What is one potential outcome of not properly managing compliance risk?

One potential outcome of not properly managing compliance risk is the increased likelihood of legal penalties and financial losses. When organizations fail to adhere to laws, regulations, and internal policies, they expose themselves to a range of legal repercussions. This could manifest as fines from regulatory bodies, legal costs associated with defending against lawsuits, and potential settlements. Additionally, non-compliance can lead to the loss of business opportunities, as partners and customers may hesitate to engage with a company that has a record of regulatory issues. Over time, these financial impacts can accumulate, adversely affecting the organization’s bottom line and overall sustainability.

In contrast, improved company reputation, enhanced employee trust, and reduced operational expenses are outcomes that typically stem from effective compliance management. Strong compliance practices can build trust with stakeholders, enhance a company's image, and streamline operations to reduce costs. Thus, the connection between poor compliance management and negative financial consequences is a critical aspect of operational risk management.