Glossary

Regulatory Risk

What is Regulatory Risk?

Regulatory risk is the impact of changing laws and regulations on your business. Changes in regulation and mandated requirements could, for example:

  • increase the costs of operating a business by increasing costs to achieving compliance
  • impact your business objectives, business model, and compliance system
  • change your competitive advantage by pushing up costs and making some business practices illegal
  • reduce the appeal of a potential investment
Regulatory Risk

Compliance Risk vs. Regulatory Risk

The term “regulatory risk” refers to the ripple effect of changes in laws and regulations. Compliance risk, however, relates to the risk of being in violation of mandated laws or regulations. Often, compliance risk is a result of the following:

  • insufficient security controls
  • lack of awareness and training
  • misconfigurations
  • lack of due diligence and system maintenance
  • human error

Regulatory risk categories can potentially expose your business to a range of consequences, including, but not limited to:

  • legal penalties
  • voided contracts
  • financial forfeiture
  • material loss
  • loss of business opportunities
  • damaged reputation

Both compliance and regulatory risks arise from laws and regulations that impose penalties or sanctions to enforce their requirements on businesses.

What is the Meaning of Risk Mitigation?

Risk mitigation is the process of identifying potential risks, assessing their business impact, and creating a plan to mitigate their damage to the company. Well-planned risk mitigation strategies can make the difference between taking a particular event in stride or going out of business because of it. 

How to Mitigate Regulatory and Compliance Risk

  • Ensure that you create a strong corporate governance structure and procedures that are in line with best practices for the sector and enable them to achieve their objective.
  • increased understanding and insight around regulatory compliance risk will enable an organization to manage regulatory change.
  • Mapping regulatory changes to business practices to pinpoint areas that need improvement in light of regulatory changes
  • Develop strategies for continuous management of compliance and regulatory obligations. 
  • Regulatory risk assessments

What are Examples of Regulatory Compliance?

Here are some examples of regulatory compliance and what an organization needs to do to stay compliant with each of them. As the risk landscape evolves, these standards go through regulatory reviews. The updates to these mandated standards introduce regulatory risks to their scope of industries.

California Privacy Rights Act CPRA

The California Privacy Rights Act (CPRA) is a state-wide data privacy law that governs how businesses all over the world may handle California residents’ personal information. The CPRA went into effect on January 1, 2023, and will become fully enforceable on July 1, 2023. Businesses that fall under the threshold requirements should work on achieving compliance by this summer.

US State Privacy Laws

California was the “father” of comprehensive state privacy laws, but there are more state laws rolling out this year. New laws will be coming out in 2023 in California, Colorado, Connecticut, Utah, and Virginia, in addition to more states that are sure to follow in their footsteps. These new laws represent a comprehensive approach to privacy protection and will have a sweeping impact on businesses across the US.

Start Getting Value With
Centraleyes for Free

See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days

Learn more about Regulatory Risk

EU General Data Protection Regulation (GDPR)

The GDPR is the most stringent data security and privacy law in the world. Despite being an EU legislation, it is applicable to all organizations that target or gather data on EU citizens. Fines for privacy and security violations can reach tens of millions of euros.

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA is a US law that regulates the use of all protected health information transmitted by healthcare organizations. It also prohibits healthcare organizations from disclosing personal information without the individual’s consent. Any violations or failure to comply results in steep financial penalties.

The Sarbanes-Oxley Act (SOX)

The SOX Act was brought into effect by the US Congress in 2002. It helps protect investors from fraudulent financial reporting by corporations. Incorrect information can result in fines of up 

to $1 million and up to 10 years in prison.

On the regulatory horizon, the UK is in the process of preparing for a new governance, audit, and reporting requirement: #UKSOX. The aim is to strengthen the internal controls and regulatory risk management systems of listed companies in the UK and restore trust in UK audit and corporate governance. The pressure is on directors, who will be required to attest to the effectiveness of controls and take responsibility.

How Can I Improve my Regulatory Compliance?

In response to the growing number of challenging requirements, Centraleyes offers a comprehensive platform to help you stay updated and compliant. Laws and regulations are implemented for a reason, and you can get ahead of your regulatory obligations by developing a structured risk and compliance program. A compliance program allows your business to monitor and improve its regulatory compliance.

Start Getting Value With
Centraleyes for Free

See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days

Want to talk to Centraleyes about Regulatory Risk?

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