Compliance vs. Risk Management: Definitions and Differences

As IT and security teams have taken on an increasing number of tasks – some of which fall into the “risk” bucket, others the “compliance” bucket, and still more that fall somewhere in between – it’s only natural that the distinction between what we call risk management and what we call compliance management has become blurred.

In fact, this happens so often that the two terms are frequently used interchangeably. However, while these two disciplines share common ground, treating them as interchangeable can create dangerous blind spots that could leave your organization vulnerable.

In today’s fast-paced business environment, understanding the nuances between compliance and risk management is crucial for safeguarding your organization’s future. This comprehensive guide will use lessons from real-world examples of compliance and risk management gone wrong and debunk common misconceptions, including the increasingly prevalent term “compliance risk management,” to provide strategies for effectively integrating these essential business functions.

• What is risk management?
• Common types of organizational risks
• What is compliance management?
• Potential impact of noncompliance
• Side-by-side comparison of compliance and risk management
• What is compliance risk management?
• Why modern compliance management needs a risk-based approach
• Best practices for integrating compliance and risk management strategy
• The future of compliance and risk management

What is risk management?

Risk management involves identifying, assessing, and mitigating potential threats to an organization’s objectives.

By continuously monitoring and reporting on the risk environment, organizations can more easily proactively prepare for, respond to, and communicate about potential risks, creating a sustainable risk management strategy. Without effective risk management, organizations face potential financial losses, reputational damage, legal issues, and even the risk of business failure.

Risks can come from anywhere, including legal liabilities, IT and data vulnerabilities, and unexpected sources like supply chain disruptions, unpatched software, financial uncertainty, and natural disasters.

Now that you know why risk management is important, let’s look deeper into the types of risks organizations commonly face to understand the unique way compliance challenges span across them and the effects of noncompliance.
 

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Common types of organizational risks

The modern business landscape is complex and interconnected, with threats emerging from multiple vectors.

By considering real-world examples, we’ll illustrate how these risks manifest and the potential consequences they can have on organizations:

• Cybersecurity threats pose an existential danger to organizations. A majority of costs associated with data breaches stem from lost business due to operational downtime and lost customers, post-breach response expenses, and regulatory fines.
  
  The ransomware attack against CDK Global in 2024, which disrupted thousands of car dealerships relying on the company’s platform, highlights the necessity of robust cybersecurity measures and effective risk management practices to mitigate such vulnerabilities.
• Operational risks, such as supply chain disruptions, process inefficiencies, and natural disasters, can severely impact an organization’s ability to deliver products or services.
  
  Hurricane Helene’s disastrous flooding of the Spruce Pines, NC, quartz mines, one of three that supply the world’s semiconductor industry with the high-purity quartz needed for silicon wafers in consumer electronics, demonstrated how operational risks can cascade through a global network. The incident helps illustrate how a single point of failure can bring down the entire system and the necessity of effective risk management practices.
• Financial risks, such as fluctuating markets and liquidity issues, can jeopardize organizational stability. Since these risks are often intertwined with other risk categories, their potential impact on organizations is amplified.
  
  Silicon Valley Bank’s 2023 collapse illustrates how rapidly financial risks can escalate — the bank’s heavy investment in long-term Treasury bonds created massive unrealized losses when interest rates rose and triggered the first internet-driven bank run in history.
• Legal challenges related to regulation changes, infringement claims, and contractual obligations present significant risks to organizations. Additionally, the constantly shifting landscape of international law adds another layer of complexity to managing and limiting legal exposure.
  
  Danske Bank is a recent example of an organization found noncompliant due to legal issues. The bank faced significant legal and financial repercussions for its involvement in a massive money laundering scandal. This case underscores the severe consequences of failing to comply with anti-money laundering regulations and the importance of robust compliance programs to manage and limit legal exposure.
• Reputational risks can rapidly erode stakeholder trust and brand value, with impacts often outlasting the initial incident.
  
