of ethical standards;
- policies that regulate conflicts of interest through the introduction of ethical standards of employee behavior;
- the company’s property protection policy, which applies to both tangible and intangible assets;
What is risk management?
Today, an important place in the field of risk management is occupied by risks that are difficult to quantify and assess, but at the same time pose a serious threat to the success of the business. Such risks include the risk of loss of business reputation and image, risks of a political and legal nature, operational risk, force majeure risk, regulatory risk, and so on. With the development of new technologies, the number of such risks is growing rapidly, so modern organizations need to develop new approaches and implement new effective tools and methods of risk management.
Basic principles of risk management are:
- timely detection;
- preventing the realization of risks and reducing the consequences to an acceptable level;
- key risk management based on regular impact analysis and assessment;
- monitoring the effectiveness of risk management measures;
- continuous improvement of the internal control and risk management system following the operating conditions.
How to differentiate?
It is important for small and medium-sized businesses to clearly define the extent to which compliance risks can affect financial performance, as the measures to be taken to minimize such risks depend on this. Risk management is directly related to compliance and is an integral part of the concept of lean manufacturing. The compliance function, as an effective tool for minimizing compliance risks, is a key aspect of modern business management and it should be noted that this applies not only to the subjects of primary financial monitoring, as defined by law, but also organizations of the real economy.