Compliance Management
Risk management and compliance are often said in one breath, but they aren’t the same thing. This long-form guide explains what each discipline does, how they intersect, and how to build a joined-up “risk & compliance” program that actually reduces incidents, costs, and headaches.
TL;DR (for busy readers)
Compliance ensures your organization meets laws, regulations, standards, and internal policies, and can prove it. ISO 37301 is the global CMS (Compliance Management System) reference.
Risk management identifies and treats uncertainty that could affect objectives. ISO 31000 defines risk as the “effect of uncertainty on objectives.”
Key difference: Compliance focuses on known obligations; risk management addresses current and emerging threats/opportunities across the business.
Best practice: Integrate both under governance (board/leadership), align with the Three Lines Model, and continuously test, monitor, and improve.
Risk & compliance: Why they matter now
Regulatory change is constant (privacy, cybersecurity, sanctions, AI, financial crime). Penalties and expectations are rising:
GDPR authorizes fines up to €20M or 4% of global annual turnover (whichever is higher).
In the U.S., the DOJ’s latest Evaluation of Corporate Compliance Programs emphasizes resourcing, data-driven monitoring, and whether your program works in practice, not just on paper.
The EU’s NIS2 and DORA significantly lift the bar on cyber and operational resilience (DORA applies as of 17 January 2025).
FATF’s 40 Recommendations remain the global baseline for AML/CFT and are regularly updated (latest June 2025).
Takeaway: risk and compliance aren’t optional extras—they protect strategy, reputation, and growth.
What is compliance? (definition & scope)
Compliance is adherence to laws, regulations, standards, ethical practices, and internal policies, plus the ability to evidence that adherence. ISO 37301:2021 is the global benchmark for building a Compliance Management System (CMS). It replaced ISO 19600 and introduced certification.
Effective compliance programs also follow guidance like the U.S. Sentencing Guidelines (Chapter 8) and the OECD Good Practice Guidance, which stress leadership commitment, risk-based controls, training, reporting, and continuous improvement.
Why compliance matters: It minimizes legal penalties, financial loss, and reputation damage, while building stakeholder trust.
What is risk management? (definition & scope)
According to ISO 31000, risk is the effect of uncertainty on objectives—positive, negative, or both. ISO 31000 provides principles and a framework for identifying, analyzing, evaluating, treating, monitoring, and communicating risks.
At an enterprise level, COSO ERM (2017) connects risk with strategy and performance.
Why risk management matters: It helps achieve objectives under uncertainty, protecting value and enabling informed risk-taking.
Compliance risk management: where the two meet
Compliance risk = the risk of legal/regulatory sanctions, financial loss, or reputational damage due to failure to comply with obligations.
It uses risk management techniques to identify, assess, and monitor non-compliance risk, driving targeted controls, testing, and remediation. Regulators (like the DOJ) explicitly ask whether compliance risks are genuinely being managed in practice.
Compliance vs. Risk management: Key differences
Focus: Compliance = satisfying obligations; Risk management = managing uncertainty.
Time horizon: Compliance = near/medium-term; Risk = short to long term.
Triggers: Compliance = external requirements; Risk = organizational objectives.
Evidence: Compliance = controls, audits, records; Risk = assessments, KRIs, treatment plans.
Frameworks: Compliance = ISO 37301, USSG, OECD; Risk = ISO 31000, COSO ERM.
Success signal: Compliance = fewer violations, regulator confidence; Risk = resilience, informed decisions, fewer losses.
Identifying compliance risks (examples)
Privacy & data protection (GDPR)
Cybersecurity & resilience (NIS2, DORA)
Financial integrity (AML/KYC, FATF, OFAC sanctions)
Anti-bribery/corruption (FCPA, UK Bribery Act)
Payments (PCI DSS v4.x)
Healthcare (HIPAA)
Financial reporting (SOX 404)
Each requires tailored controls and assessments.
Industry-specific compliance risks
Financial services: AML/CFT, sanctions, DORA operational resilience.
Healthcare: HIPAA privacy/security enforcement.
Technology/Digital platforms: GDPR, NIS2.
Retail/eCommerce/Payments: PCI DSS v4.x.
Compliance management: core components
Governance & tone at the top
Risk-based policies & procedures
Compliance risk assessment integrated into ERM
Controls (preventive, detective, corrective)
Training & awareness
Reporting & speak-up channels
Monitoring/auditing & continuous improvement
Compliance risk assessment (how-to)
Steps:
Identify obligations and map to processes.
Catalog risks.
Assess likelihood/impact, controls, residual risk.
Define appetite & thresholds.
Plan treatments (controls, training, remediation).
Assign owners, track to closure.
Review regularly with regulatory/business changes.
Implementing compliance controls
Preventive: Segregation of duties, KYC, sanctions screening, MFA.
Detective: Continuous monitoring, exception reports, audits, vulnerability scans.
Corrective: Incident response, supplier remediation, control redesign.
Controls should map to frameworks (e.g., PCI DSS, NIST, SOX).
Monitoring & reviewing compliance
KPI/KRI dashboards
Control testing (risk-based frequency)
Independent assurance (Internal Audit, Three Lines Model)
Lessons learned, continuous improvement
Compliance training & awareness
Effective programs = standards communicated, role-based training, effectiveness measured.
Enterprise risk context (ERM, GRC, IRM)
ERM integrates risk with strategy.
GRC = governance, risk, compliance integration.
IRM = holistic, technology-enabled risk view.
Compliance should plug into ERM/GRC/IRM for one unified risk picture.
Developing a compliance strategy
Five pillars:
Governance & culture (accountability, Three Lines Model).
Obligation intelligence (regulatory tracking).
Risk-based design (ISO 31000).
Operationalization (controls inside workflows).
Continuous improvement (testing, monitoring, DOJ/USSG standards).
Managing compliance risks: a practical roadmap
Phase 1 (Baseline): Inventory obligations/controls, risk assessment, speak-up processes.
Phase 2 (Embed): Map policies to processes, automate approvals, role-based training.
Phase 3 (Optimize): Continuous monitoring, integrate ERM/GRC, benchmark frameworks.
FAQs
What is compliance and risk management?
Compliance = adherence to obligations. Risk management = addressing uncertainty. Together they protect value.What is compliance risk?
Risk of sanctions, loss, or damage from non-compliance (Basel definition).What is compliance risk management?
Applying risk practices to compliance exposures.Examples of compliance risk:
GDPR breach, AML failures, PCI DSS control issues, HIPAA violations.Regulatory vs compliance risk:
Regulatory = changes in laws; Compliance = failing to follow obligations.What does a compliance risk manager do?
Leads assessments, designs controls, monitors/reporting, embeds compliance into processes.
How Approveit helps manage risk & compliance in workflows
Approveit can:
Embed policy into Slack/Teams approvals.
Capture audit-ready evidence automatically.
Reduce exposure with risk checks before money/data moves.
Standardize exception handling.
Result: compliance integrated seamlessly into workflows.
Final thoughts
Compliance and risk management use different lenses but aim for the same goal: protect and enable performance.
Use ISO 37301 for compliance, ISO 31000/COSO ERM for risk, the Three Lines Model for governance, and DOJ/USSG/OECD for effectiveness. Operationalize all of it with strong controls, automation, and evidence.
When programs are well-designed, resourced, and effective in practice, you cut incidents, lower costs, satisfy auditors, and keep strategy on track.
