Notwithstanding strategic misalignment (when leadership continues to pursue outdated or poorly defined goals in a rapidly evolving market, or when poor governance and decision-making inhibit agility and innovation), there are three other broad categories of threat: operational failure, regulatory non-compliance, and cyber and data security breaches.

Operational failures—such as supply chain disruptions, quality control issues, or lack of business continuity planning—can be catastrophic. For example, Boeing’s issues with the 737 MAX aircraft revealed deep flaws in both engineering oversight and internal communication, resulting in billions in losses and severe reputational damage.

Five things to get right to establish and maintain robust operations are:

1. Establish a formal compliance governance structure. Define clear roles, reporting lines, and accountability across compliance, legal, risk, and business units.
2. Develop and regularly update policies and procedures. Ensure that key compliance and legal policies (e.g., anti-bribery, data privacy, conflicts of interest) are current, accessible, and tailored to operational realities.
3. Conduct ongoing training and awareness campaigns. Provide mandatory training and socialize resources on legal and regulatory topics (e.g., anti-trust, insider trading, data protection) to foster a culture of compliance.
4. Use technology to automate compliance workflows. Deploy tools for policy management, case tracking, and regulatory reporting to reduce human error and enhance documentation.
5. Encourage a speak-up culture and protect whistleblowers. Provide safe, anonymous reporting channels, address reports promptly, and ensure non-retaliation policies are enforced.

Non-compliance with legal or regulatory obligations (e.g., privacy laws, financial controls, anti-corruption laws) can lead to fines, lawsuits, and regulatory bans. Major enforcement actions under laws like the General Data Protection Regulation (GDPR) or the U.S. Foreign Corrupt Practices Act (FCPA) illustrate this risk.

Key actions for organizations to take include:

1. Map regulatory requirements to business operations. Identify all applicable laws and regulations (e.g., GDPR, FCPA, SOX) and ensure controls are embedded where compliance risk arise.
2. Maintain a comprehensive compliance program aligned with legal obligations. Structure your program to align with recognized frameworks (e.g., DOJ’s Evaluation of Corporate Compliance Programs, ISO 37301).
3. Strengthen third-party due diligence and monitoring. Evaluate vendors, partners, and intermediaries for legal and compliance risks as part of onboarding and periodic reviews.
4. Implement a centralized issue management and escalation process. Track and address compliance issues systematically, with clear thresholds for escalation to legal or senior management.
5. Monitor regulatory developments and adjust controls proactively. Stay ahead of legal changes (e.g., ESG disclosures, AI regulations, privacy laws) through horizon scanning and external legal counsel input.

Data and Cybersecurity risk is arguably the fastest growing risk. The average cost of a data breach in 2023 was $4.45 million globally, according to IBM’s annual report, and for highly regulated industries, the impact is often far higher. A single breach can erode customer trust overnight and draw scrutiny from regulators and investors.

Five things to get right include:

1. Implement a formal data governance framework. Define ownership, classification, and lifecycle management of data across the enterprise, ensuring compliance with privacy and security laws.
2. Conduct regular data protection and cybersecurity risk assessments. Identify vulnerabilities in data handling, storage, and transmission, and prioritize remediation based on risk exposure.
3. Enforce access controls and data minimization. Limit access to sensitive data based on job roles and ensure only necessary data is collected, processed, and retained.
4. Develop and test an incident response and breach notification plan. Ensure legal, compliance, and IT teams are prepared to respond quickly to cyber incidents and meet regulatory notification timelines (e.g., GDPR’s 72-hour rule).
5. Train employees in data handling and cyber hygiene practices. Provide ongoing training on phishing, password management, secure file sharing, and recognizing suspicious activity — often the first line of defense.

Understanding these risks is not just about compliance or damage control—it’s about ensuring long-term resilience. Organizations that invest in risk governance, agile strategy, transparent culture, and ethical leadership are not only better equipped to survive shocks—they often outperform their peers in sustainable value creation.

Explore our resources and discover how we can help you navigate the complexities of compliance and secure your business against existential threats. For more in-depth insights and practical solutions on how to manage compliance effectively, visit our Compliance Solutions Page.