When a new year begins, business leaders start to spring into action. It’s time to rally the team around fresh goals. Brand-new initiatives, as well as strategies for growth, are often on the table. Yet new growth objectives aren’t without challenges and risks.
Many of these threats are linked to compliance issues. Typical compliance-related risks involve navigating updated laws, following stricter industry standards, or building an ethical company culture. Reducing your company’s compliance risks isn’t just something you have to do because an outside entity requires it. Managing threats is a smart business move to protect your resources, including your company’s reputation. Here are four ways to do it.
1. Start With Strategy
Not all business teams face the same risks, even if they all must manage common threats to varying degrees. However, companies that don’t identify what risks exist for their business can’t address them. Some are obvious, but others might fly under the radar without a thorough strategy.
One comprehensive approach combines governance, risk, and compliance efforts within an organization. Also known as GRC, this integrated method examines threats across a company’s departments, processes, and business activities. GRC strategies increase transparency while giving employees the tools they need to mitigate risks.
Ransomware attacks are an example of an increasing threat that most, if not all, businesses face. However, not every company has the same level of IT resources. Nor do organizations implement identical procedures and software applications to prevent ransomware attacks. Luckily, a GRC approach can reveal where vulnerabilities exist throughout a company. GRC strategies will also uncover what gaps teams can close to reduce the likelihood of an attack.
2. Stay on Top of Regulations
Data management is another area where companies face threats, particularly when natural disasters strike. Businesses without sufficient disaster recovery plans may find operations aren’t easy to restore after a major incident. Thanks to consumer privacy legislation, a lack of preparation can even lead to legal violations if sensitive data becomes exposed.
Of course, knowing what regulations impact your business today may not be enough. Following developments with impending legislation can help companies prepare for what might be coming. Changes to current laws, even if they’re minor on the surface, can call for new risk assessments. Your team may need to overhaul procedures, secure different internal resources, and seek assistance from brand-new vendors.
Preparing for regulatory changes usually also involves training. Staff members across the organization must understand how those changes impact their job responsibilities. You may need to refresh any existing compliance strategies to take modified laws into account. Some organizations go beyond minimum legal requirements by adding stricter industry certifications to those strategies. This way, business teams can think ahead and not get caught off guard.
3. Include Vendors in the Mix
Harvard Business School’s research found that more than half of a typical company’s budget goes toward paying suppliers. Yet CEOs of companies spend about 1% of their time with vendors. This could mean top executives aren’t aware of their vendors’ practices. However, these practices may expose a company to risk.
Different industries will encounter unique threats. For example, retailers become vulnerable to supply chain disruptions and reputation loss if their suppliers are revealed to be sweatshops that violate labor laws. Manufacturers could suffer similar impacts if producers of their raw materials are shut down for safety or environmental violations. Securing partnerships with more diverse sets of suppliers is one way to avoid such situations; thoroughly vetting suppliers is another.
Besides product supply risks, vendors with access to a company’s network can raise the possibility of cyber threats. Your business may rely on several cloud-based software solutions. While these providers allow your company to serve its customers, business leaders should get to know how these vendors operate. Being aware of their network access procedures can reveal opportunities for better monitoring and risk reduction.
4. Reward Compliance Culture
Most employees don’t intend to engage in unethical behaviors. Many will also want to help the company stay compliant with regulatory mandates and industry standards. But if there aren’t consequences for questionable actions (e.g., storing customer data in violation of privacy laws), those intentions will have less influence. When employees engage in non-compliant practices without incurring corrective action or a manager fails to lead by example, others may follow suit.
Putting compliance procedures on paper is one thing. But compliance cultures aren’t built on words alone. Having employees go through compliance training is a waste of time if you don’t enforce those best practices. In addition, not demonstrating those procedures yourself can send a conflicting message. Staff members tend to get their cues about acceptable behaviors by watching what leaders do.
Rewarding employees for speaking up about non-compliance in the organization shows you take compliance seriously. Curbing problematic activities is another way to create a supportive compliance culture. However, your organization can be more thorough by making compliance part of employees’ performance evaluations. You can also establish dedicated resource teams to guide staff members through complex situations.
Mitigating Compliance Risks
A new year presents opportunities for businesses to grow. Managers may task their teams with expanding product lines, capturing additional market share, or redesigning old programs. But navigating new territories increases the potential for risks, some of which may be difficult to anticipate. Implementing holistic risk management strategies will better position business leaders to reduce any compliance threats coming their way.
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