How does compliance contribute to risk management?

Compliance plays a critical role in risk management by identifying and mitigating regulatory risks that could threaten the organization. Organizations operate in environments filled with various regulatory requirements, which, if not adhered to, can lead to significant legal penalties, financial losses, or reputational damage.

When compliance measures are integrated into an organization's operations, they help to create systems and processes that systematically identify, assess, and address potential risks associated with non-compliance with regulations. This proactive approach allows businesses to prevent compliance-related issues before they escalate into more severe problems, thereby safeguarding their assets, reputation, and overall viability.

The other options reflect impacts that, while important, do not specifically encapsulate the primary function of compliance in relation to risk management. While increasing employee productivity and promoting senior management effectiveness are positive outcomes in their own right, they do not directly address compliance’s foundational role in mitigating regulatory risks. Enhancing corporate greed contradicts the very purpose of compliance, as it typically focuses on ethical standards and regulatory adherence rather than fostering unethical behavior.