  The Boeing 737 MAX scandal reignited in January 2024 with the Alaska Airlines door plug incident shows how quality control issues (and how you handle the dispensation) can devastate public confidence — leading to grounded planes, canceled orders, and billions in costs while damaging the company’s century-old reputation for engineering excellence.
• Compliance risk is getting more complex every year. Organizations must manage multiple data protection and privacy compliance frameworks that are regional (e.g., the General Data Protection Regulation (GDPR) for organizations that handle personal data of E.U. residents and U.S. state laws like California Consumer Privacy Act of 2018 ), industry-specific (like HIPAA for healthcare providers and organizations that handle protected health information and PCI DSS for organizations that store/process/transmit cardholder data), and apply to organizations within the public sector (including FISMA, FedRamp, and NIST). These frameworks all demand rigorous attention.

[Learn about Tanium Cloud for U.S. Government: A FedRamp Authorized cloud platform]

Last year, Meta was fined for regulatory noncompliance when the E.U. hit the company with a $1.3 billion fine for violating GDPR by transferring user data to U.S. servers, demonstrating how international data protection regulations can create significant legal exposure, even for tech giants.

In addition to these data protection and compliance frameworks, organizations may also need to comply with other regulatory requirements, including workplace health and safety regulations, environmental impact regulations, anti-corruption measures, and the Federal Trade Commission’s truth-in-advertising regulations.

Risk management provides a broad framework for identifying and mitigating threats to your organization’s objectives.

However, staying current with these ever-evolving compliance regulations can be challenging. Overlooked changes in applicable laws and standards can disrupt business, damage reputation, lead to security vulnerabilities, and expose your organization to severe penalties, fines, or costly breaches, making compliance gaps a financial, operational, legal, reputational, and security risk.

In the following section, we’ll discuss compliance management, focusing specifically on meeting compliance requirements and industry standards and the role compliance-related challenges play in these risks.

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What is compliance management?

Compliance management is a proactive approach to ensuring adherence to regulatory requirements and internal policies, including corporate governance standards and industry-specific regulations.

When effective compliance management is in place, it drives operational improvements that enhance competitiveness and resilience by monitoring current requirements, anticipating regulatory changes, and integrating internal controls into daily operations and strategic planning.
 

[Read also: What is IT compliance? Basic overview and guidelines]

Your organization can’t afford to take a reactive approach when the stakes are this high, as organizations found noncompliant can incur substantial fines, legal ramifications, and significant damage to their reputation.

Here are some of the major consequences of noncompliance from a risk perspective, which help highlight the importance of implementing robust compliance strategies.

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Potential impact of noncompliance

The days of “seeking forgiveness instead of permission” in compliance are behind us. While organizations once calculated that paying fines might be cheaper than implementing comprehensive compliance programs, the current regulatory environment has fundamentally changed that equation.

Modern regulations are more numerous, stringent, and aggressively enforced. They are designed to protect not just individual organizations, but entire industries, our customers, and our national interests. The implications of noncompliance now extend far beyond immediate financial penalties, creating cascading impacts, and organizations must prioritize compliance to safeguard their long-term viability and success.

Common types of compliance risk include:

• Financial penalties: Regulatory fines have reached unprecedented levels. This year, financial institutions faced record-breaking penalties for compliance violations.
• Legal consequences: Noncompliance often triggers costly litigation and regulatory investigations, which consume substantial resources and management attention. These legal battles can last years, creating uncertainty and draining organizational focus from strategic priorities.
  
  Major investigations often require dedicated compliance teams, external counsel, forensic auditors, and substantial executive time — making the total cost of a regulatory investigation a significant organizational burden.
• Reputation damage: Trust, once lost, is difficult to rebuild. Stakeholders, including customers, investors, and partners, increasingly demand transparency and ethical behavior, making compliance failures particularly damaging to brand value.
  
  Studies show that companies experiencing significant compliance failures see a reduction in customer trust metrics.
• Supply chain impacts: Noncompliance can ripple through partner networks as organizations increasingly scrutinize their suppliers’ compliance standards. Major companies now regularly perform internal audits of their suppliers’ compliance programs, making noncompliance a potential threat to critical business relationships and market access.

