Understanding compliance risk management is vital, especially for those operating within the construction industry.
Compliance risk management involves several steps, including identifying any issues that have arisen from an organisation’s failure to be compliant. Read on to discover more about what compliance risk management is, and the best practices.
What Is Compliance Risk Management?
What is compliance risk management? Compliance risk management is the process of identifying, assessing, and mitigating any losses that could arise from an organisation’s non-compliance with:
- Laws
- Regulations
- Industry standards
- Requirements
- Internal and external policies
For example, the Building Safety Act was given Royal Assent in 2022 – it provides a more efficient framework for compliance management in the UK and must be followed especially by those working in high-risk sectors, such as construction.
Undoubtedly, compliance management comes with some challenges. Compliance changes can evolve quickly – often requiring a quick response to upcoming, potential threats and regulations.
In some cases, compliance management can become a struggle when there’s a large team, with compliance efforts becoming more challenging when you need to coordinate a big group of workers at once.
The Difference Between Compliance Risk Management and Risk Management
What is the difference between compliance risk management and risk management? Although the two sound similar, they differ slightly. Let’s take a look at the differences between the two.
Compliance Risk Management
Compliance risk management identifies any legal penalties, reputational damage, and financial or material losses that are associated with a company’s failure to comply with set laws and regulations, as well as certain policies that are in place.
Effective compliance risk management helps to prevent various other negative consequences that come with not complying with rules and regulations.
Risk Management
On the other hand, risk management primarily focuses on finding potential risks and minimising the chance of them interfering with an organisation’s objectives, goals and projects.
The risk management process is key – for construction companies, it helps ensure projects can be delivered safely and successfully.
Many compliance and risk management tools are available – they’re there to help organisations easily keep track of any changes in law and regulations while better developing their policies and procedures.
To better understand, compliance risk management identifies anything that has happened due to a company not complying with rules and regulations, whereas risk management involves the identification and overall management of potential risks.
The Risks of Non-Compliance
Essentially, non-compliance occurs when an organisation does not comply with certain policies, regulations, or set standards.
Whether it’s failing to ensure the correct personal protective equipment (PPE) is worn, or your organisation hasn’t followed health and safety operation procedures, numerous risks come with non-compliance.
Being compliant ensures your organisation has improved efficiency while protecting itself. Undoubtedly, construction is a high-risk industry to work in, which is why compliance is key.
45 fatal injuries and 53,000 non-fatal injuries occurred in construction between 2022 and 2023. Ensuring compliance is vital – with non-compliance comes a range of consequences, from delayed project deadlines to potential legal action, but what else does being non-compliant do?
Damage to Your Brand Reputation
Non-compliance comes with several legal consequences. However, one of the main outcomes of being non-compliant is reputational damage. Penalties and fines will be issued to organisations for being non-compliant. Laws and regulations include monetary penalties for compliance failures.
Poor reputation can be detrimental to all companies, particularly those working in the construction sector. Not only is a poor reputation likely to result in fewer clients and negative publicity, it can also deem a company untrustworthy.
In worse cases, faulty consumer safety practices or accounting fraud will often end up in the news for a wider audience to see.
Disrupted Supply Chain
Human errors, weather, and delays often disrupt the supply chain, but so does being non-compliant. Compliance Chain suppliers are verified in as little as 48 hours, allowing them to pre-qualify for opportunities much quicker.
Furthermore, when organisations fail to comply with rules and regulations, there’s a higher chance for cost overruns and project delays, to name a few. By remaining compliant, you can ensure a smoother, more streamlined supply chain.
At Compliance Chain, we offer a risk review feature as part of our supply chain management solution which allows you to see if suppliers are fully compliant or are a financial risk.
Best Practices for Compliance Risk Management
Compliance risk management is essential to ensure organisations are adhering to set rules and regulations – it minimises the risk of being given penalties and fines for being non-compliant. But what are the different types of compliance risk management practices to consider?
Have Effective Policies and Procedures in Place
Compliance should be integrated into every function. With effective policies and procedures in place, construction companies can address all compliance requirements promptly.
With such policies and procedures being set, the likelihood of non-compliance is slim. Numerous consequences come with being non-compliant, including fines and penalties, as mentioned.
Whether it’s implementing data security policies or ensuring you have the appropriate accreditations and certifications for your projects, compliance can be dealt with accordingly by introducing these policies and procedures.
Utilise The Best Software
It’s important to choose the right software that aligns with your organisation’s security needs to manage regulatory risks. Compliance Chain offers an innovative and streamlined approach, helping companies manage and oversee compliance.
We enable our clients and contractors to have complete control and visibility over their supply chain, ensuring your suppliers are meeting premier industry standards.
Suppliers are automatically notified when their accreditations are about to run out with Compliance Chain. This ensures that suppliers using our platform are always reminded and up-to-date with the relevant accreditations and insurances.
Try a Free Demo With Compliance Chain Today
Compliance Chain’s software solutions ensure compliance across the construction industry. You will be able to monitor all suppliers on various factors, such as insurance, accreditations and financial standing, to name a few.
Our easy-to-use software can provide you with an accurate risk review score, which helps make assessing operational risk with possible suppliers as easy as ever. Try our free demo today or download our brochure!
With over 6 years in the construction industry (specifically compliance within construction), Luke is responsible for managing and overseeing the functionality of Compliance Chain’s Supplier Solution.