Compliance risk is the threat posed to a company’s earnings or capital as a result of violation or nonconformance with laws, regulations, or prescribed practices. Companies that fail to comply with the necessary standards may be subjected to fines, payment of damages, and voided contracts.
This risk is the overall risk that a company will not comply with all of the legal requirements laid out in the companies Act. One key area here is the requirement for the directors of a company to keep proper accounting records.