[Read also: What is software supply chain security?]

Understanding the potential impact of noncompliance, which can include financial penalties, legal repercussions, reputational damage, and supply chain disruptions, helps underscore the importance of creating effective risk management strategies.

However, simply being able to prioritize between and understand the dependencies compliance risks may have with other risk types is an essential component of how IT teams and organizations must approach comprehensive risk management efforts.

A critical component of developing a comprehensive risk management strategy is understanding the role of compliance management in informing risk management efforts and vice versa. By not identifying, stack ranking, and determining the interconnected nature between all the risks an organization could face, organizations lose the ability to take appropriate actions based on the greatest threats to their environment and will find it challenging to address all potential gaps caused by not remediating vulnerabilities in the order of urgency they demand or the long-term mitigation strategy they deserve.

By analyzing the differences and similarities between risk management and compliance management, including their scopes, approaches, and objectives, we can better understand how these disciplines intersect and complement each other and the benefits of considering both when addressing organizational risks.
 

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Side-by-side comparison of compliance and risk management

Let’s explore the commonalities and differences between compliance and risk management responsibilities:

Scope

Risk management: Encompasses a broader spectrum of potential risks and threats, including those arising from internal and external sources
Compliance management: Primarily deals with meeting external requirements imposed by laws, regulations, standards, or customers

Approach

Risk management: Predictive in nature, focusing on identifying, assessing, and mitigating potential risks that could impact the organization’s objectives
Compliance management: Prescriptive in nature, ensuring adherence to specific guidelines, rules, and regulations

Objective

Risk management: To proactively manage and reduce vulnerabilities and risks across the entire IT environment
Compliance management: To maintain compliance across the organization’s digital estate and avoid penalties or fines associated with noncompliance

Comparing risk management and compliance management helps reveal their significant differences and similarities. However, it’s also important to understand how organizations must evolve their methodologies for managing risk and compliance using a single approach.

This leads us to the emergence of “compliance risk management” as a unified approach to compliance and risk management. While the popularity of this term highlights the growing recognition of the interconnected nature of these functions and the need for a more cohesive approach, it was not initially meant to describe such integration.

Let’s delve into the origins and implications of compliance risk management to understand its role in today’s regulatory environment.

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What is compliance risk management?

The term “compliance risk management” often creates confusion. While some use it to describe general regulatory compliance, its true meaning centers on the approach financial institutions must take to manage compliance-related risks.

This concept gained prominence following a 2004 foreign exchange scandal at an Australian bank. The scandal prompted the Organisation for Economic Co-operation and Development (OECD) to develop comprehensive guidance on managing compliance risks for tax administrations and financial institutions.

The discussion has evolved beyond viewing compliance risk management as merely a subset of enterprise risk management (ERM).

Organizations now understand that compliance and risk management are closely linked disciplines that demand effective integrated strategies and cybersecurity frameworks, recognizing compliance failures pose substantial operational risks while effective risk management bolsters compliance goals.

This shift in thinking raises an important question: What benefits do organizations gain from aligning their compliance and risk management efforts?

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Why modern compliance management needs a risk-based approach

While compliance and risk management serve distinct functions, treating them as separate silos no longer meets the demands of today’s complex business environment. Forward-thinking organizations recognize that these disciplines work best when integrated, allowing each to inform and strengthen the other.

Regulations are generally written in a very broad fashion since they must cover many different types of industries, domains, and scenarios, with the general goal to help organizations put in place best practices and measures that effectively prevent and mitigate specific kinds of risks or threats.

Instead of viewing compliance as a mandatory task, adopting a risk-based approach will enable your organization to move toward more strategic, proactive compliance management. This will help your organization meet regulatory requirements and foster a culture of continuous improvement and innovation.

If an IT team understands the type of threats the regulation is a response to, then the compliance activities can be better focused on targeting the actual risk, rather than just checking a compliance box.

Understanding the wider risk landscape from a compliance standpoint can also help teams prioritize efforts more effectively, allocate resources efficiently, and spot potential issues before they arise.

