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The 5 Hidden Risks of Non-Compliance in Organizations

by Michael McDonald
January 19, 2022
in Business
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The 5 Hidden Risks of Non-Compliance in Organizations
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Any business owner knows how vital compliance training courses are, but how about the risks of non-compliance? Not many people are aware of the consequences!

Compliance risk refers to any company’s potential exposure to financial forfeiture, material loss, or legal penalties due to failure to act in accordance with internal policies, best practices, or the industry laws and regulations. Any organization, big or small, has the potential to run through compliance risks.

If an organization fails to comply with the relevant laws and regulations, it can affect the revenue, resulting in losing reputation, valuation, and business opportunities. That’s why it’s crucial to perform compliance training with practical tools like True Office Learning.

That said, let’s take a deeper look into the hidden risks of non-compliance in organizations.

Types of Non-Compliance and the Risks Involved

There are different types of compliance risks a company might be implicated in, such as:

  • Corruption and illegal practices such as theft, fraud, bribery, embezzlement, or money laundering
  • Environmental concerns such as destroying natural habitats, using harmful chemicals, waste disposal, and pollution
  • Process risks, which refers to the failure to follow or deviation from established procedures
  • Workplace health and safety

If a company is deemed non-compliant, it may face the following consequences:

  1. Penalties

One of the common consequences of non-compliance is hefty penalizations. Regulatory fines can drain company profits considerably, significantly smaller businesses. Sometimes, the penalty causes such stiff hits that it can cause small businesses to shut down.

State authorities penalize companies who don’t comply with external requirements, with fines ranging from minuscule amounts to dire consequences. In fact, some banks in the US paid significant penalties amounting to over $11 billion, all that in 2020 alone!

  1. Damage to Reputation

When word spreads about non-compliance of a company, the reputational damage is massive. Non-compliance issues can put companies in a terrible light, depending on the issue.

The company’s brand value and reputation would take a huge hit, again depending on the issue and severity of non-compliance. Reputational damage would result in the loss of many opportunities as well!

  1. Audits

Non-compliant companies may result in additional audits to identify the reasons behind the non-compliance. Such audits are time-consuming, require a lot of effort and manpower, and cost companies productivity time and finances.

  1. Legal Actions

In very dire cases of non-compliance, there have been compliance officers who faced government enforcement and regulatory action. Since the financial crash in 2008, government agencies and regulators have become stricter about the duties and responsivities of compliance officers.

Besides penalizing non-compliance organizations, government agencies and regulatory boards hold those involved in the non-compliance accountable.

  1. Organizations Shut Down

Non-compliance is considered illegal, with governing bodies taking all relevant action on the company. Sometimes, governing authorities may order the shutdown or complete dissolving of companies in severe cases.

Wrapping It Up

Now that you’re more aware of the different risks of non-compliance, ensure your company complies with all rules, regulations, and policies through the proper training programs.

Michael McDonald
Michael McDonald
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