Thursday, August 20, 2009

Good risk management leads to Compliance?

This is a quite logical line of thought, but there is one catch. Not all regulations are created in order to reduce risk to the part who is responsible for applying the controls and will go over compliance validation. Think about PCI-DSS compliance by merchants. It tries to reduce risk for card brands, issuers and acquirers by forcing the key point of compromise (merchants) to apply the proper controls. However, the cost for the merchant to apply those controls is higher than the risk reduction he will get. That's why fines are usually established by regulating bodies, to artificially increase the risk to the entity who is responsible for applying the controls. If this "manipulation of risk economy" is not properly done, the "good risk management leads to compliance" concept does not work. 


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