Let’s examine this integrated risk and compliance approach in practice and see how organizations can effectively implement it to enhance their prevention and mitigation capabilities.
 

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Best practices for integrating compliance and risk management strategy

Organizations achieving the greatest success treat compliance and risk management as complementary functions that inform and strengthen each other.

Here are five best practices to add to your compliance and risk management workflow:

1. Conduct regular compliance and risk assessments to determine your risk score
   
   Perform compliance risk assessments on a prescribed cadence to determine your organization’s compliance risk profile. Poor risk assessment processes and inadequate compliance controls can have high costs.
2. Prioritize risks with goals and organizational objectives
   
   Align risk management strategies with organizational objectives to ensure resources target the most critical areas. This approach helps balance compliance efforts with broader business goals.
3. Make reporting actionable
   
   It’s time to create an action plan. First, focus on your organization’s most critical compliance vulnerabilities. Then, implement targeted solutions, such as comprehensive staff training and robust cybersecurity measures, auditing risk management processes, and refining internal policies.
4. Consolidate tools
   
   Replace fragmented solutions with integrated platforms to eliminate silos and enhance visibility. Multiple tools cause gaps, contribute to silos, and increase costs.
5. Automate
   
   Leverage AI and automation to streamline compliance processes and risk management workflows. Automated management systems can reduce compliance monitoring costs by reducing manual effort, improving accuracy, and providing real-time insights.
   
   Automated systems can minimize compliance monitoring costs by standardizing processes and ensuring they run as intended every time.

[Read also: Ultimate guide to AI cybersecurity: Benefits, risks, and rewards]

As we look toward tomorrow’s challenges, let’s review how automated solutions are gaining popularity as necessary solutions to allow organizations to meet increasingly complex compliance and risk management demands.

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The future of compliance and risk management

With the growing complexity of threats and regulations, organizations can no longer rely on traditional, isolated methods to ensure compliance and effective risk management.

The future of compliance and risk management lies in automation and integrating these solutions. By combining real-time monitoring, intelligent prioritization, and automated remediation capabilities within a single platform, these tasks can be transformed from burdensome tasks to streamlined, proactive operations.

Comprehensive visibility and control are key to a successful compliance risk management program. Advanced platforms now offer continuous scanning of all endpoints — both managed and unmanaged — without straining network resources.

This real-time monitoring will give your organization an accurate risk score and compliance status across the entire digital estate. When potential issues are identified, intelligent prioritization features map the potential impact, consider endpoint criticality, and factor in lateral movement risks, ensuring you can direct resources to your most pressing concerns.

Automated remediation capabilities significantly enhance how organizations respond to identified security incidents, risks, and compliance gaps. Instead of manual interventions that can take months to implement, automated solutions can execute and validate fixes in real time, dramatically reducing your exposure and extending to on-premises and remote endpoints essential in today’s hybrid work environment.

The evolution toward automated, integrated solutions delivers multiple benefits, including:

• Drastically reducing time to address vulnerabilities
• Simplifying compliance management using a single platform
• Lowering operational costs by consolidating disparate point solutions
• Streamlining regulatory audit preparation
• Validating remediation in real time

[Read also: What is security automation? Benefits, importance, and features]

Organizations that embrace these integrated, automated compliance and risk management solutions will be better positioned to protect their assets, maintain regulatory compliance, and adapt to emerging threats. The future of effective risk and compliance management isn’t about working harder — it’s about working smarter through intelligent automation and integration.

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Tanium’s Risk & Compliance solution provides real-time visibility into the IT environment, enabling proactive risk management and efficient remediation. Integrating workflows across IT, risk, compliance, and security enhances security posture, reduces risk exposure, and ensures regulatory compliance.

Enhancing efforts using Tanium autonomous innovations streamlines processes by quickly identifying and prioritizing vulnerabilities. This ensures timely resolution, better efficiency, and reduced cyber breach risk. Request a free personalized demo to learn more about Tanium Autonomous Endpoint Management and how it supports improving risk and compliance management.