Complying with risk management laws and regulations doesn’t have to be expensive or time-consuming. In fact, ensuring compliance and going above and beyond your legal responsibilities can save you both time and money.
However, there is a running cost of compliance that you’ll need to cover before you can reap the benefits of risk management compliance — although it’s likely to cost less than you think.
In this article, we’ll break down the running cost of compliance in risk management and why it’s worth every penny.
What Is Compliance Cost?
Compliance cost refers to any expenses involved in meeting the requirements of laws and regulations. Examples of these costs include the salaries or fees of any employees or consultants in compliance, insurance costs and the cost of control measures or systems used to achieve compliance. Any time and funds dedicated to achieving and maintaining compliance fall under this category of expenses.
What Is the Running Cost of Compliance in Risk Management?
The exact cost of compliance in risk management isn’t possible to estimate because every business is unique, and it will depend largely on the size of your organisation and the operations your workers complete. There are several different areas of risk management that businesses may need to consider and comply with, but not all of them will apply to every business. The cost of compliance can range from thousands to tens of thousands depending on these factors. For larger businesses, the costs of compliance may be much higher, even into the hundreds of thousands or millions.
The Cost of Risk Assessments
Risk assessments don’t have to cost your business anything. You may be able to carry out risk assessments yourself, so the only costs involved are your time, or the time and salary of employees carrying out risk assessments.
However, if you need to complete a risk assessment for an area of risk management that you’re not familiar with, you may decide to outsource this task. For example, you might want to hire a fire risk assessor to assess the fire safety of your workplace. This could cost anything from £150 to £900 depending on the size of your business premises and whether you hire a lone assessor or a company.
Always check that any external support you may engage to support your business with any risk management elements, have the skills, knowledge, training and capability to ensure you receive the required level of support and assistance.
The Cost of Compliance in Health and Safety
As one of the most important areas of risk management, health and safety compliance was reported to cost between £5k and £40k in 2016. This figure was collected from small and medium-sized businesses, and the cost of compliance for larger businesses will undoubtedly be a lot higher.
While this may sound like a hefty expense, when compared with the cost of non-compliance, it’s a small fee to pay.
Risk Management Services and Resources: A Cost Worth Considering
Risk management services and resources can help you achieve and maintain compliance. You can access leading risk management resources by joining an accreditation scheme, such as CHAS. When you join CHAS, you’ll have all the resources and support you need to comply with regulations without wasting any time or money. You’ll have full confidence in the compliance status of your whole supply chain.
Once accredited, you can also demonstrate your compliance to clients through our online portal. You’ll prequalify for work opportunities, and by using your compliance to land more contracts, you’ll easily make back the costs of compliance.
CHAS accreditation packages start at just £239 for sole traders and £279 for small businesses. The level of compliance you want to achieve and demonstrate is up to you, so you can choose a larger or smaller package depending on your business needs. Our dynamic pricing model means you’ll only pay for what you need.
The Cost of Compliance vs the Cost of Non-compliance
When you fail to comply with risk management legislation, you leave yourself and your business vulnerable to legal fines, penalties, reputational damage and profit loss. These costs will always exceed the cost of compliance — they can leave your business in financial difficulty, with lost loyalty from clients and employees causing long-term profitability issues.
Legal Fines and Penalties
Legal fines and penalties for non-compliance and failure to manage risks effectively will be proportionate to the size of your business and the severity of the breach. Fines are also dependent on culpability — whether the breach was deliberate or efforts were made to achieve compliance.
Larger organisations that put people’s lives at risk during a deliberate breach may face fines of up to £10 million. Fines for micro and small businesses start at £200 for a low-risk, low-culpability breach, but can be as much as £1,600,000 for a serious, deliberate breach.
Other legal penalties can include prosecution, a ban on trading or a temporary pause on operations, which can cost your business huge amounts of money in both the short and long term. If clients turn to competitors after your conviction, this is business you may not get back.
Reputational Damage and Profit Loss
Whether you’re convicted for non-compliance or not, poor risk management standards in your business can lead to serious reputational damage. Word will inevitably spread about your lack of commitment to risk management. Employees, workers and business partners may discuss it with people outside of your organisation, and legal cases against you can cause your compliance breaches to become public.
The reputational damage that stems from non-compliance can have a significant impact on your profitability. Clients may not remain loyal or satisfied with your business, investors may avoid your business to protect themselves from legal liability, and you may experience retention and recruitment issues. Your sales may drop, it may become difficult to find willing and suitable business partners and suppliers, and with high employee turnover, you’ll incur recruitment (and potentially outsourcing) costs.
When your business is found guilty of not complying with risk management legislation, your business insurance premiums may also increase.
The costs of non-compliance all add up, and together they far exceed the cost of compliance. To avoid fines, irreversible reputational damage and reduced profitability, make sure you achieve and maintain compliance throughout your organisation and supply chain.
CHAS can help you achieve and maintain compliance with leading risk management resources, supply chain risk management services and accreditation schemes. Get in touch with our team of risk management and compliance experts to find out how we can help you.
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